Tableof Contents

 

 

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

** **

**FORM 10-K**

** **

 

x                               **ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the yearended December 31, 2009**

 

o                                  **TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thetransition period from                    to                     **

 

**CommissionFile Number:  333-122770**

 

**Boise CascadeHoldings, L.L.C.**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **20-1478587**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**1111West Jefferson StreetSuite 300Boise, Idaho  83702-5389**

(Address ofprincipal executive offices) (Zip Code)

** **

**(208)384-6161**

(Registrant’stelephone number, including area code)

 

Securities registered pursuant to Section 12(b) of theAct:  **None**

 

Securities registered pursuant to Section 12(g) of theAct:  **None**

 

Indicate by check mark ifregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.     Yes o     No x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.    Yes x    No o

 

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.     Yes o     No x

 

We are a voluntary filerof reports required of companies with public securities under Sections 13or 15(d) of the Securities Exchange Act of 1934, and we have filed allreports which would have been required of us during the past 12 months hadwe been subject to such provisions.

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post suchfiles).     Yes o     No o

 

Indicate by check mark ifthe registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company (as defined by Rule 12b-2of the Exchange Act).

 
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o |
|---------------------------|---------------------|-------------------------|-----------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).      Yes o     No x

 

The registrant, a limitedliability company, has no voting or nonvoting equity held by nonaffiliates.

 

DOCUMENTS INCORPORATEDBY REFERENCE

 

None.

 

 

 

----

Tableof Contents

 

**Table ofContents**

 
| **PART I** |
|-----------------|
|            |   |   |
| Item 1.         | Business | 1 |
|            | Corporate  Structure | 1 |
|            | Segments | 2 |
|            | Customers | 7 |
|            | Competition | 7 |
|            | Environmental  Issues | 8 |
|            | Capital  Investment | 8 |
|            | Seasonal and Inflationary Influences | 8 |
|            | Acquisitions and Divestitures | 9 |
|            | Employees | 9 |
|            | Identification of Executive Officers | 9 |
|            |   |   |
| Item 1A.        | Risk Factors | 9 |
|            |   |   |
| Item 1B.        | Unresolved  Staff Comments | 12 |
|            |   |   |
| Item 2.         | Properties | 13 |
|            | Building Materials Distribution | 13 |
|            | Wood  Products | 14 |
|            |   |   |
| Item 3.         | Legal Proceedings | 14 |
|            |   |   |
| Item 4.         | Reserved | 14 |

 
| **PART II** |
|------------------|
|             |   |   |
| Item 5.          | Market for  Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases  of Equity Securities | 15 |
|             |   |   |
| Item 6.          | Selected  Financial Data | 16 |
|             |   |   |
| Item 7.          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 18 |
|             | Understanding Our Financial Information | 18 |
|             | Executive  Overview | 18 |
|             | Factors That Affect Our Operating Results | 19 |
|             | Sale of Our Paper and Packaging & Newsprint  Assets | 20 |
|             | Our  Operating Results | 21 |
|             | Industry Mergers and Acquisitions | 29 |
|             | Acquisitions | 29 |
|             | Divestitures | 30 |
|             | Liquidity and Capital Resources | 30 |
|             | Contractual  Obligations | 35 |
|             | Off-Balance-Sheet Activities | 37 |
|             | Guarantees | 37 |
|             | Seasonal and Inflationary Influences | 37 |
|             | Employees | 37 |
|             | Disclosures of Financial Market Risks | 38 |
|             | Financial  Instruments | 39 |
|             | Environmental | 39 |
|             | Critical Accounting Estimates | 40 |
|             | New and Recently Adopted Accounting Standards | 44 |
|             |   |   |
| Item 7A.         | Quantitative  and Qualitative Disclosures About Market Risk | 44 |

 

iii

----

Tableof Contents

 
| Item 8.     | Financial  Statements and Supplementary Data                                          | 45     |
|-------------|---------------------------------------------------------------------------------------|--------|
|        |                                                                                  |   |
|        | 1.   Nature of Operations and Basis of  Presentation                   | 50     |
|        | 2.   Summary of Significant Accounting  Policies                       | 51     |
|        | 3.   Sale of Our Paper and  Packaging & Newsprint Assets      | 56     |
|        | 4.   Investment in Equity Affiliate                                    | 57     |
|        | 5.   Transactions With Related Parties                                 | 59     |
|        | 6.   Other (Income) Expense, Net                                       | 60     |
|        | 7.   Leases                                                            | 60     |
|        | 8.   Income  Taxes                                                     | 61     |
|        | 9.   Goodwill and Intangible Assets                                    | 62     |
|        | 10. Debt                                                                         | 64     |
|        | 11. Financial Instrument Risk                                                    | 65     |
|        | 12. Retirement and Benefit Plans                                                 | 66     |
|        | 13. Long-Term Incentive Compensation Plans                                       | 71     |
|        | 14. Capital                                                                      | 77     |
|        | 15. Segment  Information                                                         | 79     |
|        | 16. Commitments and Guarantees                                                   | 84     |
|        | 17. Legal Proceedings and Contingencies                                          | 85     |
|        | 18. Quarterly Results of Operations (unaudited)                                  | 85     |
|        | 19. Consolidating Guarantor and Nonguarantor  Financial Information              | 86     |
|        |                                                                                  |   |
|        | Report of Independent Registered Public Accounting  Firm                              | 97     |
|        |                                                                                  |   |
| Item 9.     | Changes In  and Disagreements With Accountants on Accounting and Financial Disclosure | 98     |
|        |                                                                                  |   |
| Item 9A(T). | Controls and  Procedures                                                              | 98     |
|        |                                                                                  |   |
| Item 9B.    | Other Information                                                                     | 99     |

 
| **PART III** |
|-------------------|
|              |   |   |
| Item 10.          | Directors,  Executive Officers, and Corporate Governance | 100 |
|              |   |   |
| Item 11.          | Executive  Compensation | 106 |
|              |   |   |
| Item 12.          | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 133 |
|              |   |   |
| Item 13.          | Certain  Relationships and Related Transactions, and Director Independence | 135 |
|              |   |   |
| Item 14.          | Principal  Accounting Fees and Services | 136 |

 
| **PART IV** |
|------------------|
| ** **       |
| Item 15.         | Exhibits  and Financial Statement Schedules | 138 |
|             |   |   |
|             | Signatures | 139 |
|             |   |   |
|             | Index  to Exhibits | 140 |

 

iv

----

Table of Contents

 

**PART I**

 

We have publicly traded,registered debt securities, which require us to file reports with theSecurities and Exchange Commission (SEC). All of our SEC filings, which includethis Form 10-K, Quarterly Reports on Form 10-Q, RegistrationStatements, Current Reports on Form 8-K, and all related amendments areavailable free of charge via Electronic Data Gathering Analysis and Retrieval(EDGAR) through the SEC website at www.sec.gov. We also provide copies of ourSEC filings at no charge upon request and make electronic copies of our reportsavailable through our website at www.bc.com as soon as reasonably practicableafter we file or furnish such reports to the SEC. Attached as exhibits to this Form 10-Kare certifications of our chief executive officer and chief financial officerrequired under Section 302 of the Sarbanes-Oxley Act of 2002.

 

***ITEM 1.                BUSINESS***

 

We are a privately-heldbuilding products company headquartered in Boise, Idaho. Our operations beganon October 29, 2004 (inception), when we acquired the forest products andpaper assets of OfficeMax (the Forest Products Acquisition). As used in this Form 10-K,the terms “BC Holdings,” “we,” and “our” refer to Boise Cascade Holdings,L.L.C., and its consolidated subsidiaries. Our wholly owned subsidiary, BoiseCascade, L.L.C., is a leading U.S. wholesale distributor of building productsand one of the largest producers of engineered wood products and plywood inNorth America. We are also a shareholder of Boise Inc., a publicly tradedNorth American paper and packaging producer. We acquired our interest inBoise Inc. in connection with the sale of our Paper and Packaging &Newsprint assets (the Sale) in February 2008. For more informationrelated to the Sale and our investment in Boise Inc., see Note 3,Sale of Our Paper and Packaging & Newsprint Assets, and Note 4,Investment in Equity Affiliate, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” ofthis Form 10-K.

 

***CorporateStructure***

 

The following sets forth our corporatestructure and equity ownership at December 31, 2009 (based on votingpower):

 

 

1

----

Table of Contents

 

***Segments***

 

We operate our business using three reportablesegments:  Building MaterialsDistribution, Wood Products, and Corporate and Other. We present informationpertaining to our segments and the geographic areas in which they operate inNote 15, Segment Information, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” ofthis Form 10-K.

 

The business discussionthat follows focuses on the businesses retained after the Sale. We have chosennot to provide the five-year data for the segments sold in connection with theSale, as these segments are not part of the business we manage today. SeeNote 15, Segment Information, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” ofthis Form 10-K for information related to the sold Paper and Packaging &Newsprint segments prior to the Sale.

 

###### ***Building Materials Distribution***

###### *** ***

# *Products*

# * *

# *We are a leading national stocking wholesaledistributor of building materials. We distribute a broad line of buildingmaterials, including engineered wood products (EWP), oriented strand board(OSB), plywood, lumber, and general line items such as framing accessories,composite decking, roofing, siding, and insulation. We purchase most of thesebuilding materials from third-party suppliers and market them primarily tocustomers that resell building materials to professional builders in theresidential, light commercial construction, and repair-and-remodeling markets.We believe our broad product line provides our customers with a one-stopresource for their needs and lowers per-unit freight costs. Our nationwidesupplier relationships allow us to offer excellent customer service on topbrands in the building materials industry. We also have expertise inspecial-order sourcing and merchandising support.*

# * *

The following table sets forth segment sales; segmentincome before interest and taxes; depreciation, amortization, and depletion;and earnings before interest, taxes, depreciation, amortization, and depletion(EBITDA) for the periods indicated:

 
| ** **                                | ** ** | **Year  Ended December 31** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|
| ** **                                | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                | ** ** | **(millions)**                   | ** ** |
| Sales                                     |       | $                                | 1,609.8    |   | $ | 2,109.4 |   | $ | 2,564.0 |   | $ | 2,950.3 |   | $ | 3,052.3 |   |
|                                      |       |                             |       |   |   |   |   |   |   |   |   |
| Segment income before interest and taxes  |       | $                                | 8.0        |   | $ | 19.5 |   | $ | 51.8 |   | $ | 75.3 |   | $ | 99.9 |   |
| Depreciation, amortization, and depletion |       | 7.6                              |       | 7.7 |   | 7.4 |   | 9.2 |   | 9.1 |   |
| EBITDA (a)                                | ** ** | **$**                            | **15.5**   | ** ** | **$** | **27.2** | ** ** | **$** | **59.2** | ** ** | **$** | **84.6** | ** ** | **$** | **109.0** | ** ** |

 

----

(a)                                 Segment EBITDAis calculated as segment income (loss) before interest (interest expense,interest income, and change in fair value of interest rate swaps), incometaxes, and depreciation, amortization, and depletion. EBITDA is the primarymeasure used by our chief operating decision makers to evaluate segmentoperating performance and to decide how to allocate resources to segments. See “Item 6.Selected Financial Data” of this Form 10-K for a description of ourreasons for using EBITDA, for a discussion of the limitations of such ameasure, and for a reconciliation of our EBITDA to net income (loss).

 

# *Facilities*

# * *

# *We operate 31 wholesalebuilding materials distribution facilities located throughout the UnitedStates. In 2009, we purchased a truss assembly operation and EWP sales officein Saco and Biddeford, Maine, respectively, which has allowed our BuildingMaterials Distribution segment to move into the truss market in the Northeast.In recent years, we have also relocated or expanded several facilities.*

 

2

----

Tableof Contents

 

# *Raw Materials and InputCosts*

# * *

# *In our Building MaterialsDistribution segment, the primary cost is for products procured for resale.After considering discounts and rebates, our products procured for resalerepresent approximately 88% of our segment’s total costs and expenses. Wepurchase the majority of the building materials we distribute from third-partysuppliers. Approximately 90% of the EWP, 20% of the commodity panels, and 2% ofthe lumber purchased by* Building Materials Distributionduring 2009 were purchased from our Wood Products segment. Our vendor baseincludes over 1,200 suppliers. We generally do not have long-term supplycontracts with our vendors. This flexibility and our national presence allow usto obtain favorable price and term arrangements.

# * *

# *Sales, Marketing, andDistribution*

# * *

We conduct our businessthrough a two-step distribution model. This means we resell the products wepurchase from manufacturers to our customers, primarily retail lumber yards andhome centers that then sell the products to the final end users, who aretypically professional builders, independent contractors, and homeownersengaged in residential construction projects. Utilizing centralized informationsystems, each of our distribution centers implements its own distribution andlogistics model tailored to the customers it serves. We operate a fleet oftrucks to deliver materials on a regularly scheduled basis. We have a largedecentralized sales force able to use timely and accurate market informationand local product knowledge to support customers and new products.

 

# *Business Plan*

# * *

# *We intend to continue to expandour building materials distribution network into new geographic markets and togrow in our existing markets by increasing market share and broadening ourproduct line. Sales in this segment are strongly correlated with newresidential construction in the United States. Measured on asales-per-housing-start basis, the business has grown successfully over thelast decade by acquiring facilities, adding new products, opening newlocations, relocating and expanding existing facilities, and capturing localmarket share through superior customer service. The pace at which we executeour business plan will be dependent on future market conditions and thecompetitive environment.*

# * *

***Wood Products***

*** ***

# *Products*

# * *

# *Ourproduct focus is on gaining EWP market share. EWP historically has had more stableprices and higher margins. We are a leading producer of EWP, consisting oflaminated veneer lumber (LVL), a high-strength engineered lumber often used inbeams; I-joists, a structural support typically used in floors and roofs; andlaminated beams. We believe we are the second-largest EWP manufacturer in NorthAmerica, with an estimated market share of approximately 23% in 2009. EWPaccounted for 34% of our sales in this segment in 2009. We also produceplywood, particleboard, dimension lumber, and high-quality ponderosa pinelumber, a premium lumber grade sold primarily to manufacturers of specialtywood windows, moldings, and doors. Our wood products are used primarily in theresidential, light commercial construction, and repair-and-remodeling markets.Most of these products are sold to wholesalers, major retailers, and industrialconverters or through our Building Materials Distribution segment.*

 

3

----

Tableof Contents

 

The following table sets forth the annual capacity andproduction by product for the periods indicated:

 
| ** **                                          | ** ** | **Year Ended December 31** | ** ** |
|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                          | ** ** | **2009**                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                          | ** ** | **(millions)**                  | ** ** |
| **Capacity**  (a) (b)                          |       |                            |       |   |   |   |   |   |   |   |   |
| Laminated veneer lumber (LVL) (cubic feet)  (c)     |       | 27.5                            |       | 27.5 |   | 27.5 |   | 27.5 |   | 25.0 |   |
| Plywood and veneer (sq. ft.) (3/8” basis)  (d) |       | 1,430                           |       | 1,600 |   | 1,600 |   | 1,600 |   | 1,620 |   |
| Lumber (board feet) (e)                             |       | 180                             |       | 230 |   | 250 |   | 270 |   | 270 |   |
| Particleboard (sq. ft.) (3/4” basis)           |       | 170                             |       | 170 |   | 170 |   | 170 |   | 160 |   |
| ** **                                          |       |                            |       |   |   |   |   |   |   |   |   |
| **Production**  (b)                                 |       |                            |       |   |   |   |   |   |   |   |   |
| Laminated veneer lumber (LVL) (cubic feet)  (c)     |       | 7.9                             |       | 11.2 |   | 17.2 |   | 18.7 |   | 19.6 |   |
| I-joists (equivalent lineal feet) (c)               |       | 81                              |       | 109 |   | 194 |   | 202 |   | 228 |   |
| Plywood and veneer (sq. ft.) (3/8” basis)  (d) |       | 1,066                           |       | 1,351 |   | 1,467 |   | 1,546 |   | 1,603 |   |
| Lumber (board feet) (e)                             |       | 141                             |       | 189 |   | 237 |   | 244 |   | 259 |   |
| Particleboard (sq. ft.) (3/4” basis)           |       | 84                              |       | 105 |   | 150 |   | 158 |   | 163 |   |

 

----

(a)                                 Annual capacity is production assuming normal operatingshift configurations. Accordingly, production can exceed capacity under someoperating conditions.

 

(b)                                 In 2008, we soldour wholly owned subsidiary in Brazil, which manufactured veneer. The annualcapacity and production of that subsidiary have been excluded from this table.

 

(c)                                  A portion of LVLproduction is used to manufacture I-joists at two EWP plants. Capacity is basedon LVL production only.

 

(d)                                 Production andcapacity applicable to plywood only. Approximately 10%, 13%, 20%, 22%, and 20%,respectively, of the plywood we produced in 2009, 2008, 2007, 2006, and 2005was utilized internally to produce EWP.

 

Inresponse to the housing downturn, we closed our plywood manufacturing facilityin White City, Oregon, and began an indefinite partial curtailment of ourOakdale, Louisiana, plywood operation in March 2009. The White City,Oregon, and Oakdale, Louisiana, mills represented approximately 1% and 2% ofour 2009 plywood production, respectively. This compares with 6% and 11% in2008. Capacity in 2009 includes our Oakdale, Louisiana, mill.

 

(e)                                  In June 2009,we closed our lumber facility in La Grande, Oregon. This mill representedapproximately 13% of 2009 lumber production, compared with 35% in 2008.

 

In June 2009, wepurchased a lumber manufacturing facility in Pilot Rock, Oregon. This millrepresents approximately 31% of the lumber capacity and 16% of the lumberproduction in 2009.

 

The following table sets forth segment sales; segmentincome (loss) before interest and taxes; depreciation, amortization, anddepletion; and EBITDA for the periods indicated:

 
| ** **                                      | ** ** | **Year  Ended December 31** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|
| ** **                                      | ** ** | **2009  (a)**                    | ** ** | **2008  (b)** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                      | ** ** | **(millions)**                   | ** ** |
| Sales                                           |       | $                                | 550.8      |   | $ | 795.9 |   | $ | 1,010.2 |   | $ | 1,155.9 |   | $ | 1,294.4 |   |
|                                            |       |                             |       |   |   |   |   |   |   |   |   |
| Segment income (loss) before interest and taxes |       | $                                | (77.3      | ) | $ | (55.1 | ) | $ | 23.6 |   | $ | 37.2 |   | $ | 119.4 |   |
| Depreciation, amortization, and depletion       |       | 33.0                             |       | 27.7 |   | 30.0 |   | 27.6 |   | 23.0 |   |
| EBITDA (c)                                      | ** ** | **$**                            | **(44.3**  | **)** | **$** | **(27.4** | **)** | **$** | **53.7** | ** ** | **$** | **64.9** | ** ** | **$** | **142.4** | ** ** |

 

----

(a)                                 In 2009, segmentloss included $8.9 million of expense related to the June 2009closure of our lumber manufacturing facility in La Grande, Oregon, ofwhich $3.7 million was included in EBITDA and $5.2 million wasaccelerated depreciation recorded in “Depreciation, amortization, anddepletion.”

 

(b)                                 In 2008, segmentloss included $11.3 million of expenses related to closing our veneeroperations in St. Helens, Oregon, and our plywood manufacturing facilityin White City, Oregon, partially offset by a $5.7 million net gainrelated to the sale of our wholly owned subsidiary in Brazil.

 

4

----

Table of Contents

 

(c)                                  Segment EBITDAis calculated as segment income (loss) before interest (interest expense,interest income, and change in fair value of interest rate swaps), incometaxes, and depreciation, amortization, and depletion. EBITDA is the primarymeasure used by our chief operating decision makers to evaluate segmentoperating performance and to decide how to allocate resources to segments. See “Item 6.Selected Financial Data” of this Form 10-K for a description of ourreasons for using EBITDA, for a discussion of the limitations of such ameasure, and for a reconciliation of our EBITDA to net income (loss).

 

# *Facilities*

# * *

# *We currently operate three EWP facilities and seven plywoodand veneer plants, five of which manufacture inputs used in our EWP facilities.We also operate three sawmills and one particleboard plant. The followingtable lists annual capacities of our Wood Products facilities as of December 31,2009, and production for the year then ended:*

 
| ** **                                              | ** ** | **Number  of Mills** | ** ** | **Capacity (a)** | ** ** | **Production** | ** ** |
|---------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|----------------|------------|
| ** **                                              | ** ** | ** **           | ** ** | **(millions)**        | ** ** |
| Engineered wood products (EWP) (b)                 |       | 3                    |       |                  |       |           |       |
| Laminated veneer lumber (LVL) (cubic feet)              |       |                 |       | 27.5                  |       | 7.9            |       |
| I-joists (equivalent lineal feet)                       |       |                 |       |                  |       | 81             |       |
| Plywood and veneer (sq. ft.) (3/8” basis) (c) |       | 7                    |       | 1,430                 |       | 1,066          |       |
| Lumber (board feet) (d)                                 |       | 3                    |       | 180                   |       | 141            |       |
| Particleboard (sq. ft.) (3/4” basis)               |       | 1                    |       | 170                   |       | 84             |       |

 

----

(a)                                 Annual capacity is production assuming normal operatingshift configurations. Accordingly, production can exceed capacity under someoperating conditions.

 

(b)                                 A portion of LVLproduction is used to manufacture I-joists at two EWP plants. Capacity is basedon LVL production only.

 

(c)                                  Production and capacity applicable to plywood only.Approximately 10% of the plywood we produced in 2009 was utilized internally toproduce EWP.

 

Inresponse to the housing downturn, we closed our plywood manufacturing facilityin White City, Oregon, and began an indefinite partial curtailment of ourOakdale, Louisiana, plywood operation in March 2009. The White City,Oregon, and Oakdale, Louisiana, mills represented approximately 1% and 2% ofour 2009 plywood production, respectively. Capacity in 2009 includes ourOakdale, Louisiana, mill.

 

(d)                                 In June 2009,we closed our lumber facility in La Grande, Oregon. This mill representedapproximately 13% of 2009 lumber production.

 

In June 2009, wepurchased a lumber manufacturing facility in Pilot Rock, Oregon. This millrepresents approximately 31% of the lumber capacity and 16% of the lumberproduction in 2009.

 

*Raw Materials and Input Costs*

 

*Woodfiber.*  Our primary raw material is wood fiber. Forthe year ended December 31, 2009, wood fiber accounted for 37% ofmaterials, labor, and other operating expenses, including from related parties,in our Wood Products segment. Our plywood and veneer facilities use Douglasfir, white woods, and pine logs as raw materials. We use ponderosa pine,spruce, and white fir logs to manufacture various grades of lumber. Our EWPfacilities in Louisiana and Oregon use veneers and parallel-laminated veneerpanels produced by our facilities and purchased from third parties, togetherwith OSB purchased from third parties, to manufacture LVL and I-joists. Ourmanufacturing facilities are located in close proximity to active wood markets.We have long-term market-based contracts for a significant portion of our fiberneeds.

 

*Other raw materials and energycosts. *We purchase other raw materials and energy used tomanufacture our products in both the open market and through long-termcontracts. These contracts are generally with regional suppliers who agree tosupply all of our needs for a certain raw material or energy at one of ourfacilities. These contracts normally contain minimum purchase requirements andare for terms of various lengths. They also contain price adjustment mechanismsthat take into account changes in market prices. Therefore, although ourlong-term contracts provide us with supplies of raw materials and energy thatare more stable than open-market purchases, in many cases, they may notalleviate fluctuations in market prices.

 

5

----

Tableof Contents

 

*Sales, Marketing, and Distribution*

 

Salesof plywood, lumber, and particleboard are managed centrally by product. Our EWPsales force is managed centrally through a main office that oversees regionalsales teams. Our sales force provides a variety of technical support servicesfor our EWP, including integrated design, engineering, product specificationsoftware, distributor inventory management software, and job-pack preparationsystems.

 

The following table listssales volumes for our Wood Products facilities for the periods indicated:

 
| ** **                                     | ** ** | **Year  Ended December 31** | ** ** |
|------------------------------------------------|------------|----------------------------------|------------|
| ** **                                     | ** ** | **2009  (a)**                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                     | ** ** | **(millions)**                   | ** ** |
| Laminated veneer lumber (LVL)(cubic feet) |       | 5.6                              |       | 7.6 |   | 10.6 |   | 12.1 |   | 12.3 |   |
| I-joists (equivalent lineal feet)              |       | 87                               |       | 117 |   | 188 |   | 219 |   | 243 |   |
| Plywood (sq. ft.) (3/8” basis)            |       | 992                              |       | 1,228 |   | 1,223 |   | 1,268 |   | 1,328 |   |
| Lumber (board feet)                            |       | 146                              |       | 191 |   | 231 |   | 277 |   | 327 |   |
| Particleboard (sq. ft.) (3/4” basis)      |       | 80                               |       | 104 |   | 151 |   | 157 |   | 165 |   |

 

----

(a)                                 The number ofhousing starts in the U.S. has declined in each of the last five years (from2.07 million in 2005 to 0.55 million in 2009) and so has the sales volumefor most of our products. The 0.55 million U.S. housing start level experiencedin 2009 was only 36% of the annual average level experienced over the prior50-year period and was 39% below the second worst year on record, whichoccurred in 2008.

 

*Business Plan*

 

Our plan is to continue to respond to difficult marketconditions by actively managing our production facilities to balance supplywith demand. In addition, we plan to further expand our market position in EWP.We believe that EWP will continue to gain market share from dimensional lumberproducts and that margins for EWP, over time, will be higher and more stablethan those for most dimensional lumber products. We are focused on leveraging ourmanufacturing position, comprehensive customer service offering, design supportcapabilities, and efficient distribution network to continue to gain marketshare among home builders, building products retailers, and other distributors.

 

***Corporate and Other***

 

Our Corporate and Othersegment includes primarily corporate support staff services, related assets andliabilities, and foreign exchange gains and losses. These support servicesinclude, but are not limited to, finance, accounting, legal, informationtechnology, and human resource functions. Since the Sale, we have purchasedmany of these services from Boise Inc. under an Outsourcing ServicesAgreement, under which Boise Inc. provides a number of corporate staffservices to us at cost. See Note 5, Transactions With Related Parties, ofthe Notes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of this Form 10-K for more information.Prior to the Sale, this segment also included certain rail and truck transportationbusinesses and related assets. All of the sales in the table below relate tothese businesses.

 

6

----

Table of Contents

 

The following table sets forth segment sales; segmentloss before interest and taxes; depreciation, amortization, and depletion; andEBITDA for the periods indicated:

 
| ** **                                | ** ** | **Year  Ended December 31** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|
| ** **                                | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                | ** ** | **(millions)**                   | ** ** |
| Sales                                     |       | $                                | —     |   | $ | 8.6 |   | $ | 58.9 |   | $ | 60.7 |   | $ | 70.0 |   |
|                                      |       |                             |       |   |   |   |   |   |   |   |   |
| Segment loss before interest and taxes    |       | $                                | (13.1      | ) | $ | (25.5 | ) | $ | (23.1 | ) | $ | (37.1 | ) | $ | (29.4 | ) |
| Depreciation, amortization, and depletion |       | 0.3                              |       | 0.5 |   | 3.8 |   | 5.4 |   | 5.5 |   |
| EBITDA (a)                                | ** ** | **$**                            | **(12.8**  | **)** | **$** | **(25.0** | **)** | **$** | **(19.4** | **)** | **$** | **(31.9** | **)** | **$** | **(23.8** | **)** |

 

----

(a)                                 Segment EBITDAis calculated as segment income (loss) before interest (interest expense,interest income, and change in fair value of interest rate swaps), incometaxes, and depreciation, amortization, and depletion. EBITDA is the primarymeasure used by our chief operating decision makers to evaluate segmentoperating performance and to decide how to allocate resources to segments. See “Item 6.Selected Financial Data” of this Form 10-K for a description of ourreasons for using EBITDA, for a discussion of the limitations of such ameasure, and for a reconciliation of our EBITDA to net income (loss).

 

***Customers***

 

Ourcustomer base includes a wide range of customers across multiple marketsegments and various end markets. For the year ended December 31, 2009,sales to one customer, Home Depot, accounted for $227.6 million, orapproximately 12%, of total sales. Sales to Home Depot of $171.3 millionand $56.3 million were recorded in our Building Materials Distribution andWood Products segments, respectively. No other single third-party customeraccounted for 10% or more of consolidated trade sales or total sales.

 

*BuildingMaterials Distribution. *In 2009, a majority of our sales in thissegment were to pro dealers and retail distributors that sell buildingmaterials to professional builders in the residential, light commercialconstruction, and repair-and-remodeling markets. We also service retaillumberyards, home improvement centers, and other industrial accounts.

 

*WoodProducts. *Our Building Materials Distributionsegment is our Wood Products segment’s largest customer, representingapproximately 34% of Wood Products’ overall sales, including approximately 67%of its EWP sales, in 2009. Our third-party customers in this segment includewholesalers, major retailers, and industrial converters in both domestic andexport markets.

 

***Competition***

 

The markets in which wecompete are highly competitive. The competitive environmentin the U.S. in 2009 was particularly difficult because of weak demand resultingfrom the significant decline in new residential and light commercialconstruction and lower repair-and-remodel spending. Industry capacity in anumber of products, including those we produce and distribute, far exceeds thecurrent level of demand. Our products and services compete with similarproducts manufactured and distributed by others. Many factors influence ourcompetitive position in the markets in which we compete. Those factors includeprice, service, quality, product selection, and convenience of location.

 

Someof our competitors are larger than we are and have greater financial resources.These resources may afford those competitors greater purchasing power,increased financial flexibility, and more capital resources for expansion andimprovement, which may enable those competitors to compete more effectivelythan we can.

 

7

----

Tableof Contents

 

*Building Materials Distribution*.  The buildingmaterials distribution markets in which we operate are highly fragmented, andwe compete in each of our geographic and product markets with national,regional, and local distributors. We compete on the basis of delivered cost,product selection and availability, quality of service, and compatibility withcustomers’ needs. We compete with other national stocking distributors as wellas wholesale brokers and buying cooperatives, some of which have sales greaterthan ours and/or have more extensive relationships with pro dealers and retaildistributors. If one or more of these competitors are able to leveragegeographic coverage and/or customer relationships into new markets, our growthstrategy in this segment could be negatively affected.In recent years, there has been consolidation among home builders, prodealers, and big box retailers. As the customer base consolidates, this dynamiccould impact our ability to maintain margins. Proximity to customers is an importantfactor in minimizing shipping costs and facilitating quick order turnaround andon-time delivery. We believe our ability to obtain quality materials, from bothinternal and external sources, and our focus on customer service are ourprimary competitive advantages in this segment.

 

*Wood Products*.  Our markets inthis segment are large and highly competitive. There are several majorproducers of most of our products, including EWP and plywood, as well asnumerous local and regional manufacturers. We have leading market positions inthe manufacture of EWP, plywood, and ponderosa pine lumber. We hold muchsmaller competitive positions with respect to our other building products. Ourproducts in this segment compete primarily on the basis of price, quality, andparticularly with respect to EWP, levels of customer service. Most of ourcompetitors are located in the United States and Canada, although there iscompetition from manufacturers in other countries. We compete not only withmanufacturers and distributors of similar building products but also withproducts made from alternative materials, such as steel and plastic. Some ofour competitors also enjoy strong reputations for product quality and customerservice, and these competitors may have strong relationships with certain distributors,making it difficult for our products to gain additional market share. Some ofour competitors in this segment are more vertically integrated than we areand/or have access to internal sources of wood fiber, which may allow them tosubsidize their base manufacturing business in periods of rising fiber prices.

 

***Environmental Issues***

 

Our discussion ofenvironmental issues is presented under the caption “Environmental” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and “Item 3. Legal Proceedings” of this Form 10-K.

 

###### ***Capital Investment***

###### *** ***

Information concerning ourcapital expenditures is presented in “Investment Activities” under “Liquidityand Capital Resources” in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” of this Form 10-K.

 

***Seasonal and InflationaryInfluences***

 

We are exposed tofluctuations in quarterly sales volumes and expenses due to seasonal factors.These seasonal factors are common in the building products industry. Seasonalchanges in levels of building activity affect our building products businesses,which are dependent on housing starts, repair-and-remodel activities, and lightcommercial construction activities. We typically report lower sales in thefirst and fourth quarters due to the impact of poor weather on the constructionmarket, and we generally have higher sales in the second and third quarters,reflecting an increase in construction due to more favorable weatherconditions. We typically have higher working capital in the second and thirdquarters due to the summer building season. Although we generally expect thesetrends to continue for the foreseeable future, we have reduced our inventory aspart of our effort to manage to the current weakened demand environment in thehousing market. Seasonally cold weather increases costs, especially energyconsumption, at most of our manufacturing facilities.

 

Our major costs of production are labor, wood fiber,energy, and chemicals. Energy costs, particularly for electricity, natural gas,and fuel oil, have been volatile in recent years. In 2009, energy and chemicalcosts were lower than in 2008 in response to global economic weakness.

 

8

----

Tableof Contents

 

***Acquisitionsand Divestitures***

 

Wemay engage in acquisition and divestiture discussions with other companies andmake acquisitions and divestitures from time to time. We review our operationsand dispose of assets that fail to meet our criteria for return on investmentor cease to warrant retention for other reasons. For more information about ouracquisitions and divestitures, see “Sale of Our Paper and Packaging &Newsprint Assets,” “Acquisitions,” and “Divestitures” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Form 10-K.

 

***Employees***

 

As of January 31, 2010, we had approximately 4,240 employees.Approximately 1,460, or 34%, of these employees work pursuant to collectivebargaining agreements. As of January 31, 2010, we had 12 collectivebargaining agreements, of which one agreement, representing 24 employees,is up for renewal in 2010. We do not expect material work interruptions or increases in our costsduring the course of the negotiations with our collective bargaining units.Nevertheless, if our expectations are not accurate, we could experience amaterial labor disruption or significantly increased labor costs at one or moreof our facilities, any of which could prevent us from meeting customer demandor reduce our sales and profitability.

 

***Identification of Executive Officers***

 

Information with respect to our executive officers isset forth in “Item 10. Directors, Executive Officers, and CorporateGovernance” of this Form 10-K.

 

***ITEM 1A.             RISK FACTORS***

 

This Form 10-Kcontains forward-looking statements. Statements that are not historical orcurrent facts, including statements about our expectations, anticipatedfinancial results, projected capital expenditures, and future businessprospects, are forward-looking statements. You can identify these statements byour use of words such as “may,” “will,” “expect,” “believe,” “should,” “plan,” “anticipate,”and other similar expressions. You can find examples of these statementsthroughout this report, including the description of our business in “Item 1.Business” and the “Executive Overview” section of Management’s Discussion andAnalysis of Financial Condition and Results of Operations. We cannot guaranteethat our actual results will be consistent with the forward-looking statementswe make in this report. You should review carefully the risk factors listedbelow, as well as those factors listed in other documents we file with the SEC.We do not assume an obligation to update any forward-looking statement.

 

***Manyof the products we manufacture, purchase, and resell are commodities whoseprice is determined by the market’s supply and demand for such products, andthe markets in which we operate are cyclical and competitive. The depressedstate of the housing, construction, and home improvement markets could continueto adversely affect demand for our products.***  Many of thebuilding products we produce or distribute, including oriented strand board,plywood, lumber, and particleboard, are commodities that are widely availablefrom other producers or distributors with prices and volumes determinedfrequently in an auction market based on participants’ perceptions ofshort-term supply and demand factors. At times, the price for any one or moreof the products we produce may fall below our cash production costs, requiringus to either incur short-term losses on product sales or cease production atone or more of our manufacturing facilities. Therefore, our profitability withrespect to these commodity products depends, in significant part, on managingour cost structure, particularly raw materials, labor, and energy prices, whichrepresent the largest components of our operating costs.

 

Historically, demand for the products we manufacture,as well as the products we purchase and distribute, has been closely correlatedwith new residential construction in the United States and, to a lesser extent,light commercial construction and residential repair-and-remodeling activity.New residential construction was extraordinarily low in 2009, andso was demand for the products we manufacture and distribute. The0.55 million U.S. housing start level experienced in 2009 was only 36% ofthe annual average level experienced over the prior 50-year period and was 39%below the second worst year on record, which occurred in 2008. There is significant uncertaintyregarding the timing and extent of any recovery in such construction activityand resulting product demand levels as we move into 2010.

 

9

----

Tableof Contents

 

Demand for new residential construction is influencedby seasonal weather factors, mortgage availability and rates, unemploymentlevels, household formation rates, immigration rates, residential vacancy andforeclosure rates, demand for second homes, existing home prices, consumerconfidence, and other general economic factors.

 

Wood products industrysupply is influenced primarily by price-induced changes in the operating ratesof existing facilities but is also influenced over time by the introduction ofnew product technologies, capacity additions, and the impact of logavailability restrictions. The balance of wood products supply and demand inthe U.S. is also heavily influenced by imported products, principally fromCanada.

 

None of the foregoing issubject to our control, and as a result, our profitability and cash flow mayfluctuate materially in response to changes in the supply and demand balancefor our primary products.

 

***Currentadverse conditions may increase the credit risk from our customers. ***Our Building Materials Distribution and Wood Productssegments extend credit to numerous customers who are heavily exposed to theeffects of the downturn in the housing market. Current housing marketconditions could result in financial failures of one or more of our significantcustomers, which could impair our ability to fully collect receivables fromsuch customers.

 

***A material disruption at one of our manufacturing facilitiescould prevent us from meeting customer demand, reduce our sales, and/ornegatively affect our financial results.  ***Any of our manufacturing facilities, orany of our machines within an otherwise operational facility, could ceaseoperations unexpectedly due to a number of events, including but not limitedto:

 
| · |   | An equipment failure,  particularly a press at one of our major EWP production facilities; |
|--------|--------|--------------------------------------------------------------------------------------------|
|   |   |                                                                                       |
| · |   | Fires, floods,  earthquakes, hurricanes, or other catastrophes;                            |
|   |   |                                                                                       |
| · |   | Ecoterrorism or threats  of ecoterrorism;                                                  |
|   |   |                                                                                       |
| · |   | Labor difficulties; or                                                                     |
|   |   |                                                                                       |
| · |   | Other operational  problems.                                                               |

 

Any downtime or facility damage could prevent us from meetingcustomer demand for our products and/or require us to make unplanned capitalexpenditures. If our machines or facilities were to incur significant downtime,our ability to meet our production capacity targets and satisfy customerrequirements would be impaired, resulting in lower sales and net income.

 

***Our manufacturing businesses may have difficulty obtaininglogs and fiber at favorable prices or at all****.  *Wood fiber is our principal raw material,which accounted for approximately 37% of the aggregate amount of materials,labor, and other operating expenses, including from related parties, for ourWood Products segment in 2009. Wood fiber is a commodity, and prices have historicallybeen cyclical. Availability of residual wood fiber for our particleboardoperation has been negatively affected by significant mill closures andcurtailments that have occurred among solid-wood product producers. Futuredevelopment of wood cellulose biofuel or other new sources of wood fiber demandcould interfere with our ability to source wood fiber or significantly raiseour costs.

 

Future domestic orforeign legislation and litigation concerning the use of timberlands, theprotection of endangered species, forest-based carbon sequestration, thepromotion of forest health, and the response to and prevention of catastrophicwildfires can also affect log and fiber supply from government and privatelands. Availability of harvested logs and fiber may be further limited by fire,insect infestation, disease, ice storms, windstorms, hurricanes, flooding, andother natural and man-made causes, thereby reducing supply and increasingprices.

 

***We are subject to environmental regulation and environmentalcompliance expenditures, as well as other potential environmentalliabilities. ***Our businesses are subject to a wide range of general andindustry-specific environmental laws and regulations, particularly with respectto air emissions, wastewater discharges, solid and hazardous waste management,and site remediation. Enactment of new environmental laws or regulations,including those aimed at addressing greenhouse gas emissions, or changes inexisting laws or regulations might require significant expenditures or restrictoperations. We may be unable to generate funds or other sources of liquidityand capital to fund unforeseen environmental liabilities or expenditures.

 

10

----

Tableof Contents

 

As an owner and operatorof real estate, we may be liable under environmental laws for cleanup and otherdamages, including tort liability, resulting from releases of hazardoussubstances on or from our properties. We may have liability under these lawswhether or not we knew of, or were responsible for, the presence of thesesubstances on our property, and in some cases, our liability may not be limitedto the value of the property.

 

***Significant changesin discount rates, actual investment return on pension assets and other factorscould affect our earnings, equity, and pension contributions in future periods.**** *Our earnings may be positively or negatively impactedby the amount of income or expense we record for our pension plans. U.S.generally accepted accounting principles require that we calculate income orexpense for the plans using actuarial valuations. These valuations reflectassumptions relating to financial market and other economic conditions. Changesin key economic indicators can change the assumptions. The most significantyear-end assumptions used to estimate pension expense are the discount rate andthe expected long-term rate of return on plan assets. In addition, we arerequired to make an annual measurement of plan assets and liabilities, whichmay result in a significant change to equity through a reduction or increase toOther Comprehensive Income (Loss). A decline in the market value of the pensionassets will increase our funding requirements. Our pension plan liabilities aresensitive to changes in interest rates. As interest rates decrease, theliabilities increase, potentially increasing benefit costs and fundingrequirements. Changes in demographics, including increased numbers ofretirements or changes in life expectancy assumptions may also increase thefunding requirements of the obligations related to the pension plans. For morediscussion regarding how our financial statements can be affected by pensionplan estimates, see “Pensions” included in “Critical Accounting Estimates” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Form 10-K.

 

***Labor disruptions or increased labor costs could adverselyaffect our business.  ***We could experience a material labor disruption orsignificantly increased labor costs at one or more of our facilities, either inthe course of negotiations of a labor agreement or otherwise, any of whichcould prevent us from meeting customer demand or increase costs, therebyreducing our sales and profitability. As of January 31, 2010, we had approximately 4,240 employees.Approximately 1,460, or 34%, of these employees work pursuant to collectivebargaining agreements.

 

***If our long-livedassets become impaired, we may be required to record noncash impairment chargesthat could have a material impact on our results of operations.***  We review the carrying value oflong-lived assets for impairment when events or changes in circumstancesindicate that the carrying amount of assets may not be recoverable. Asdiscussed in “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” the downturn in the residentialconstruction market continued throughout 2009 and has become the most severehousing downturn in U.S. history. As a result, the financial performance of ourbusiness segments was weak in 2009, as U.S. new residential housing demandcontinued to decline from the low levels experienced in 2008. We expect thedemand for the products we distribute and manufacture will likely remain weakin 2010. However, along with many forecasters, we believe U.S. housing demandwill improve in the long term based on population demographics and a variety ofother factors. We currently believe we have adequate support for the carryingvalue of all of our assets based on anticipated undiscounted cash flows thatwill result from our estimates of future demand, pricing, and production costs,assuming certain levels of capital expenditures. However, should the marketsfor our products deteriorate further or should we decide to invest capitaldifferently and should other cash flow assumptions change, it is possible thatwe will be required to record noncash impairment charges in the near term that couldhave a material impact on our results of operations.

 

***The terms of the Revolving Credit Facility and the indenturegoverning our senior subordinated notes restrict our ability to operate ourbusiness and to pursue our business strategies. ***Our five-year $290 million senior secured asset-based revolvingcredit facility (Revolving Credit Facility) and the indenture governing our senior subordinatednotes contain, and any future indebtedness of ours would likely contain, anumber of restrictive covenants that impose customary operating and financialrestrictions on us. The Revolving Credit Facility and the indenture governingour senior subordinated notes limit our ability, among other things, to makematerial acquisitions, enter into new lines of business, and incur additionalindebtedness.

 

***As a result of the Sale, we nowrely on Boise Inc. for many of our administrative services.***  In conjunction with the 2008 sale of ourPaper and Packaging & Newsprint Assets (the Sale),

 

11

----

Table of Contents

 

we entered into an Outsourcing ServicesAgreement under which Boise Inc. provides a number of corporate staff servicesto us at cost. These services include information technology, accounting, andhuman resource services. Most of the Boise Inc. staff that provide theseservices are providing the same services they provided when they were ouremployees. Nevertheless, we cannot be assured that these employees will remainwith Boise Inc. or that there will not be a disruption in the continuity orlevel of service provided. If Boise Inc. is unwilling or unable to provideservices at the same quality levels as those services have been provided in thepast, our business and compliance activities and results of operations could besubstantially and negatively affected.

 

***ITEM 1B.             UNRESOLVEDSTAFF COMMENTS***

 

We have no unresolved comments from the Commissionstaff.

 

12

----

Table of Contents

 

***ITEM2.******                                                ******PROPERTIES***

 

Ourproperties are in good operating condition and are suitable and adequate forthe operations for which they are used. We own substantially all equipment usedin our facilities. Information concerning production capacity and theutilization of our manufacturing facilities is presented in “Item 1.Business” of this Form 10-K.

 

The following is a list of our facilities by segmentas of February 28, 2010. We lease office space for our corporateheadquarters in Boise, Idaho.

 

***Building MaterialsDistribution***

 

The following table summarizes our 31 BuildingMaterials Distribution facilities:

 
| **Location**                  | ** ** | **Owned********or********Leased** | ** ** | **Approximate********Warehouse********Square Footage** |
|-------------------------------|------------|-----------------------------------|------------|--------------------------------------------------------|
| Phoenix, Arizona              |       | Owned/Leased                      |       | 32,027                                                 |
| Lathrop,  California          |       | Leased                            |       | 162,000                                                |
| Riverside,  California        |       | Leased                            |       | 131,263                                                |
| Denver, Colorado              |       | Owned                             |       | 203,212                                                |
| Grand Junction,  Colorado     |       | Owned                             |       | 82,000                                                 |
| Milton, Florida               |       | Leased                            |       | 80,000                                                 |
| Orlando, Florida              |       | Owned                             |       | 105,000                                                |
| Auburn, Georgia               |       | Leased                            |       | 155,000                                                |
| Boise, Idaho                  |       | Owned                             |       | 62,297                                                 |
| Idaho Falls,  Idaho           |       | Owned/Leased                      |       | 51,752                                                 |
| Rochelle,  Illinois           |       | Leased                            |       | 86,000                                                 |
| Biddeford, Maine              |       | Leased                            |       | 55,000                                                 |
| Annapolis  Junction, Maryland |       | Owned/Leased                      |       | 14,000                                                 |
| Westfield, Massachusetts      |       | Leased                            |       | 112,400                                                |
| Wayne, Michigan               |       | Leased                            |       | 40,500                                                 |
| Lakeville,  Minnesota         |       | Leased                            |       | 72,000                                                 |
| Billings,  Montana            |       | Owned                             |       | 77,024                                                 |
| Portsmouth, New  Hampshire    |       | Owned/Leased                      |       | 39,400                                                 |
| Delanco, New  Jersey          |       | Owned/Subleased                   |       | 15,000                                                 |
| Albuquerque, New  Mexico      |       | Owned                             |       | 30,000                                                 |
| Greensboro,  North Carolina   |       | Leased                            |       | 88,140                                                 |
| Marion, Ohio                  |       | Leased                            |       | 60,250                                                 |
| Tulsa, Oklahoma               |       | Owned                             |       | 128,552                                                |
| Memphis,  Tennessee           |       | Owned                             |       | 38,926                                                 |
| Dallas, Texas                 |       | Owned                             |       | 137,840                                                |
| Sugarland, Texas              |       | Leased                            |       | 104,949                                                |
| Salt Lake City,  Utah         |       | Owned                             |       | 114,610                                                |
| Spokane,  Washington          |       | Owned/Leased                      |       | 43,060                                                 |
| Vancouver,  Washington        |       | Leased                            |       | 50,600                                                 |
| Woodinville,  Washington      |       | Owned/Leased                      |       | 32,200                                                 |
| Yakima,  Washington           |       | Owned/Leased                      |       | 33,779                                                 |

 

 

13

----

Tableof Contents

 

 

###### ***Wood Products***

 

We own all of our Wood Products manufacturingfacilities. The following table summarizes our Wood Products facilities:

 
| **Facility  Type**         | ** ** | **Number of  Facilities** | ** ** | **Locations**                              |
|----------------------------|------------|---------------------------|------------|--------------------------------------------|
| LVL/I-joist  plants        |       | 3                         |       | Louisiana,  Oregon, and Canada             |
| Plywood and  veneer plants |       | 7                         |       | Louisiana (2),  Oregon (4), and Washington |
| Sawmills                   |       | 3                         |       | Oregon  (2) and Washington            |
| Particleboard  plant       |       | 1                         |       | Oregon                                     |
| Wood beam plant            |       | 1                         |       | Idaho                                      |

 

***ITEM 3.                LEGALPROCEEDINGS***

 

We are a party to routine legal proceedings that arisein the ordinary course of our business. We are not currently a party to anylegal proceedings or environmental claims that we believe would have a materialadverse effect on our financial position, results of operations, or cash flows.

 

***ITEM4.******                RESERVED***

 

14

----

Table of Contents

 

**PART II**

 

***ITEM5.******                                                ******MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, ANDISSUER PURCHASES OF EQUITY SECURITIES***

 

Weare a limited liability company, and the equity in our company is neitherlisted nor publicly traded in any market. The equity units issued andoutstanding on February 28, 2010, were as follows:

** **
| Series A Common Units |   | 66,000,000  |
|----------------------------|--------|-------------|
| Series B Common Units |   | 535,323,527 |
| Series C Common Units |   | 28,222,367  |

 

As ofFebruary 28, 2010, OfficeMax owned all of the Series A equity units.Forest Products Holdings, L.L.C. (FPH) and OfficeMax owned 426,323,527 and109,000,000 Series B equity units, respectively. FPH holds all 28,222,367 Series Cequity units.

 

The Series Aequity units accrue dividends daily at a rate of 8% per annum, compoundedsemiannually, on the holder’s capital contributions (net of any distributionspreviously received by such holder) plus any accumulated dividends. Accrued andunpaid dividends accumulate on the Series A equity units on June 30and December 31 of each year. At December 31, 2009 and 2008,$25.9 million and $19.2 million, respectively, of dividends wereaccrued on our Consolidated Balance Sheets as an increase in the value of the Series Aequity units. Neither the Series B nor Series C equity units accruedividends, but they do participate in distributions (liquidating andotherwise).

 

In 2004, most of our keymanagers purchased FPH Series B common units and were issued a grant ofFPH Series C common units. In addition, from time to time additionalgrants of Series C common units have been made to selected employees anddirectors. Each issue or award of equity by FPH to our employees or directorsis matched by a parallel issuance of the same amount of our equity on the sameterms to FPH. The equity held by our employees and directors pursuant to suchtransactions is treated as ownership of a beneficial interest in a like numberof units of our common units. See “Item 13. Certain Relationships andRelated Transactions, and Director Independence” of this Form 10-K andNote 13, Long-Term Incentive Compensation Plans, of the Notes toConsolidated Financial Statements in “Item 8. Financial Statements andSupplementary Data” of this Form 10-K. Under the terms of our operatingagreements neither we nor FPH have authority to issue such equity absentspecific ad hoc authorization by our respective boards of directors.

 

15

----

Tableof Contents

 

***ITEM 6.                SELECTEDFINANCIAL DATA***

 

The following table setsforth our selected financial data for the periods indicated and should be readin conjunction with the disclosures in “Item 7. Management’s Discussionand Analysis of Financial Condition and Results of Operations” and “Item 8.Financial Statements and Supplementary Data” of this Form 10-K.

 
| ** **                                                                                     | ** ** | **Year Ended December 31** | ** ** |
|------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                     | ** ** | **2009 (a)**                    | ** ** | **2008 (b)** | ** ** | **2007 (c)** | ** ** | **2006 (d)** | ** ** | **2005 (e)** | ** ** |
| ** **                                                                                     | ** ** | **(millions)**                  | ** ** |
| **Statement  of income (loss) data**                                                           | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                                                      | ** ** | **$**                           | **1,973**  | ** ** | **$** | **2,977** | ** ** | **$** | **5,413** | ** ** | **$** | **5,780** | ** ** | **$** | **5,907** | ** ** |
|                                                                                           | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  income (loss)                                                                             | ** ** | **$**                           | **(19**    | **)** | **$** | **(288** | **)** | **$** | **128** | ** ** | **$** | **72** | ** ** | **$** | **121** | ** ** |
|                                                                                           | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Earnings  before interest, taxes, depreciation, amortization, and depletion  (EBITDA) (f) | ** ** | **$**                           | **44**     | ** ** | **$** | **(218** | **)** | **$** | **349** | ** ** | **$** | **339** | ** ** | **$** | **401** | ** ** |
| ** **                                                                                     | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Balance sheet data (at end of year)**                                                        | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                                                                                     | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current  assets                                                                                |       | $                               | 623        |   | $ | 644 |   | $ | 2,381 |   | $ | 1,083 |   | $ | 1,136 |   |
| Property  and equipment, net                                                                   |       | 279                             |       | 301 |   | 337 |   | 1,503 |   | 1,549 |   |
| Investment  in equity affiliate                                                                |       | 63                              |       | 21 |   | — |   | — |   | — |   |
| Deferred  financing costs                                                                      |       | 6                               |       | 8 |   | 23 |   | 31 |   | 38 |   |
| Other                                                                                          |       | 30                              |       | 26 |   | 33 |   | 88 |   | 91 |   |
|                                                                                           | ** ** | **$**                           | **1,001**  | ** ** | **$** | **1,000** | ** ** | **$** | **2,774** | ** ** | **$** | **2,705** | ** ** | **$** | **2,814** | ** ** |
|                                                                                           | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Liabilities and capital**                                                                    | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current  liabilities                                                                           |       | $                               | 140        |   | $ | 145 |   | $ | 605 |   | $ | 504 |   | $ | 546 |   |
| Long-term  debt, less current portion                                                          |       | 303                             |       | 315 |   | 1,113 |   | 1,214 |   | 1,366 |   |
| Note  payable to related party, net                                                       |       | —                          |       | — |   | — |   | — |   | 271 |   |
| Other                                                                                          |       | 128                             |       | 184 |   | 64 |   | 148 |   | 153 |   |
| Redeemable equity units                                                                        |       | 8                               |       | 6 |   | 27 |   | 24 |   | 13 |   |
| Capital                                                                                        |       | 422                             |       | 350 |   | 965 |   | 815 |   | 465 |   |
| ** **                                                                                     | ** ** | **$**                           | **1,001**  | ** ** | **$** | **1,000** | ** ** | **$** | **2,774** | ** ** | **$** | **2,705** | ** ** | **$** | **2,814** | ** ** |

 

----

(a)                                  The followingwere included in 2009 net loss:

 

·                  $43.0 millioncharge for the other-than-temporary impairment of our investment inBoise Inc.;

 

·                  $42.8 milliongain on the sale of 18.8 million shares of Boise Inc. stock;

 

·                  $6.0 milliongain on the repurchase of $11.9 million of senior subordinated notes; and

 

·                  $8.9 million of expense related to the closure ofour lumber manufacturing facility in La Grande, Oregon.

 

(b)           The following were included in 2008 net loss:

 

·                  Operatingresults of the Paper and Packaging & Newsprint businesses through February 21,2008;

 

·                  $208.1 millioncharge for the other-than-temporary impairment of our investment inBoise Inc.;

 

·                  $11.3 millionof expense related to closing our veneer operations in St. Helens, Oregon,and our plywood manufacturing facility in White City, Oregon; and

 

·                  $6.3 millionof expense related to changes in the fair value of our interest rate swaps,which were terminated in February 2008.

 

(c)           The following were included in 2007 net income:

 

·                  $4.4 milliongain for changes in our retiree healthcare programs;

 

·                  Approximately $8.4 million of income related tothe change in the fair value of interest rate swaps in connection with therepayment of some of our variable-rate debt, partially offset by$4.6 million of expense related to changes in the fair value of ourinterest rate swaps that we accounted for as economic hedges; and

 

16

----

Table of Contents

 

·                  $6.3 million of expense related to the write-off ofdeferred financing costs in connection with the repayment of debt.

 

(d)                                 Net income in 2006 included a $3.7 million gain forchanges in our retiree healthcare programs.

 

(e)           The following were included in 2005 net income:

 

·                  $9.9 million net gain for the changein the fair value of interest rate swaps;

 

·                  $43.0 millionof expense related to the write-off of deferred financing costs in connectionwith the repayment of debt; and

 

·                  $9.9 milliongain for changes in our retiree healthcare programs.

 

(f)            The following table reconciles netincome (loss) to EBITDA for the periods indicated:

 
| ** **                                  | ** ** | **Year Ended December 31** | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|
| ** **                                  | ** ** | **2009**                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                  | ** ** | **(millions)**                  | ** ** |
| Net income (loss)                           |       | $                               | (19        | ) | $ | (288 | ) | $ | 128 |   | $ | 72 |   | $ | 121 |   |
| Change in fair value of interest rate swaps |       | —                          |       | 6 |   | (4 | ) | — |   | (10 | ) |
| Interest expense                            |       | 23                              |       | 34 |   | 97 |   | 112 |   | 166 |   |
| Interest income                             |       | (1                              | )          | (8 | ) | (4 | ) | (4 | ) | (3 | ) |
| Income tax provision (benefit)              |       | 1                               | ** ** | **—** |   | 8 |   | 4 |   | (2 | ) |
| Depreciation, amortization, and depletion   |       | 41                              |       | 36 |   | 124 |   | 155 |   | 129 |   |
| EBITDA                                      | ** ** | **$**                           | **44**     | ** ** | **$** | **(218** | **)** | **$** | **349** | ** ** | **$** | **339** | ** ** | **$** | **401** | ** ** |

 

EBITDArepresents income (loss) before interest (interest expense, interest income,and change in fair value of interest rate swaps), income taxes, anddepreciation, amortization, and depletion. EBITDA is the primary measure usedby our chief operating decision makers to evaluate segment operatingperformance and to decide how to allocate resources to segments. We believeEBITDA is useful to investors because it provides a means to evaluate theoperating performance of our segments and our company on an ongoing basis usingcriteria that are used by our internal decision makers and because it isfrequently used by investors and other interested parties in the evaluation ofcompanies. We believe EBITDA is a meaningful measure because it presents atransparent view of our recurring operating performance and allows managementto readily view operating trends, perform analytical comparisons, and identifystrategies to improve operating performance. For example, we believe that theinclusion of items such as taxes, interest expense, and interest incomedistorts management’s ability to assess and view the core operating trends inour segments. EBITDA, however, is not a measure of our liquidity or financialperformance under generally accepted accounting principles (GAAP) and shouldnot be considered as an alternative to net income (loss), income (loss) fromoperations, or any other performance measure derived in accordance with GAAP oras an alternative to cash flow from operating activities as a measure of ourliquidity. The use of EBITDA instead of net income (loss) or segment income(loss) has limitations as an analytical tool, including the inability todetermine profitability; the exclusion of interest expense, interest income,change in fair value of interest rate swaps, and associated significant cashrequirements; and the exclusion of depreciation, amortization, and depletion.Management compensates for these limitations by relying on our GAAP results.Our measures of EBITDA are not necessarily comparable to other similarly titledcaptions of other companies due to potential inconsistencies in the methods ofcalculation.

 

17

----

Tableof Contents

 

***ITEM7.******                                                ******MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS***

 

***Understanding Our FinancialInformation***

 

This Management’s Discussion and Analysis of Financial Condition andResults of Operations should be read in conjunction with our consolidatedfinancial statements and related notes and other financial informationappearing elsewhere in this Form 10-K. The following discussion includesstatements regarding our expectations with respect to our future performance,liquidity, and capital resources. Such statements, along with any othernonhistorical statements in the discussion, are forward-looking. These forward-looking statements include,without limitation, any statement that may predict, indicate, or imply futureresults, performance, or achievements and may contain the words “may,” “will,” “expect,”“believe,” “should,” “plan,” “anticipate,” and other similar expressions. Allof these forward-looking statements are based on estimates and assumptions madeby our management that, although believed by us to be reasonable, areinherently uncertain. Theseforward-looking statements are subject to numerous risks and uncertainties,including, but not limited to, the risks and uncertainties described in “Item 1A.Risk Factors” of this Form 10-K, as well as those factors listed in otherdocuments we file with the Securities and Exchange Commission (SEC). We do notassume an obligation to update any forward-looking statement. Our actualresults may differ materially from those contained in or implied by any of theforward-looking statements in this Form 10-K.

 

*Background*

 

Boise Cascade Holdings, L.L.C. is a privately-heldbuilding products company headquartered in Boise, Idaho. Our operations beganon October 29, 2004 (inception), when we acquired the forest products andpaper assets of OfficeMax (the Forest Products Acquisition). As used in this Form 10-K,the terms “BC Holdings,” “we,” and “our” refer to Boise Cascade Holdings,L.L.C., and its consolidated subsidiaries. Our wholly owned subsidiary, BoiseCascade, L.L.C., is a leading U.S. wholesale distributor of building productsand one of the largest producers of engineered wood products and plywood inNorth America. We are also a shareholder of Boise Inc., a publicly tradedNorth American paper and packaging producer. See “Operating Results” in thisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations for more information related to our investment in Boise Inc.

 

We operate our business using three reportablesegments:  (1) Building MaterialsDistribution, which is a wholesale distributor of building materials, (2) WoodProducts, which manufactures and sells engineered wood products (EWP), plywood,particleboard, dimension lumber, and high-quality ponderosa pine lumber, and (3) Corporateand Other, which includes corporate support staff services, related assets andliabilities, and foreign exchange gains and losses. These segments representdistinct businesses that are managed separately because of differing productsand services. Each of these businesses requires distinct operating andmarketing strategies. Management reviews the performance of the company basedon these segments. For more information see Note 15, Segment Information,of the Notes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of this Form 10-K.

 

***Executive Overview***

 

The U.S. economy declined dramatically late in 2008and the first part of 2009, and although real gross domestic product growthturned positive in third quarter 2009, the economy remains weak. The nationalunemployment rate continues to be high. The unemployment rate increased to10.0% at December 31, 2009, compared with 7.4% at December 31, 2008.Concerns continue over the availability and cost of credit, the volatility andstrength of the capital markets, unemployment, and consumer and businessconfidence, which all affect the business and economic environment in which weoperate.

 

The downturn in theresidential construction market has become the most severe housing downturn inU.S. history. The housing start level in 2009 was approximately 39% below thesecond worst year on record, which occurred in 2008. The U.S. Census Bureaureported 2009 single- and multifamily housing starts in the U.S. at0.55 million units, compared with 0.91 million units in 2008. Theseamounts are significantly below historical trends of approximately 1.65 millionunits over the ten years prior to 2009. The housing downturn resulted from theturmoil of the global financial crisis and high

 

18

----

Tableof Contents

 

unemployment rates thathave created an excess supply of homes, tight credit conditions, and anincrease in foreclosures.

 

In response to thehousing downturn and uncertain economic environment, we took rollingcurtailments at a number of our wood products operations to maintainappropriate inventory levels, while trying to minimize the negative impact ofthe curtailments on our employees and our operating results. We alsopermanently closed some facilities. It is likely that we will need to continuecurtailments in a manner that allows us to retain our skilled workforce andkeep our inventories in balance with demand. We managed our labor costs in 2009by implementing pay freezes for our salaried employees. We also amended ourbenefit plans to freeze the pension benefits for all salaried employeeseffective December 31, 2009, and suspended the $0.70 company matchcomponent of our 401(k) plan for salaried employees effective April 1,2009.

 

We ended 2009 with$287.1 million of cash and cash equivalents and $303.1 million oflong-term debt, or $16.0 million of net debt. As a result, we are in agood liquidity position to fund working capital needs and capital expendituresand to take advantage of market opportunities in 2010.

 

Looking ahead to 2010,the general tenor among analysts is that the demand for new residentialconstruction will improve over the record low levels experienced in 2009. Anyimprovement in our product sales volumes and pricing will be dependent upon theinterplay of industry production levels, imports, and product demand, whichwill in turn depend on improvements in housing starts. We expect to manage ourproduction levels to our sales demand, which will likely cause us to continueto operate our facilities below their capacity in 2010. We will continue toprudently manage our inventories, receivables, and spending in thisenvironment. Along with many forecasters, we believe U.S. housing demand willimprove in the long term based on population demographics and a variety ofother factors.

 

***Factors That Affect Our OperatingResults***

 

Our results of operations and financial performanceare influenced by a variety of factors, including the following:

 

·                  General economic conditions, including but not limitedto housing starts, repair-and-remodel activity and light commercialconstruction, foreclosure rates, interest rates, unemployment rates, andrelative currency values;

 

·                  Mortgage pricing and availability, as well as otherconsumer financing mechanisms, that ultimately impact demand for our products;

 

·                  Availability and affordability of raw materials,including wood fiber, energy, and chemicals;

 

·                  The commodity nature of our products and their price movements,which are driven largely by supply and demand;

 

·                  Industry cycles and capacity utilization rates;

 

·                  Cost of compliance with government regulations;

 

·                  Legislative or regulatory environments, requirements,or changes affecting the businesses in which we are engaged;

 

·                  Labor and personnel relations and shortages of skilledand technical labor;

 

·                  The financial condition and creditworthiness of ourcustomers;

 

·                  Major equipment failure;

 

·                  Severe weather phenomena such as drought, hurricanes,tornadoes, and fire;

 

·                  Actions of suppliers, customers, andcompetitors, including merger and acquisition activities, plant closures, andfinancial failures;

 

·                  Boise Inc.’s performance under the OutsourcingServices Agreement; and

 

·                  The other factors described in “Part I,Item 1A. Risk Factors” in this Form 10-K.

 

19

----

Table of Contents

 

***Sale of Our Paper and Packaging &Newsprint Assets***

 

In February 2008, Boise Cascade, L.L.C., our wholly owned directsubsidiary, sold its Paper and Packaging & Newsprint assets and mostof its Corporate and Other assets (the Sale) to Boise Inc. for cash andsecurities equal to $1.6 billion, plus working capital adjustments.Immediately following the Sale, Boise Cascade, L.L.C., distributed thesecurities received in the transaction to us. As a result, we had a significantindirect financial interest in the results of the sold businesses. After the Sale, the equity interest we owned in Boise Inc. representeda significant continuing involvement*.*As a result, the sold assets are not classified asdiscontinued operations, and therefore, the results of the Paper and Packaging &Newsprint segments are included in the Consolidated Statements of Income (Loss)for the year ended December 31, 2007, and for the period of January 1,2008, through February 21, 2008. The discussion of “Our Operating Results”below describes the impact of the Paper and Packaging & Newsprint businesseson our consolidated results prior to the Sale; however, the segment discussionfocuses on the businesses retained after the Sale. See the “Liquidity andCapital Resources” section below in this Management’s Discussion and Analysisof Financial Condition and Results of Operations for more information relatedto how the Sale has affected our liquidity and capital resources.

 

20

----

Tableof Contents

 

***Our Operating Results***

 

The following tables set forth the results ofoperations in dollars and as a percentage of sales for the years ended December 31,2009, 2008, and 2007:

 
| ** **                                                          | ** ** | **Year  Ended December 31** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **2009**                         | ** ** | **2008  (a)** | ** ** | **2007  (a)** | ** ** |
| ** **                                                          | ** ** | **(millions)**                   | ** ** |
| **Sales**                                                           |       |                             |       |   |   |   |   |
| Trade                                                               |       | $                                | 1,935.4    |   | $ | 2,831.3 |   | $ | 4,797.8 |   |
| Related parties                                                     |       | 37.9                             |       | 146.2 |   | 615.7 |   |
|                                                                |       | 1,973.3                          |       | 2,977.5 |   | 5,413.5 |   |
|                                                                |       |                             |       |   |   |   |   |
| **Costs and expenses**                                              |       |                             |       |   |   |   |   |
| Materials, labor, and other operating expenses                      |       | 1,757.1                          |       | 2,620.1 |   | 4,705.3 |   |
| Materials, labor, and other operating expenses from related parties |       | 29.9                             |       | 70.0 |   | — |   |
| Depreciation, amortization, and depletion                           |       | 40.9                             |       | 36.3 |   | 123.9 |   |
| Selling and distribution expenses                                   |       | 190.5                            |       | 231.6 |   | 285.7 |   |
| General and administrative expenses                                 |       | 27.4                             |       | 36.6 |   | 84.1 |   |
| General and administrative expenses from related party              |       | 10.2                             |       | 8.1 |   | — |   |
| Gain on sale of Paper and Packaging & Newsprint assets     |       | —                           |       | (2.9 | ) | — |   |
| Other (income) expense, net                                         |       | 0.8                              |       | 10.6 |   | (5.7 | ) |
|                                                                |       | 2,056.8                          |       | 3,010.4 |   | 5,193.3 |   |
|                                                                |       |                             |       |   |   |   |   |
| Income (loss) from operations                                       | ** ** | **$**                            | **(83.5**  | **)** | **$** | **(32.9** | **)** | **$** | **220.2** | ** ** |
|                                                                |       | ** **                       |       |
|                                                                |       | **(percentage of sales)**        |       |
| **Sales**                                                           |       |                             |       |   |   |   |   |
| Trade                                                               |       | 98.1                             | %          | 95.1 | % | 88.6 | % |
| Related parties                                                     |       | 1.9                              |       | 4.9 |   | 11.4 |   |
|                                                                |       | 100.0                            | %          | 100.0 | % | 100.0 | % |
|                                                                |       |                             |       |   |   |   |   |
| **Costs and expenses**                                              |       |                             |       |   |   |   |   |
| Materials, labor, and other operating expenses                      |       | 89.0                             | %          | 88.0 | % | 86.9 | % |
| Materials, labor, and other operating expenses from related parties |       | 1.5                              |       | 2.3 |   | — |   |
| Depreciation, amortization, and depletion                           |       | 2.1                              |       | 1.2 |   | 2.3 |   |
| Selling and distribution expenses                                   |       | 9.7                              |       | 7.8 |   | 5.3 |   |
| General and administrative expenses                                 |       | 1.4                              |       | 1.2 |   | 1.5 |   |
| General and administrative expenses from related party              |       | 0.5                              |       | 0.3 |   | — |   |
| Gain on sale of Paper and Packaging & Newsprint assets     |       | —                           |       | (0.1 | ) | — |   |
| Other (income) expense, net                                         |       | —                           |       | 0.4 |   | (0.1 | ) |
|                                                                |       | 104.2                            | %          | 101.1 | % | 95.9 | % |
|                                                                |       |                             |       |   |   |   |   |
| Income (loss) from operations                                       | ** ** | **(4.2**                         | **)%**     | **(1.1** | **)%** | **4.1** | **%** |

 

----

(a)                                 Includes theresults of the Paper and Packaging & Newsprint assets in 2007 and forthe period of January 1, 2008, through February 21, 2008.

 

21

----

Table of Contents

 

***Sales Volumes and Prices***

 

Setforth below are our segment sales volumes and average net selling prices forour principal products in our Building Materials Distribution and Wood Productssegments for the years ended December 31, 2009, 2008, and 2007:

 
| ** **                                       | ** ** | **Year Ended December 31**                            | ** ** |
|--------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2009**                                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **(millions)**                                             | ** ** |
| **Segment Sales**                                |       |                                                       |       |   |   |   |   |
| Building Materials  Distribution                 |       | $                                                          | 1,609.8    |   | $ | 2,109.4 |   | $ | 2,564.0 |   |
| Wood  Products                                   |       | 550.8                                                      |       | 795.9 |   | 1,010.2 |   |
|                                             |       | ** **                                                 |       |
|                                             |       | **(percentage of Building Materials  Distribution sales)** |       |
| **Product  Line Sales**                          |       |                                                       |       |   |   |   |   |
| Commodity                                        |       | 46.3                                                       | %          | 46.2 | % | 44.0 | % |
| Engineered  wood                                 |       | 11.0                                                       |       | 11.9 |   | 14.7 |   |
| General  line                                    |       | 42.7                                                       |       | 41.9 |   | 41.3 |   |
| ** **                                       |       | ** **                                                 |       |
| ** **                                       |       | **(millions)**                                             |       |
| **Sales  Volumes**                               |       |                                                       |       |   |   |   |   |
| **Wood  Products**                               |       |                                                       |       |   |   |   |   |
| Laminated  veneer lumber (LVL) (cubic feet)      |       | 5.6                                                        |       | 7.6 |   | 10.6 |   |
| I-joists  (equivalent lineal feet)               |       | 87                                                         |       | 117 |   | 188 |   |
| Plywood  (sq. ft.) (3/8” basis)             |       | 992                                                        |       | 1,228 |   | 1,223 |   |
| Lumber  (board feet)                             |       | 146                                                        |       | 191 |   | 231 |   |
| Particleboard  (sq. ft.) (3/4” basis)       |       | 80                                                         |       | 104 |   | 151 |   |
| ** **                                       |       | ** **                                                 | ** ** |
| ** **                                       |       | **(dollars  per unit)**                                    | ** ** |
| **Average Net Selling Prices**                   |       | ** **                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Wood Products**                                | ** ** | ** **                                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Laminated veneer lumber  (LVL) (100 cubic feet)  |       | $                                                          | 1,492      |   | $ | 1,573 |   | $ | 1,702 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 895                                                        |       | 942 |   | 1,026 |   |
| Plywood (1,000 sq. ft.)  (3/8” basis)       |       | 213                                                        |       | 248 |   | 264 |   |
| Lumber (1,000 board feet)                        |       | 349                                                        |       | 369 |   | 437 |   |
| Particleboard (1,000 sq.  ft.) (3/4” basis) |       | 333                                                        |       | 357 |   | 317 |   |

 

***Operating Results***

 

***2009 Compared With 2008***

 

*Sales*

 

Total sales decreased$1.0 billion, or 34%, to $2.0 billion in 2009 from $3.0 billionin 2008. The decrease was primarily due to decreased sales in our BuildingMaterials Distribution and Wood Products segments due to weaker product demandand prices, as U.S. new residential housing demand continued to decline fromthe low levels experienced in 2008. Our sales are driven principally by U.S.housing starts, which decreased 39% to 0.55 million units, compared with0.91 million units in 2008. Relative to 2008, the decrease also resultedfrom the sale of our Paper and Packaging & Newsprint assets in firstquarter 2008. For the period of January 1 through February 21, 2008,the sold businesses had sales of $359.9 million.

 

*BuildingMaterials Distribution.*  Sales decreased$499.6 million, or 24%, to $1,609.8 million in 2009 from $2,109.4 million in 2008. The decrease wasdriven primarily by a 19% decrease in product volumes sold and a 6% decrease inaverage net selling prices due to extraordinarily low new residentialconstruction in 2009. Despite the weak demand environment, our product volumedeclines compare favorably to the overall decline in residential construction,as we were able to capture market share through the introduction of new productlines, product line expansions, and facility expansions.

 

*W**ood Products.* Sales decreased $245.1 million, or 31%,to $550.8 million in 2009from $795.9 million in 2008. While the decrease in sales was driven bylower volumes and prices for all of our products, the decline in EWP andplywood sales volumes and prices had the greatest impact on our reported sales.Compared with 2008, sales volumes for both LVL and I-joists declined 26%, whilethe average net selling prices of LVL and I-joists decreased approximately 5%.Plywood sales volumes and average net selling prices decreased 19% and 14%,respectively.

 

22

----

Table of Contents

 

*Costs and Expenses*

 

Materials, labor, andother operating expenses decreased $0.8 billion, or 33%, to$1.8 billion in 2009,compared with $2.6 billion in 2008. The decrease was driven primarily bylower purchased materials costs in our Building Materials Distribution segmentof $488.1 million and lower wood costs in our Wood Products segment of$54.9 million, as decreased residential construction activity led to lowerdemand for these materials. In addition, compared with 2008, we had$33.2 million of lower chemical and energy costs in our Wood Productssegment. The decline in these key production inputs resulted from reducedmanufacturing volumes and prices in response to weaker sales activity. Alsocontributing to the decrease in materials, labor, and other expenses were$321.6 million of expenses that our Paper and Packaging & Newsprintassets incurred prior to the Sale in February 2008.

 

Depreciation, amortization, and depletion expenses increased $4.6 million, or 13%, to $40.9 million in 2009, compared with$36.3 million in 2008. The increase in expense relates to our recognizing$5.2 million of incremental expense as a result of accelerating depreciation onthe assets at our La Grande, Oregon, lumber manufacturing facilityfollowing our decision to close the operations.

 

Selling and distributionexpenses decreased $41.1 million, or 18%, to $190.5 million in 2009, compared with$231.6 million in 2008. Selling and distribution expenses declined in ourBuilding Materials Distribution and Wood Products segments due to lower salesactivity and our continued focus on reducing costs. While total selling anddistribution expenses decreased, the costs increased as a percent of sales inour Building Materials Distribution segment, as these costs did not decline atthe same pace as sales. Also contributing to the decrease in total selling anddistribution expenses in 2009 were $9.1 million of expenses that our Paperand Packaging & Newsprint assets incurred prior to the Sale in February 2008.In 2009, selling and distribution expenses include $2.7 million ofrelated-party expenses incurred under the Outsourcing Services Agreement withBoise Inc. discussed below.

 

General and administrativeexpenses decreased $9.2 million,or 25%, to $27.4 million in 2009,compared with $36.6 million in 2008. The decrease was driven primarily bythe sale of our Paper and Packaging & Newsprint assets in firstquarter 2008. These operations reported $6.6 million of expenses for theperiod of January 1 through February 21, 2008. While total generaland administrative expenses decreased, the costs increased as a percent ofsales in our Building Materials Distribution and Wood Products segments, as thesecosts did not decline at the same pace as sales.

 

##### ***Costsand Expenses From Related Parties***

 

Materials, labor, andother operating expenses from related parties decreased $40.1 million, or57%, to $29.9 million in2009, compared with $70.0 million in 2008. Compared with 2008, the decrease primarily reflects reduced fiberprocurement purchases from Louisiana Timber Procurement Company, L.L.C. (LTP), an unconsolidated variable-interestentity that is 50% owned by Boise Cascade, L.L.C., and 50% owned byBoise Inc. During the yearsended December 31, 2009 and 2008, we purchased $25.5 million and$64.9 million of fiber from LTP at prices designed to approximate market. The decreasein purchases primarily related to decreased demand for logs used in our southern region plywood mills thatwere curtailed during some of the year.

 

In connection with theSale, we entered into an Outsourcing Services Agreement under which Boise Inc.provides a number of corporate staff services to us at cost. These servicesinclude information technology, accounting, and human resource services. Theinitial term of the agreement was for three years with expiration scheduled on February 22,2011. The agreement automatically renews for successive one-year terms unlesseither party provides notice of termination to the other party at least12 months in advance of the expiration date. Because neither party gavenotice of termination to the other party in February 2010, the term of theagreement has been extended to February 22, 2012. The Outsourcing ServicesAgreement also gives us (but not Boise Inc.) the right to terminate all or anyportion of the services provided to us on 30 days’ notice, subject topayment of an absorption fee. The remaining absorption fee of$1.0 million, effective February 2010, is allocated among theservices provided under the contract and declines to zero in total and on anallocable basis through February 22, 2011. If at some time in the futureBoise Inc. is unwilling or unable to provide services at the same qualitylevels as those services have been provided in the past, our business andcompliance activities and results of operations could be negatively affected.

 

23

----

Tableof Contents

 

During the years ended December 31,2009 and 2008, we recognized $15.0 million and $12.1 million ofexpenses related to the Outsourcing Services Agreement in our ConsolidatedStatements of Loss. The increase in expenses incurred under the OutsourcingServices Agreement primarily relates to our purchasing twelve months ofservices in 2009, compared with ten months in 2008. In 2008, we purchased theservices following the Sale in February 2008.

 
| ** **                                                           | ** ** | **Year Ended  December 31** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                           | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **                                                           | ** ** | **(millions)**                   | ** ** |
| Materials, labor, and other operating expenses from  related parties |       | $                                | 2.1        |   | $ | 1.7 |   |
| Selling and distribution expenses                                    |       | 2.7                              |       | 2.3 |   |
| General and administrative expenses from related  party              |       | 10.2                             |       | 8.1 |   |
|                                                                 | ** ** | **$**                            | **15.0**   | ** ** | **$** | **12.1** | ** ** |

 

*Other (income) expense, net*

 

“Other(income) expense, net” includes miscellaneous income and expense items. Thecomponents of “Other (income) expense, net” in the Consolidated Statements ofIncome (Loss) are as follows:

 
| ** **                                                   | ** ** | **Year Ended********December 31** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                   | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| ** **                                                   | ** ** | **(millions)**                         | ** ** |
| Facility closures and curtailments (a)                  |       | $                                      | 3.2        |   | $ | 9.9 |   |
| Changes in pension plans (b)                                 |       | (0.7                                   | )          | — |   |
| Loss on sale of note receivable from related  party (c) |       | —                                 |       | 8.4 |   |
| Sales of assets, net (d)                                     |       | 0.2                                    |       | (7.9 | ) |
| Other, net                                                   |       | (1.9                                   | )          | 0.2 |   |
| ** **                                                   | ** ** | **$**                                  | **0.8**    | ** ** | **$** | **10.6** | ** ** |

 

----

(a)                                  In 2009, weclosed the lumber manufacturing facility in La Grande, Oregon, andrecorded $3.1 million of expense in “Other (income) expense, net,”$5.2 million of accelerated depreciation in “Depreciation, amortization,and depletion,” and $0.6 million of expenses in “Materials, labor, andother operating expenses” in our Consolidated Statement of Loss.

 

In2008, we recorded $9.3 million of expense related to closing our veneeroperations in St. Helens, Oregon, and our plywood manufacturing facilityin White City, Oregon, in “Other (income) expense, net” and$2.0 million of expense for the write-down of log inventories in “Materials,labor, and other operating expenses” in our Consolidated Statement of Loss.

 

(b)                                 In March 2009,we amended our defined benefit pension plan for salaried employees andnonqualified salaried plans so that no future benefits accrue in the plansafter December 31, 2009. We recognized a net $0.7 million noncashcurtailment gain, primarily related to our nonqualified salaried pension plans.For more information, see Note 12, Retirement and Benefit Plans, of theNotes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of this Form 10-K.

 

(c)                                  In 2008, we solda note receivable from Boise Inc. for $52.7 million after sellingexpenses, and we recorded an $8.4 million loss on the sale.

 

(d)                                 In 2008, we soldour indirect wholly owned subsidiary in Brazil, Boise Cascade do Brasil LTDA.,to Aracruz Celulose, S.A., for $45.5 million after selling expenses, andwe recorded a $5.7 million net gain on the sale.

 

*Income (Loss) From Operations*

 

Our loss from operations increased $50.6 million, or 154%, from $32.9 million in 2008 to$83.5 million in 2009. Compared with 2008, we reported lower operatingincome in our Building Materials Distribution and Wood Products segments, asthe downturn in the residential construction market became the most severehousing downturn in U.S. history — which reduced the demand for our products.Compared with 2008, the decrease in operating income also resulted from thesale of our Paper and 

 

24

----

Table of Contents

 

Packaging &Newsprint assets in first quarter 2008. These businesses reported $23.1 millionof income from operations during the period of January 1 through February 21,2008.

 

*Building Materials Distribution. *Segment income decreased $11.5 million, or 59%, from $19.5 million in 2008 to $8.0 million in 2009. The decrease was driven primarily by fewer grossmargin dollars available to cover relatively fixed expenses such as occupancy,payroll, and delivery costs, as sales volumes declined from the same period ayear ago. However, almost 70% of the decline in gross profit dollars wasfavorably offset by lower operating costs resulting from cost-reductioninitiatives implemented over the last year. In addition, our gross marginpercentage improved in 2009, as more of our sales mix was composed ofsmaller-quantity orders delivered from our warehouses as opposed tolarge-volume purchases that are typically shipped directly from themanufacturer and generate lower gross margins.

 

*WoodProducts.*Segmentloss increased $22.2 million,or 40%, from $55.1 millionin 2008 to $77.3 million in 2009. The increase was driven primarily byprice declines for plywood, compared with the same period a year ago. Thesedeclines were partially offset by favorable input costs, primarily wood costs;productivity improvements; and curtailments at facilities previously generatingcash losses. We have been taking rolling curtailments at all of our WoodProducts operations and closed some facilities to maintain appropriateinventory levels, while trying to minimize the negative impact thesecurtailments and/or closures have on our operating results. In 2009, the WoodProducts segment recorded $8.9 million of expenses related to closing ourlumber manufacturing facility in La Grande, Oregon, compared with$11.3 million of expenses in 2008 related to closing operations inSt. Helens and White City, Oregon. In addition, 2008 included a$5.7 million net gain, related to the sale of our wholly owned subsidiaryin Brazil.

 

*Other*

 

*Investment in equityaffiliate. *In connection with the Sale, we received37.9 million, or 49%, of Boise Inc.’s shares of common stock. We recordedour investment in “Investment in equity affiliate” on our Consolidated BalanceSheet. The ownership interest provided us with the ability to exercise significantinfluence. Accordingly, we accounted for the investment under the equity methodof accounting. In 2009, we sold 18.8 million Boise Inc. shares andcontributed 0.8 million shares to settle our obligation under theContingent Value Rights (CVR) Agreement (see “Disclosuresof Financial Market Risks” in this Management’s Discussion and Analysis ofFinancial Condition and Results of Operations for more information on the CVRsettlement), whichdecreased our ownership in Boise Inc. to 23.5% at December 31, 2009(or 21.7% on a fully diluted basis). In February 2010, we sold 13.1 millionBoise Inc. shares for expected net proceeds of approximately $61 million. Allof the sales will be settled by March 3, 2010. At February 28, 2010, we ownedless than 10% of Boise Inc. and we will account for the remaining investmentunder the cost method. We expect to sell our remaining 5.2 million Boise Inc.shares under the trading plan adopted in fourth quarter 2009.

 

In 2009 and 2008, werecorded $79.4 million of income, net, and $219.4 million of netexpense related to our investment in Boise Inc. in our ConsolidatedStatements of Loss, as follows:

 
| ** **                                                        | ** ** | **Year Ended  December 31** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                        | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **                                                        | ** ** | **(millions)**                   | ** ** |
| Equity  in net income (loss) of Boise Inc. (a)          |       | $                                | 59.4       |   | $ | (22.8 | ) |
| Amortization  of basis differential (b)                           |       | 21.4                             |       | 5.3 |   |
| Adjustment  for impairment recognized by Boise Inc. (c) |       | —                           |       | 6.2 |   |
| Loss  on shares issued for settlement of CVR liability (d)   |       | (1.0                             | )          | — |   |
| Equity  in net income (loss) of affiliate                         |       | 79.7                             |       | (11.3 | ) |
| Gain  on sale of shares of equity affiliate (e)                   |       | 42.8                             |       | — |   |
| Impairment  of investment in equity affiliate (f)                 |       | (43.0                            | )          | (208.1 | ) |
| Total                                                             | ** ** | **$**                            | **79.4**   | ** ** | **$** | **(219.4** | **)** |
|                                                                   |            |                                  |            |  |  |  |  |  |  |  |  |

 

----

(a)                                  In 2009, “Equityin net income of Boise Inc.” included approximately $50 million ofincome, net of expenses and taxes, for refundable tax credits arising fromBoise Inc.’s use of alternative fuels, partially offset by approximately $15 millionof expenses, net of tax benefits, related to Boise Inc.’s extinguishmentof debt in 2009. The provision in the U.S. Internal Revenue Code allowing forthe alternative fuel tax credits expired December 31, 2009.

 

(b)                                 At December 31,2009, the carrying value of our investment in Boise Inc. was approximately$103.9 million less than our share of Boise Inc.’s underlying equityin net assets. The difference is due to write-downs of our investment inBoise Inc. We have been amortizing the difference to income on astraight-line basis over the weighted average useful life of Boise Inc.’sassets. The 

 

25

----

Tableof Contents

 

amortization of the basis differential resulted in our recognizing$21.4 million and $5.3 million of income in “Equity in net income(loss) of affiliate” in our Consolidated Statements of Loss for the years endedDecember 31, 2009 and 2008.

 

(c)                                  In 2008, weallocated the $208.1 million impairment charge to Boise Inc.’s long-livedassets on a pro rata basis based on the net book values assigned to theirassets on September 30, 2008. Subsequent to our recording an impairment ofour investment, Boise Inc. recognized a $19.8 million charge for theimpairment of long-lived assets, of which we were allocated 49% when werecorded our proportionate share of Boise Inc.’s net loss. Based on ourallocation of the $208.1 million charge to Boise Inc.’s long-lived assets,we concluded we had already expensed $6.2 million of the$19.8 million charge Boise Inc. recorded for long-lived assetimpairment. Accordingly, we adjusted our equity in net loss of Boise Inc.for the $6.2 million we had already expensed.

 

(d)                                 In 2009, wesettled our obligation related to the contingent value rights (CVRs) we issuedto holders of Boise Inc. common stock. In connection with the settlement,we transferred ownership of 0.8 million Boise Inc. shares and recorded a$1.0 million loss in “Equity in net income (loss) of affiliate” in ourConsolidated Statement of Loss for the difference between the market price onthe date we settled our obligation with the shares and the carrying amount ofthe shares recorded on our Consolidated Balance Sheet. For more information,see Note 11, Financial Instrument Risk, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and SupplementaryData” of this Form 10-K.

 

(e)                                  In 2009, we sold18.8 million Boise Inc. shares for net proceeds of$83.2 million, and we recorded a $42.8 million gain on the sale ofthe shares in our Consolidated Statement of Loss. In connection with the sale,we decreased our investment in Boise Inc. $41.1 million, and wereduced by $0.7 million our accumulated other comprehensive loss relatedto our investment in Boise Inc. Under the terms of the indenture governing our 7.125%senior subordinated notes due 2014, we are required to use the net proceedsfrom the sale of the Boise Inc. shares within one year to repay seniorindebtedness, acquire additional assets, or make a tender offer at par for aportion of the senior subordinated notes.

 

(f)                                    Quarterly, we compare the fair value ofthe Boise Inc. stock price with the carrying value of our investment to assessfor other-than-temporary impairment. The fair value of our investment inBoise Inc. is calculated based on the number of Boise Inc. shares weown and Boise Inc.’s stock price on the respective balance sheet date. Thecarrying value of our investment is calculated as the sum of (1) theamount recorded in “Investment in equity affiliate” on our Consolidated BalanceSheet and (2) the amount of accumulated other comprehensive income relatedto our investment in Boise Inc. recorded within “Series B equityunits” on our Consolidated Balance Sheet.

 

OnMarch 31, 2009, and September 30, 2008, we concluded that ourinvestment in Boise Inc. met the definition of other than temporarilyimpaired. We made the other-than-temporary-impairment determination basedprimarily on the length of time and extent to which the fair value of ourinvestment had been trading below its carrying value. As of September 30,2008, Boise Inc.’s stock had traded below our carrying value for over sixmonths, and as of March 31, 2009, Boise Inc.’s stock had traded belowour carrying value since we wrote the investment down in September 2008.Accordingly, we recorded a $43.0 million impairment charge for the yearended December 31, 2009, and a $208.1 million impairment charge forthe year ended December 31, 2008, in “Impairment of investment in equityaffiliate” in our Consolidated Statements of Loss. For the year ended December 31,2009, we reduced by $40.8 million our accumulated other comprehensive lossrelated to our investment in Boise Inc. (which was accumulated monthly fromrecording our proportionate share of Boise Inc.’s other comprehensive income orloss). In addition, we decreased “Investment in equity affiliate”$2.2 million to reduce the aggregate carrying value of our investmentrecorded on our Consolidated Balance Sheet to its fair value on March 31,2009, of $0.61 per share.

 

In accordance with SECRegulation S-X Rule 3-09, *SeparateFinancial Statements of Subsidiaries Not Consolidated and 50 Percent orLess Owned Persons,*we filed Boise Inc.’s 2009 auditedconsolidated financial statements as Exhibit 99 to this Form 10-K.

 

*Foreignexchange gain (loss*).  In 2009, we reported a $1.0 millionforeign exchange gain, compared with a loss of $1.8 million in 2008. Theincrease was due primarily to weakening of the U.S. dollar, compared with theCanadian dollar.

 

*Changein fair value of interest rate swaps. *The year ended December 31, 2008, included$6.3 million of expense related to changes in the fair value of ourinterest rate swaps. We terminated all of the swaps in February 2008.

 

*Interest expense. *In 2009, interest expense was $22.5 million,compared with $34.3 million in 2008. The decrease in interest expense isprimarily attributable to the reduction of long-term debt in 

 

26

----

Table of Contents

 

February 2008 after the Sale. For more information, see “Financing Activities” under“Liquidity and Capital Resources” in this Management’s Discussion and Analysisof Financial Condition and Results of Operations.

 

*Interest income. *In 2009, interest income was $0.9 million,compared with $7.7 million in 2008. The decrease in interest income isprimarily attributable to the decrease in interest rates in 2009. Also, in2008, interest income included $2.8 million of non cash income related tothe note receivable from Boise Inc., which we sold in June 2008. Formore information related to the note receivable from Boise Inc., seeNote 5, Transactions With Related parties, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and Supplementary Data”of this Form 10-K.

 

*Income tax (provision) benefit.* Our income tax provision generally consists ofincome taxes payable to states that do not allow for the income tax liabilityto be passed through to our equity holders, as well as income taxes payable byour separate subsidiaries that are taxed as corporations. For the year ended December 31,2009, income tax expense was $0.7 million, compared with $0.5 millionin 2008. During the years ended December 31, 2009 and 2008, our effectivetax rates for our separate subsidiaries that are taxed as corporations were30.6% and 43.9%. The decrease in our 2009 effective tax rate is primarily dueto the effects of the separate subsidiaries of the Paper and Packaging &Newsprint businesses on the effective tax rate in 2008.

 

***2008 Compared With 2007***

 

*Sales*

 

Total sales decreased$2.4 billion, or 45%, to $3.0 billion in 2008 from $5.4 billionin 2007. The decrease was driven primarily by the sale of our Paper andPackaging & Newsprint assets in first quarter 2008. The soldbusinesses had sales of $2.3 billion in 2007. For the period of January 1through February 21, 2008, the sold businesses had sales of$359.9 million. Sales decreased in our Building Materials Distribution andWood Products segments due to weaker product demand and prices as newresidential housing demand in the U.S. declined.

 

*BuildingMaterials Distribution.*  Sales decreased$454.6 million, or 18%, to $2,109.4 million in 2008 from $2,564.0 million in 2007. The decrease wasdriven primarily by a 19% decline in the volume of product sold, offset in partby a 1% increase in product prices. The reduced volumes were the result ofdecreased demand in new residential construction markets. Relative to 2007, EWPsales represented a lower percentage of our overall Building MaterialsDistribution sales, as EWP sales are more dependent on new residentialconstruction than the traditional building products we sell.

 

*WoodProducts.* Sales decreased $214.3 million, or 21%,to $795.9 million in 2008from $1,010.2 million in 2007. The decrease in sales was driven primarilyby lower volumes and/or prices for all of our products. In 2008, the decline inEWP volumes and prices had the biggest impact on our reported sales. Comparedwith 2007, sales volumes for LVL and I-joists declined 28% and 38%,respectively, while the average net selling prices for both LVL and I-joistsdecreased approximately 8%. Also contributing to the decrease in sales duringthe year were lower sales prices for plywood, lower sales volumes for particleboard,and lower sales volumes and prices for lumber.

 

##### ***Costsand Expenses***

 

Materials, labor, andother operating expenses, including from related parties, decreased$2.0 billion, or 43%, to $2.7 billion in 2008, compared with $4.7 billion in 2007. The decreasewas driven primarily by the sale of our Paper and Packaging &Newsprint assets in first quarter 2008. The sold businesses had materials,labor, and other operating expenses, including from related parties, of$2.0 billion in 2007. For the period of January 1 through February 21,2008, the sold businesses had materials, labor, and other operating expenses,including from related parties, of $321.6 million. In our buildingproducts businesses, materials, labor, and other operating expenses, including fromrelated parties, decreased due to lower purchased materials costs in ourBuilding Materials Distribution segment due to lower sales volumes. Alsocontributing to the decline were lower log costs, offset in large part byhigher conversion costs, in our Wood Products segment. Fiber costs for our WoodProducts segment declined, primarily due to lower log prices and lower logconsumption.

 

27

----

Tableof Contents

 

Depreciation, amortization, and depletion expenses decreased $87.6 million, or 71%, to $36.3 million in 2008, compared with$123.9 million in 2007. The year ended December 31, 2007, includedapproximately $84.6 million of depreciation and amortization expenserelated to the sold Paper, Packaging & Newsprint, and Corporate andOther segments that was not included in 2008, because the assets were sold on February 22,2008, and because, prior to the Sale, we had discontinued depreciation andamortization on the assets as a result of classifying them as held for sale. Of the $84.6 million of depreciationand amortization expense recorded during the year ended December 31, 2007,$45.0 million related to our Paper segment, $37.7 million related toour Packaging & Newsprint segment, and $1.9 million related toour Corporate and Other segment.

 

Selling and distributionexpenses decreased $54.1 million, or 19%, to $231.6 million in 2008, compared with$285.7 million in 2007. Relative to 2007, selling and distributionexpenses decreased $50.4 million as a result of the sale of our Paper andPackaging & Newsprint assets in first quarter 2008. Selling anddistribution expenses declined in our Building Materials Distribution and WoodProducts segments due to lower sales activity; however, selling anddistribution expenses were higher as a percentage of sales, as these costs didnot decline at the same pace as sales.

 

General andadministrative expenses, including $8.1 million of related party expensesincurred under the Outsourcing Services Agreement with Boise Inc., decreased $39.4 million, or 47%, to$44.7 million in 2008,compared with $84.1 million in 2007. The decrease was driven primarily bylower compensation costs associated with operating as a smaller company.

 

“Other(income) expense, net” includes miscellaneous income and expense items. Thecomponents of “Other (income) expense, net” in the Consolidated Statements ofIncome (Loss) are as follows:

 
| ** **                                                   | ** ** | **Year Ended  December 31** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                   | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| ** **                                                   | ** ** | **(millions)**                   | ** ** |
| Facility closures (a)                                        |       | $                                | 9.9        |   | $ | — |   |
| Loss on sale of note receivable from related  party (b) |       | 8.4                              |       | — |   |
| Sales of assets, net (c)                                     |       | (7.9                             | )          | (2.3 | ) |
| Changes in retiree healthcare programs                       |       | —                           |       | (4.4 | ) |
| Other, net                                                   |       | 0.2                              |       | 1.0 |   |
| ** **                                                   | ** ** | **$**                            | **10.6**   | ** ** | **$** | **(5.7** | **)** |

 

----

(a)                                  In 2008, werecorded $9.9 million of expense related to facility closures in “Other(income) expense, net” and $2.0 million of expense for the write-down oflog inventories in “Materials, labor, and other operating expenses” in ourConsolidated Statement of Loss.

 

(b)                                 In 2008, we solda note receivable from Boise Inc. for $52.7 million after sellingexpenses, and we recorded an $8.4 million loss on the sale.

 

(c)                                  In 2008, we soldour indirect wholly owned subsidiary in Brazil, Boise Cascade do Brasil LTDA.,to Aracruz Celulose, S.A., for $45.5 million after selling expenses, andwe recorded a $5.7 million net gain on the sale.

 

*Income (Loss) From Operations*

 

Income (loss) from operations decreased $253.1 million, or 115%, from income of $220.2 million in 2007 toa loss of $32.9 million in 2008. The decrease was primarily the result ofthe sale of our Paper and Packaging & Newsprint assets in firstquarter 2008, which reported $160.5 million of income from operations in2007 and $23.1 million of income from operations for the period of January 1through February 21, 2008. We also reported lower operating income in ourBuilding Materials Distribution and Wood Products segments as unprecedentedturmoil in the mortgage market and a significant oversupply of homes for saleled to a sharp drop-off in housing construction and demand for our products.The impact of reduced demand on sales prices and volume is discussed in moredetail below.

 

*BuildingMaterials Distribution. *Segment income decreased $32.3 million, or 62%, from $51.8 million in 2007 to $19.5 million in 2008. The decrease was driven primarily bylower gross margin dollars available to cover relatively fixed expenses, suchas occupancy, payroll, and delivery costs, as sales volumes declined year overyear.

 

28

----

Tableof Contents

 

*WoodProducts.*Segmentincome (loss) decreased $78.7 million,or 333%, from income of $23.6 millionin 2007 to a loss of $55.1 million in2008. The decreasewas driven primarily by a combination of lower sales volumes and/or prices formost of our products, coupled with higher conversion costs. These negativeswere slightly offset by lower log costs. In addition, during 2008, the WoodProducts segment recorded $11.3 million of expenses related to closing ourveneer operations in St. Helens, Oregon, and our plywood manufacturingfacility in White City, Oregon, partially offset by a $5.7 millionnet gain related to the sale of our wholly owned subsidiary in Brazil.

 

*Other*

 

*Equityin net loss of affiliate and impairment of investment in equity affiliate*. In 2008, we recorded $219.4 million of expense related to ourinvestment in Boise Inc. in our Consolidated Statement of Loss. Of the$219.4 million of expense, we recorded $208.1 million of expense in “Impairmentof investment in equity affiliate” and $11.3 million of expense in “Equityin net loss of affiliate” in our Consolidated Statement of Loss. For additionalinformation, see Note 4, Investment in Equity Affiliate, of the Notes toConsolidated Financial Statements in “Item 8. Financial Statements andSupplementary Data” of this Form 10-K.

 

*Changein fair value of interest rate swaps. *The years ended December 31, 2008 and 2007,included $6.3 million of expense and $3.7 million of income relatedto changes in the fair value of our interest rate swaps. We terminated all ofthe swaps in February 2008.

 

*Interest expense. *In 2008, interest expense was $34.3 million,compared with $96.8 million in 2007. The decrease in interest expense isprimarily attributable to the significant reduction in our long-term debt. At December 31,2008, our long-term debt was $315.0 million, compared with$1.1 billion at December 31, 2007. The decrease in long-term debt is primarilyattributable to the use of the majority of the proceeds from the Sale to reducedebt. For more information, see “Financing Activities” under “Liquidity andCapital Resources” in this Management’s Discussion and Analysis of FinancialCondition and Results of Operations.

 

*Incometax (provision) benefit.* For the year ended December 31,2008, income tax expense was $0.5 million, compared with $8.0 millionin 2007. Relative to 2007, the decrease in income tax expense is primarilyrelated to no income tax expense related to cash flow hedges in 2008. Duringthe years ended December 31, 2008 and 2007, our effective tax rates forour separate subsidiaries that are taxed as corporations were 43.9% and 40.3%.The primary reason for the difference in tax rates is the effect of stateincome taxes and the mix of domestic and foreign sources of income.

 

***Industry Mergers and Acquisitions***

 

Severely depressed demandfor building products the last several years and the uncertainty as to thetiming and strength of a future recovery have caused a number of companiesinvolved in the production or distribution of building products to curtail orpermanently close individual operations. In addition, a number of NorthAmerican building products manufacturing and distribution companies have beenliquidated or filed for bankruptcy with resulting changes in ownership andcontrol or cessation of operations.

 

Recently, CanWel HoldingsCompany completed its acquisition of Broadleaf Logistics Company, making it thelargest wholesale building products distributor in Canada.

 

Georgia-Pacific, LLC hasannounced that it intends to acquire Grant Forest Products, Inc.’soriented strand board (OSB) facility at Englehart, Ontario, Canada, and theassociated facility at Earlton, Ontario, Canada, as well as its OSB facilitiesat Allendale and Clarendon, S.C.

 

There have been no othermajor transactions in the North American building products manufacturing anddistribution sectors in the past several months.

 

***Acquisitions***

 

We may engage inacquisition discussions with other companies and make acquisitions from time totime. In 2009, we purchased a sawmill in Pilot Rock, Oregon, which has improvedour regional fiber 

 

29

----

Tableof Contents

 

integration in our WoodProducts segment and a truss assembly operation and EWP sales office in Sacoand Biddeford, Maine, respectively.

 

***Divestitures***

 

We may engage in divestiture discussions with othercompanies and make divestitures from time to time. We review our operations anddispose of assets that fail to meet our criteria for return on investment orcease to warrant retention for other reasons. In 2008, we sold our Paper andPackaging & Newsprint assets and most of our Corporate and Otherassets and our Brazilian subsidiary. See “Sale of Our Paper and Packaging &Newsprint Assets” and “Liquidity and Capital Resources” in this Management’sDiscussion and Analysis of Financial Condition and Results of Operations formore information related to the Sale. For additional information related to thesale of our Brazil operations, see the discussion of “Other (income) expense,net” in “Costs and Expenses” under “Our Operating Results” in this Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

 

***Liquidity and Capital Resources***

 

As a company, we continue to face extraordinaryconditions. The downturn in the residential construction market has become themost severe housing downturn in U.S. history, consumer confidence remains low,and tight credit poses a significant threat to customers. Although the generaltenor among analysts is that the demand for new residential construction willimprove over the low levels experienced in 2009, the significant uncertaintyaround the timing and extent of the recovery creates uncertainty around theamount of cash flow we will generate in 2010. In response to the continuedeconomic uncertainty and to enhance our liquidity, we have and will continue toaggressively manage working capital and match production with market demand. Wealso implemented pay freezes for salaried employees and suspended the companymatch component of our 401(k) plan for salaried employees. We announced aredesign of the company match provisions to the savings plan for salariedemployees effective March 1, 2010. Under the redesign, we will contribute4% of an employee’s eligible wages (base salary and short-term incentivecompensation).

 

Despite the difficult conditions, with $83.2 millionof net proceeds received from the sale of Boise Inc. shares in 2009, weended the year with $287.1 million of cash, $303.1 million of long-termdebt, and $299.6 million of available liquidity. In February 2010, we sold 13.1million Boise Inc. shares for expected proceeds of approximately $61 million.We expect to sell the remaining Boise Inc. shares under the trading planadopted in fourth quarter 2009. We are obligated under the indenture governingour 7.125% senior subordinated notes to use the net proceeds (as defined in theindenture) from the sale of shares of Boise Inc. within one year to repaysenior indebtedness, acquire additional assets, or make a tender offer at parfor a portion of the senior subordinated notes. At December 31, 2009, andFebruary 28, 2010, approximately $78 million and $137 million of cash wasgoverned by the indenture. 

 

At December 31, 2009, our cash was invested inhigh-quality, short-term investments, which we record in “Cash and cashequivalents.” The credit quality of our portfolio of short-term investmentsremains strong, with the majority of our cash and cash equivalents invested inmoney market funds that are broadly diversified and invest in high-quality,short-duration securities, including commercial paper, certificates of deposit,U.S. government agency securities, and similar instruments.

 

The credit markets have experienced difficultconditions that may adversely affect the ability of our lenders to fulfilltheir commitment under our five-year $290 million senior securedasset-based revolving credit facility (Revolving Credit Facility). Wecontinuously monitor the credit quality of the banks that participate in ourRevolving Credit Facility. Based on information available to us as of thefiling date of this Form 10-K, we have no indications that the financialinstitutions included in our Revolving Credit Facility would be unable tofulfill their commitments. At December 31, 2009, a total of ten lendersparticipated in the Revolving Credit Facility, and the largest singlecommitment under the Revolving Credit Facility was $117.7 million.

 

We believe that our cash flows from operations,combined with our current cash levels and available borrowing capacity, will beadequate to fund debt service requirements and provide cash, as required, tosupport our ongoing operations, capital expenditures, lease obligations, andworking capital in 2010.

 

30

----

Table of Contents

 

***Sources and Uses of Cash***

 

We generate cash from sales of our products and fromshort-term and long-term borrowings, as well as from cash proceeds from thesale of nonstrategic assets. Our primary uses of cash are for expenses relatedto the manufacture and distribution of building products, including fiber,inventory purchased for resale, labor, energy, and chemicals. In addition topaying for ongoing operating costs, we use cash to invest in our business,repay debt, and meet our contractual obligations and commercial commitments.Below is a discussion of our sources and uses of cash for operating activities,investing activities, and financing activities.

 

***OperatingActivities***

 

We operate in a cyclical industry, and our operatingcash flows vary accordingly. Our principal operating cash expenditures are forpurchased inventories in our Building Materials Distribution segment andexpenditures related to the manufacture of building products, including fiber,energy, labor, and chemicals, in our Wood Products segment. Operatingactivities provided (used) cash in 2009, 2008, and 2007 as follows:

 

*2009 Compared With 2008*

 

In 2009 and 2008, our operating activities used $35.2 million and$24.4 million of cash, respectively. Compared with 2008, the increase in cash used byoperations relates primarily to the following:

 

·                  *An $11.5 million decrease inincome in our Building Materials Distribution segment and a $22.2 millionincrease in losses in our Wood Products segment. *As discussed under “Operating Results” above, the lower results for 2009were the result of fewergross margin dollars available in our Building Materials Distribution segmentto cover relatively fixed expenses, such as occupancy, payroll, and deliverycosts, as sales volumes declined from the same period a year ago. Also, in ourWood Products segment, the increased loss was driven primarily by pricingdeclines for plywood, which were partially offset by favorable input costs,primarily wood costs, productivity improvements, and curtailments at facilitiespreviously generating cash losses.

 

·                  *More cash contributions to ourpension plans.*  During 2009, we used $28.4 million of cash to make pensioncontributions, compared with $20.4 million during 2008.

 

·                  *The increase in cash usedfor the items discussed above was partially offset by $40.7 million ofcash generated by the reduction of working capital during 2009, compared with$4.6 million of cash used in 2008 for increases in working capital.*  Working capital is subject to cyclical operatingneeds, the timing of the collection of receivables, the payment of payables andexpenses, and to a lesser extent, seasonal fluctuations in our operations. Thedecrease in working capital during 2009 was primarily attributable to adecrease in inventory in our Building Materials Distribution and Wood Productssegments, which reflects our effort to manage inventories to the currentweakened demand environment in the housing market, and higher accounts payableand accrued liabilities in our Building Materials Distribution segment. Thesepositive working capital changes were partially offset by higher receivables inour Building Materials Distribution and Wood Products segments, which primarilyreflect increased sales of approximately 6%, comparing sales for the month of December 2009with sales for the month of December 2008, and a modest increase in dayssales outstanding, compared with the prior year.

 

*2008 Compared With 2007*

 

In 2008 and 2007, our operating activitiesused $24.4 million and provided $250.1 million of cash, respectively.Relative to 2007, thedecrease in cash provided by operations relates primarily to the following:

 

·                  *Items in net income (loss)provided $1.8 million of cash during 2008, compared with$275.4 million of cash in 2007*.  The decreaseis due to the sale of our Paper and Packaging & Newsprint assets infirst quarter 2008 and lower income in our Building Materials Distribution andWood Products segments due to significant deterioration in the U.S. housingmarket. As discussed under “Our Operating Results”above, this lower income was driven primarily by lower 

 

31

----

Table of Contents

 

sales activity in our Building MaterialsDistribution segment and by a combination of lower sales volumes and/or pricesfor most of our products, coupled with higher conversion costs, in our WoodProducts segment.

 

·                  *Changes in working capital*. In 2008, unfavorablechanges in working capital used $4.6 million of cash from operations,compared with $26.4 million of cash used in 2007. During 2008, theincrease in working capital was primarily attributable to a decrease inaccounts payable and accrued liabilities, offset by decreases in accountsreceivable, inventory, and other assets. The decrease in accounts receivablereflects a lower level of sales activity due to weaker product demand and prices, as U.S. newresidential housing demand declined. Due to the decrease in product demand, wetook rolling curtailments at a number of our wood products operations andreduced inventories in our building materials distribution business to maintainappropriate inventory levels. The decrease in accounts payable was dueprimarily to a reduction in inventory and a decrease in overall costs in 2008. See “Our Operating Results” above for moreinformation.

 

·                  *More cash contributions to ourpension plans.*  During 2008, we used $20.4 million of cash to make pensioncontributions, compared with $0.7 million during 2007. Of the 2008contributions, $11.0 million was included in the pension assetstransferred in the Sale.

 

***Investing Activities***

 

In 2009 and 2008, cash from investing activitiesprovided $62.9 million and $1,271.4 million. In 2007, we used$186.7 million of cash for investment activities.

 

*2009*

 

During 2009, we received $83.2 million of netproceeds from the sale of 18.8 million Boise Inc. shares. We usedapproximately $16.8 million of cash for purchases of property andequipment, which included expenditures for a new dryer in Medford, Oregon, aswell as costs related to other replacement projects and ongoing environmentalcompliance. In addition, we spent $4.6 million for the acquisition ofbusinesses and facilities. We purchased a sawmill in Pilot Rock, Oregon, whichhas improved our regional fiber integration in our Wood Products segment and atruss assembly operation and EWP sales office in Saco and Biddeford, Maine,respectively.

 

Details of 2009 capital investment by segment are includedin the table below:

 
| ** **                          | ** ** | **Year Ended December 31, 2009**   | ** ** |
|-------------------------------------|------------|-----------------------------------------|------------|
| ** **                          | ** ** | **Acquisition/    Expansion** | ** ** | **Quality/  Efficiency (a)** | ** ** | **Replacement,  Environmental,  and Other** | ** ** | **Total** | ** ** |
| ** **                          | ** ** | **(millions)**                          | ** ** |
| Building Materials Distribution (b) |       | $                                       | 2.0        |   | $ | — |   | $ | 3.4 |   | $ | 5.4 |   |
| Wood Products (c)                   |       | 3.9                                     |       | 5.2 |   | 6.9 |   | 16.0 |   |
| Corporate and Other                 |       | —                                  |       | — |   | — |   | — |   |
|                                | ** ** | **$**                                   | **5.9**    | ** ** | **$** | **5.2** | ** ** | **$** | **10.3** | ** ** | **$** | **21.4** | ** ** |

 

----

(a)                                  Quality andefficiency projects include quality improvements, modernization, energy, andcost-saving projects.

 

(b)                                 Acquisition/Expansionincludes $0.9 million of cash paid for the purchase of a truss assemblyoperation and EWP sales office in Saco and Biddeford, Maine, respectively.

 

(c)                                  Acquisition/Expansionincludes $3.7 million of cash paid for the purchase of a sawmill in Pilot,Rock, Oregon.

 

We expect capital investments in 2010 to totalapproximately $35 million to $40 million, excluding acquisitions.This level of capital expenditures could increase or decrease as a result of anumber of factors, including our financial results, future economic condition,and timing of equipment purchases. Our capital spending in 2010 will be forexpansion, business improvement and quality/efficiency projects, replacementprojects, and ongoing environmental compliance. During 2009, we spentapproximately $1.1 million on environmental compliance. We expect to spenda similar amount in 2010 for this purpose.

 

32

----

Table of Contents

 

*2008*

 

We received $1,323.7 million of net cash from the sale of assets in2008, as follows:

 
| ** **                                                             | ** ** | **(millions)** | ** **  |
|------------------------------------------------------------------------|------------|----------------|-------------|
|                                                                   |       |           |        |
| Proceeds from sale of Paper and  Packaging & Newsprint assets |       | $              | 1,277.2     |   |
| Selling expenses                                                       |       | (37.3          | )           |
| Cash contributed to Boise Inc.                                         |       | (38.0          | )           |
| Sales proceeds, net of selling expenses and cash  contributed          |       | 1,201.9        |        |
| Proceeds from the sale of Brazil operations, net                       |       | 45.5           |        |
| Proceeds from other asset sales, net                                   |       | 23.6           |        |
|                                                                   |       | 1,271.0        |        |
| Proceeds from the sale of note receivable from  Boise Inc., net   |       | 52.7           |        |
|                                                                   | ** ** | **$**          | **1,323.7** | ** ** |

 

In connection with the Sale, we received$1,201.9 million, which is net of $38.0 million of cash contributedto Boise Inc. and $37.3 million of selling expenses, which included$24.9 million of financing costs that we agreed to pay for Boise Inc. Wealso received approximately $45.5 million of cash for the sale of ourBrazil operations and $23.6 million of cash for the sale of our Vancouver,Washington, and Independence, Oregon, closed mill sites and other miscellaneousassets. During 2008, cash investingactivities also included $52.7 million of net proceeds from the sale ofthe note receivable from Boise Inc. We used $51.9 million of cash for purchases of property,plant, and equipment ($10.2 million of which was invested in the Paper andPackaging & Newsprint businesses we sold on February 22, 2008).

 

*2007*

 

In 2007, investing activities included $188.0 million of capitalexpenditures for the purchase of property, plant, and equipment. Approximately$45 million of our expenditures for property, plant, and equipment relatedto the reconfiguration of the paper machine at our pulp and paper mill inWallula, Washington, to produce both pressure sensitive paper and commodityuncoated free sheet. Also included in this amount is $10 million ofspending related to the installation of a shoe press in the DeRidder,Louisiana, mill to reduce its use of energy in producing linerboard. Investingactivities also included $27.8 million of proceeds from the sale ofassets, which included $10.1 million of net proceeds from the sale of ournewly constructed building materials distribution center in Milton, Florida,which we completed during the second quarter. In connection with the sale ofour Milton facility, we leased it back over a 15-year lease term. We received approximately$5.2 million (net of cash costs paid to the buyer) from the sale of thepaper converting facility in Salem, Oregon. Additionally, in 2007 we receivedapproximately $3.7 million and $3.2 million of proceeds from the saleof the Wallula, Washington, fiber farm and Jackson, Alabama, sawmill.

 

Investing activities in 2007 also used $32.5 million of cash to payamounts owed to OfficeMax under an Additional Consideration Agreement enteredinto in connection with the Forest Products Acquisition. Under the agreement,the parties agreed to adjust the purchase price based on changes in paperprices, from time to time, in effect. Based on paper prices during the thirdanniversary period ended October 29, 2007, we paid OfficeMax$32.5 million. This agreement was terminated in connection with the Sale,and we will neither receive payments from, nor make subsequent payments to,OfficeMax under this agreement.

 

***FinancingActivities***

 

In 2009, we used $16.4 million in cash forfinancing activities, compared with $1,028.8 million in 2008 and$51.0 million in 2007.

 

*2009*

 

During 2009 we repurchased $11.9 million ofsenior subordinated notes for $5.6 million, plus accrued interest. Inaddition, we repaid, and subsequently reborrowed, $60.0 million ofoutstanding borrowings under the Revolving Credit Facility. In connection withthe $60.0 million payment on the Revolving Credit Facility, we amended theRevolving Credit Facility to permanently reduce the lending commitments by$60.0 million, bringing the total commitments from $350 million to$290 million. This debt reduction, in combination with capital spending,fulfilled our obligations under the senior subordinated 

 

33

----

Tableof Contents

 

notes indenture with respect to net available cashreceived in connection with the June 2008 sale of the note receivable fromBoise Inc. and the July 2008 sale of our Brazilian subsidiary.

 

During 2009 we also made $10.7 million of taxdistributions to equity holders, most of which related to the taxable gain onthe Sale.

 

*2008*

 

In 2008, cash used for financing activities relatedprimarily to the repayment of long-term debt. During the period of January 1to February 21, 2008, we borrowed $125.0 million under ourreceivables securitization facility and $40.0 million under our previousrevolving credit facility to make $7.4 million of tax distributions to ourequity holders, contribute $20.0 million to our pension plans, and fundworking capital and other operating requirements. In 2008, with proceeds fromthe Sale and an initial borrowing under the Revolving Credit Facility, werepaid $1,085.6 million of outstanding debt and terminated all of ourcredit facilities with the exception of $240.0 million of 7.125% seniorsubordinated notes and $75.0 million outstanding under the RevolvingCredit Facility at December 31, 2008.

 

In 2008, we terminated all of our interest rate swapagreements for approximately $11.9 million. We also made$128.1 million of tax distributions to our equity holders and paid$28.6 million to repurchase equity units from management investors.

 

*2007*

 

In 2007, financing activities included $538.9 million of debtprepayments related to our Tranche D term loan, which was paid downprimarily with the proceeds from our new $525.0 million Tranche Eterm loan. Cash used for financing also included $250.0 million for therepayment of our senior unsecured floating-rate notes, which was primarilyfunded with the proceeds from a $200.0 million delayed-draw term loan.Cash used for financing activities also included a $15.0 million netincrease in borrowings under our accounts receivable securitization program,$2.8 million of proceeds from unwinding two of our interest rate swapagreements that were scheduled to begin in 2009, and $2.8 million of cashused to pay one of our equity investors to fund its tax obligations related toits investment in us.

 

The following discussion describes our debt structure in more detail.

 

*Debt Structure*

 

At December 31, 2009and 2008, our long-term debt was as follows:

 
| ** **                                      | ** ** | **December 31** | ** ** |
|-------------------------------------------------|------------|----------------------|------------|
| ** **                                      | ** ** | **2009**             | ** ** | **2008** | ** ** |
| ** **                                      | ** ** | **(millions)**       | ** ** |
| Asset-based revolving credit facility, due 2013 |       | $                    | 75.0       |   | $ | 75.0 |   |
| 7.125% senior subordinated notes, due 2014      |       | 228.1                |       | 240.0 |   |
| Total long-term debt                            | ** ** | **$**                | **303.1**  | ** ** | **$** | **315.0** | ** ** |

 

*Asset-Based Revolving CreditFacility*

 

On February 22, 2008, Boise Cascade, L.L.C., andits principal operating subsidiaries, Boise Building Solutions Manufacturing,L.L.C., and Boise Building Solutions Distribution, L.L.C., acting asborrowers, entered into a five-year $350 million senior securedasset-based revolving credit facility with Bank of America (Revolving CreditFacility). As part of the syndication process, the Revolving Credit Facilitywas amended in April 2008 to revise the pricing and incorporate additionalcovenants. In May 2009, we repaid, and subsequently reborrowed,$60.0 million of outstanding borrowings under the Revolving CreditFacility, and we amended the Revolving Credit Facility to permanently reducethe lending commitments by $60 million, bringing the total commitments to$290 million. At both December 31, 2009 and 2008, we had $75.0 millionof borrowings outstanding under the Revolving Credit Facility.

 

Interest rates under the Revolving Credit Facility arebased on either the prime rate or the London Interbank Offered Rate (LIBOR).Pricing is subject to quarterly adjustment based on the average availabilityunder the Revolving Credit Facility during the prior quarter. The range ofborrowing costs 

 

34

----

Tableof Contents

 

under the pricing grid is:  (i) prime plus 1.00% to 1.50% or (ii) LIBORplus 2.50% to 3.00%. For the years ended December 31, 2009 and 2008,the average interest rates for our borrowings under the Revolving CreditFacility were 2.9% and 5.0%. Letters of credit are subject to a 0.125% frontingfee payable to the issuing bank and a fee payable to the lenders equal to theproduct of the interest rate spread applicable to LIBOR borrowings underthe Revolving Credit Facility and the daily average amount available fordrawing under the outstanding letters of credit.

 

The borrowings under the Revolving Credit Facilityranged from a low of $15.0 million to a high of $75.0 million duringthe year ended December 31, 2009. The weighted average amount of borrowingsoutstanding under the Revolving Credit Facility during the year ended December 31,2009, was $74.0 million. The Revolving Credit Facility provides for acommitment fee of 0.50% per annum payable to the lenders on the average dailyunused portion of the Revolving Credit Facility. The Revolving Credit Facilityis guaranteed by our domestic subsidiaries (other than the three borrowersnoted above) and is secured by a first-priority security interest in the stockof our foreign subsidiaries and substantially all of our domestic assets,except for property, plant, and equipment.

 

Borrowings under theRevolving Credit Facility are constrained by a borrowing base formula dependentupon levels of eligible inventory and receivables reduced by outstandingletters of credit and, when our fixed-charge coverage ratio is below 1:1, as itwas on December 31, 2009, by a further requirement that we maintain acombination of unrestricted cash and borrowing base, less outstanding loans, ator in excess of the greater of $45 million or 15% of the borrowing basedetermined under the Revolving Credit Facility. At December 31, 2009, ouraggregate liquidity from unrestricted cash and cash equivalents and unusedborrowing capacity under the Revolving Credit Facility totaled $299.6 million.

 

In addition, theRevolving Credit Facility contains a restriction on capital investments that isapplicable when a minimum availability threshold is not met. That covenant wasnot applicable on December 31, 2009. The Revolving Credit Facility alsocontains customary nonfinancial covenants, including a negative pledge covenantand restrictions on distributions to equity holders, acquisitions, anddivestitures. These covenants will become more restrictive if a minimumavailability threshold is not maintained.

 

*Letters of Credit*

 

At December 31, 2009and 2008, we had $16.5 million and $14.2 million of letters of creditoutstanding, respectively. These letters of credit reduce our borrowingcapacity under the Revolving Credit Facility.

 

*Senior Subordinated Notes*

 

In October 2004,Boise Cascade, L.L.C., issued $400.0 million of 7.125% senior subordinatednotes due in 2014. Net proceeds from the notes were used to fund a portion ofthe Forest Products Acquisition. In July 2005, we completed an exchange offerwhereby all of our senior subordinated notes were exchanged for registeredsecurities with identical terms (other than terms relating to registrationrights) to the notes issued in October 2004. We may redeem all or part ofthe notes at any time at redemption prices set forth in the indenture. If wesell specific assets or experience specific kinds of changes in control, wemust offer to purchase the notes. In connection with the Sale, we repurchased $160.0 million of thenotes at par in April 2008. In 2009, we repurchased $11.9 million ofsenior subordinated notes and recorded a $6.0 million gain in “Gain onrepurchase of long-term debt” in our Consolidated Statement of Loss.

 

*Other*

 

For the years ended December 31, 2009, 2008, and 2007, cash payments forinterest, net of interest capitalized, were $20.0 million,$36.0 million, and $96.1 million, respectively.

 

***Contractual Obligations***

 

In the table below, weset forth our enforceable and legally binding obligations as of December 31,2009. Some of the amounts included in the table are based on management’sestimates and assumptions about these obligations, including their duration,the possibility of renewal, anticipated actions by third parties, and otherfactors. Because these estimates and assumptions are necessarily

 

35

----

Tableof Contents

 

subjective, our actualpayments may vary from those reflected in the table. Purchase orders made inthe ordinary course of business are excluded from the table below. Any amountsfor which we are liable under purchase orders are reflected on the ConsolidatedBalance Sheets as accounts payable and accrued liabilities.

 
| ** **                                                  | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                  | ** ** | **2010**                   | ** ** | **2011-2012** | ** ** | **2013-2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                                  | ** ** | **(millions)**             | ** ** |
| Long-term debt (a)                                          |       | $                          | —     |   | $ | — |   | $ | 303.1 |   | $ | — |   | $ | 303.1 |   |
| Interest (b)                                                |       | 18.3                       |       | 36.7 |   | 32.8 |   | — |   | 87.8 |   |
| Operating leases (c)                                        |       | 10.9                       |       | 19.1 |   | 14.7 |   | 31.8 |   | 76.5 |   |
| Purchase obligations                                        |       |                       |       |   |   |   |   |   |   |   |   |
| Raw materials and finished goods inventory (d)         |       | 69.9                       |       | 124.8 |   | 118.8 |   | 0.3 |   | 313.8 |   |
| Utilities (e)                                               |       | 7.1                        |       | 0.1 |   | — |   | — |   | 7.2 |   |
| Other                                                       |       | 1.6                        |       | 0.5 |   | — |   | — |   | 2.1 |   |
| Other long-term liabilities reflected on our  Balance Sheet |       |                       |       |   |   |   |   |   |   |   |   |
| Compensation and benefits (f)                               |       | 3.1                        |       | 41.6 |   | 52.6 |   | 16.9 |   | 114.2 |   |
| Other (g)                                                   |       | 2.4                        |       | 3.0 |   | 1.5 |   | 9.5 |   | 16.4 |   |
|                                                        | ** ** | **$**                      | **113.3**  | ** ** | **$** | **225.8** | ** ** | **$** | **523.5** | ** ** | **$** | **58.5** | ** ** | **$** | **921.1** | ** ** |

 

----

(a)                                  These borrowingsare further explained in “Financing Activities” under “Liquidity and CapitalResources” in this Management’s Discussion and Analysis of Financial Conditionand Results of Operations. The table assumes our long-term debt is held tomaturity.

 

(b)                                 Amounts represent estimated interest payments as of December 31,2009, assuming our long-term debt is held to maturity.

 

(c)                                  We enter into operating leases in the normal course ofbusiness. We lease a portion of our distribution centers as well as otherproperty and equipment under operating leases. Some lease agreements provide uswith the option to renew the lease or purchase the leased property. Ouroperating lease obligations would change if we exercised these renewal optionsand/or if we entered into additional operating lease agreements. For moreinformation, see Note 7, Leases, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” ofthis Form 10-K.

 

(d)                                 Amounts represent contracts to purchase approximately$313.8 million of wood fiber based on contract terms or first quarter 2010pricing. Under most of these log and fiber supply agreements, we have the rightto cancel or reduce our commitments in the event of a mill curtailment orshutdown. Future purchase prices under most of these agreements will be setquarterly or semiannually based on regional market prices. Our log and fiberobligations are subject to change based on, among other things, the effect ofgovernmental laws and regulations, our manufacturing operations not operatingin the normal course of business, log and fiber availability, and the status ofenvironmental appeals. Except for deposits required pursuant to wood supplycontracts, these obligations are not recorded in our consolidated financialstatements until contract payment terms take effect.

 

(e)                                  We enter into utility contracts for the purchase ofelectricity and natural gas. We also purchase these services under utilitytariffs. The contractual and tariff arrangements include multiple-yearcommitments and minimum annual purchase requirements. These payment obligationswere valued at prices in effect on December 31, 2009, or contractlanguage, if applicable. Because we consume the energy in the manufacture ofour products, these obligations represent the face value of the contracts, notresale value.

 

(f)                                    Amounts consistprimarily of our pension obligation, including current portion of$0.9 million. Actuarially determined liabilities related to pension andpostretirement benefits are recorded based on estimates and assumptions. Keyfactors used in developing estimates of these liabilities include assumptionsrelated to discount rates, rates of return on investments, future compensationcosts, and other factors. Changes in assumptions related to the measurement offunded status could have a material impact on the amount reported. In the tableabove, we allocated our pension obligations by year based on the futurerequired minimum pension contributions, as determined by our actuaries.

 

(g)                                 Includes current liabilities of$2.1 million.

 

In addition to the contractual obligations quantified in the table above,we have other obligations for goods and services and raw materials entered intoin the normal course of business. In the years we report taxable income, to theextent that tax losses passed through to investors in prior years do not offsetcurrent-year taxable income, we expect to make tax distributions to our equityholders based on the greater of either our regular taxable income or ouralternative minimum taxable income. The tax

 

36

----

Table of Contents

 

distributions related to regular taxable income are distributed at 38.9%.The tax distributions related to alternative minimum taxable income aredistributed at 20% for OfficeMax and 28% for all of our other equity holders.

 

The Series A equityunits issued to OfficeMax in connection with the Forest Products Acquisitionaccrue dividends daily at a rate of 8% per annum on OfficeMax’s capitalcontribution (net of any distributions previously received) plus anyaccumulated dividends. Accrued and unpaid dividends accumulate on the Series Aequity units on June 30 and December 31 of each year. At December 31,2009 and 2008, $25.9 million and $19.2 million, respectively, ofdividends were accrued on our Consolidated Balance Sheets as an increase in thevalue of the Series A equity units. Neither the original investment nor the accumulated dividends on the Series Aequity units are subject to a fixed retirement or redemption schedule.

 

***Off-Balance-Sheet Activities***

 

At December 31, 2009and 2008, we had no material off-balance-sheet arrangements with unconsolidatedentities.

 

***Guarantees***

 

Note 16, Commitmentsand Guarantees, and Note 19, Consolidating Guarantor and NonguarantorFinancial Information, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K describethe nature of our guarantees, including the approximate terms of theguarantees, how the guarantees arose, the events or circumstances that wouldrequire us to perform under the guarantees, and the maximum potentialundiscounted amounts of future payments we could be required to make.

 

***Seasonal and Inflationary Influences***

 

We are exposed to fluctuations in quarterly salesvolumes and expenses due to seasonal factors. These seasonal factors are commonin the building products industry. Seasonal changes in levels of buildingactivity affect our building products businesses, which are dependent onhousing starts, repair-and-remodel activities, and light commercialconstruction activities. We typically report lower sales in the first andfourth quarters due to the impact of poor weather on the construction market,and we generally have higher sales in the second and third quarters, reflectingan increase in construction due to more favorable weather conditions. Wetypically have higher working capital in the second and third quarters due tothe summer building season. Although we generally expect these trends tocontinue for the foreseeable future, we have reduced our inventory as part ofour effort to manage to the current weakened demand environment in the housingmarket. Seasonally cold weather increases costs, especially energy consumption,at most of our manufacturing facilities.

 

Our major costs of production are labor, wood fiber,energy, and chemicals. Energy costs, particularly for electricity, natural gas,and fuel oil, have been volatile in recent years. In 2009, energy and chemicalcosts were lower than in 2008 in response to global economic weakness.

 

***Employees***

 

As of January 31, 2010, we had approximately 4,240 employees.Approximately 1,460, or 34%, of these employees work pursuant to collectivebargaining agreements. As of January 31, 2010, we had 12 collectivebargaining agreements, of which one agreement, representing 24 employees,is up for renewal in 2010. We do not expect material work interruptions or increases in our costsduring the course of the negotiations with our collective bargaining units.Nevertheless, if our expectations are not accurate, we could experience amaterial labor disruption or significantly increased labor costs at one or moreof our facilities, any of which could prevent us from meeting customer demandor reduce our sales and profitability.

 

37

----

Table of Contents

 

***Disclosures of Financial Market Risks***

 

In the normal course of business, we are exposed tofinancial risks such as changes in interest rates, credit risk, and foreigncurrency exchange rates. We do not use derivative instruments for speculativepurposes. If any derivative instruments are purchased to minimize risk, theymay not qualify for hedge accounting.

 

*Interest Rate Risk*

 

We are exposed to interest rate risk arising from fluctuations in interestrates on our cash and cash equivalents and bank credit facility. In 2009, wedid not use any interest rate swap contracts to manage this risk.

 

In 2008, we significantly decreased our variable-rate debt with theproceeds from the Sale. As a result, we terminated all of our interest rateswap agreements for approximately $11.9 million. The interest rate swaps were consideredeconomic hedges.During 2008, we recorded the fair valueof the interest rate swaps, or $6.3 million of expense, in “Change in fairvalue of interest rate swaps” in our Consolidated Statement of Loss.

 

*Concentration of Credit Risk*

 

We are exposed to credit risk related to customeraccounts receivable. In order to reduce this risk, we consider customerconcentrations and current economic trends and monitor the creditworthiness ofsignificant customers based on ongoing credit evaluations. At December 31,2009 and 2008, the receivables from a single customer accounted for approximately14% and 18% of total receivables, respectively. No other customer accounted for10% or more of total receivables.

 

*Foreign Currency Risk*

 

We have manufacturingoperations in the United States and Canada. As a result, we are exposed tomovements in the foreign currency exchange rate in Canada. At December 31,2009, we had no foreign currency hedges.

 

*Contingent Value Rights*

 

As part of the Sale,Terrapin Partners Venture Partnership and Boise Cascade, L.L.C., issued21.2 million contingent value rights (CVRs) to holders of Boise Inc.stock. During 2009, we settled our obligation related to the CVRs using0.8 million of Boise Inc. shares and recorded a $1.0 millionloss in “Equity in net income (loss) of affiliate” in our ConsolidatedStatement of Loss for the difference between the market price on the date wesettled our obligation with shares and the carrying amount of the sharesrecorded on our Consolidated Balance Sheet.

 

In 2008, we recorded thefair value of the CVR liability and associated expense based on a simulationanalysis that considered the likelihood of Boise Inc. investors receivingpayment under the Contingent Value Rights Agreement. We updated the simulationmodel each quarter and revalued the liability based on the results. During2008, we recognized $0.5 million of expense in “Change in fair value ofcontingent value rights” in our Consolidated Statement of Loss.

 

38

----

Table of Contents

** **

***FinancialInstruments***

 

The table below providesinformation as of December 31, 2009, about our financial instruments thatare sensitive to changes in interest rates. The table presents principal cashflows and related weighted average interest rates by expected maturity dates.For obligations with variable interest rate sensitivity, the table sets forthpayout amounts based on current rates and does not attempt to project futurerates. Other instrument s subject to market risk, such as obligations forpension plans and other postretirement benefits, are not reflected in thetable.

 
| ** **                                       | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** **              | ** ** | **December 31** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|------------|------------|------------|------------|-------------------------|------------|----------------------|------------|
| ** **                                       | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** **              | ** ** | **2009**             | ** ** | **2008** | ** ** |
| ** **                                       | ** ** | **2010-********2012** | ** ** | **2013**   | ** ** | **2014**   | ** ** | **There********-after** | ** ** | **Total**            | ** ** | **Fair******** Value** | ** ** | **Total** | ** ** | **Fair******** Value** | ** ** |
| ** **                                       | ** ** | **(millions)**        | ** ** |
| **Long-term debt, including****current portion** |       |                  |       |       |       |       |       |                    |       |                 |       |   |   |   |   |   |   |
| Fixed-rate debt payments (a)                     |       |                  |       |       |       |       |       |                    |       |                 |       |   |   |   |   |   |   |
| Senior subordinated notes                   |       | $                     | —     |       | $          | —     |       | $                       | 228.1      |                 | $          | — |   | $ | 228.1 |   | $ | 205.6 |   | $ | 240.0 |   | $ | 140.5 |   |
| Average interest rates                           |       | —                |       | —     |       | 7.1        | %          | —                  |       | 7.1                  | %          | — |   | 7.1 | % | — |   |
| Variable-rate debt payments (a)                  |       | $                     | —     |       | $          | 75.0       |       | $                       | —     |                 | $          | — |   | $ | 75.0 |   | $ | 75.0 |   | $ | 75.0 |   | $ | 75.0 |   |
| Average interest rates                           |       | —                |       | 2.9        | %          | —     |       | —                  |       | 2.9                  | %          | — |   | 3.0 | % | — |   |

 

----

(a)                                 These obligations are further explained in “Financing Activities” under “Liquidityand Capital Resources” in this Management’s Discussion and Analysis ofFinancial Condition and Results of Operations. The table assumes our long-termdebt is held to maturity.

 

***Environmental***

 

Our businesses aresubject to a wide range of general and industry-specific environmental laws andregulations. In particular, we are affected by laws and regulations coveringair emissions, wastewater discharges, solid and hazardous waste management, andsite remediation. Compliance with these laws and regulations is a significantfactor in the operation of our businesses. We believe that we have created acorporate culture of strong compliance by taking a conservative approach toenvironmental issues in order to assure that we are operating well within thebounds of regulatory requirements. However, we cannot assure you that we willat all times be in full compliance with environmental requirements, and wecannot assure you that we will not incur fines and penalties in the future. In2009, we paid an insignificant amount of environmental fines and penaltiesacross all of our segments.

 

We incur capital andoperating expenditures to comply with federal, state, and local environmentallaws and regulations. Failure to comply with these laws and regulations couldresult in civil or criminal fines or penalties or in enforcement actions. Ourfailure to comply could also result in governmental or judicial orders thatstop or interrupt our operations or require us to take corrective measures,install additional pollution control equipment, or take other remedial actions.During 2009, we spent approximately $1.1 million on capital expendituresto comply with environmental requirements. We expect to spend a similar amountin 2010 for this purpose.

 

As an owner and operatorof real estate, we may be liable under environmental laws for the cleanup ofpast and present spills and releases of hazardous or toxic substances on orfrom our properties and operations. We can be found liable under these lawswhether or not we knew of, or were responsible for, the presence of suchsubstances. In some cases, this liability may exceed the value of the propertyitself.

 

OfficeMax retainsresponsibility for environmental liabilities that occurred with respect tobusinesses, facilities, and other assets not purchased by us in 2004 as part ofthe Forest Products Acquisition. In addition, OfficeMax generally indemnifiesus for hazardous substance releases and other environmental violations thatoccurred prior to the Forest Products Acquisition or arose out of pre-ForestProducts Acquisition operations at the businesses, facilities, and other assetspurchased by us. However, OfficeMax may not have sufficient funds to fullysatisfy its indemnification obligations when required, and in some cases, wemay not be contractually entitled to indemnification by OfficeMax.

 

In connection with the Sale, Boise Inc. and itsaffiliates assumed any and all environmental liabilities arising from ourownership or operation of the assets and businesses sold to them and we believewe are entitled to indemnification by them from third party claims in the eventthey fail to fully

 

39

----

Tableof Contents

 

discharge any such liabilities on the basis of commonlaw rules of indemnification. However, Boise Inc. may not have sufficientfunds to discharge its obligations when required or to indemnify us from thirdparty claims arising out of any such failure.

 

*Climate Change Matters*

 

Various legislative andregulatory proposals to restrict emissions of greenhouse gasses are underconsideration in Congress, state legislative bodies, and the EnvironmentalProtection Agency. Most of our manufacturing facilities operate power boilerswhich emit carbon dioxide. Such regulatory initiatives may require us to modifyoperating procedures or production levels, incur capital expenditures, purchaseemission credits, or take other actions that may adversely affect our financialresults. However, given the high degree of uncertainty about the ultimateparameters of any such regulatory initiative, it is premature to make anyprediction concerning such impacts. A significant portion of our greenhouse gasemissions are from biomass-fired power boilers. Many, but not all, regulatoryprograms or legislative packages under consideration treat biomass-generatedgreenhouse gases as being carbon-neutral and, therefore, excluded fromregulation. However, no assurance can be given that the final regulation, onceadopted, will exclude biomass-generated greenhouse gasses from directregulation. Even if regulatory programs are not applied directly to ouroperations, it is likely that they will, in their application to our energysuppliers and other raw material and service suppliers, cause our productioncosts to increase. We are unable to estimate the magnitude of any such increaseand the relative increase experienced by our competitors.

 

In addition, variousgovernment entities have adopted or are considering energy sourcing regulationswhich subsidize, or mandate consumption of specified percentages of, electricalpower generated from nontraditional generating sources, including biomassfuels. These programs may create significant new competition for our fibersources.

 

***Critical Accounting Estimates***

 

The preparation offinancial statements in accordance with generally accepted accountingprinciples in the United States of America requires management to makeestimates and assumptions about future events. These estimates and theunderlying assumptions affect the amounts of assets and liabilities reported,disclosures about contingent assets and liabilities, and reported amounts ofrevenues and expenses. Actual results could differ from these estimates. Webelieve that the accounting estimates discussed below represent the accountingestimates requiring the exercise of judgment where a different set of judgmentscould result in the greatest changes to reported results. We reviewed thedevelopment, selection, and disclosure of our critical accounting estimateswith the audit committee of our board of directors. Our current criticalaccounting estimates are as follows:

 

***Pensions***

 

We calculate pension expense and liabilities usingactuarial assumptions, including discount rates, expected return on planassets, expected rate of compensation increases, retirement rates, mortalityrates, expected contributions, and other factors. We based the assumptions usedto calculate pension expense on the following factors:

 

*DiscountRate Assumption.*  The discount rate reflects the current rateat which the pension obligations could be settled based on the measurementdates of the plans — December 31. In all years presented, the discountrates were determined by matching the expected plan benefit payments against aspot rate yield curve constructed to replicate Aa-graded corporate bonds.

 

*AssetReturn Assumption*.  We base our expected long-term rate of returnon plan assets on a weighted average of our expected returns for the majorasset classes (equities and fixed-income securities) in which we invest.Expected returns for the asset classes are based on long-term historicalreturns, inflation expectations, forecasted gross domestic product, earningsgrowth, and other economic factors. The weights we assign each asset class arebased on our investment strategy. The weighted average expected return on planassets we will use in our calculation of 2010 net periodic benefit cost is 7.25%.

 

*Rate ofCompensation Increases. *Generally, this assumption reflects ourlong-term actual experience, the near-term outlook, and assumed inflation.However, in connection with amending the salaried and nonqualified plans on March 18,2009, to freeze pension benefits effective December 31, 

 

40

----

Tableof Contents

 

2009 (see Note 12, Retirement and Benefit Plans, of theNotes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of this Form 10-K), we changed theassumption for the rate of compensation increase to zero. In addition to thesalaried benefits being frozen, there are currently no scheduled increases in pensionbenefit rates for employees in our hourly plans.

 

*Retirement and Mortality Rates*.  These rates are developed toreflect actual and projected plan experience.

 

*ExpectedContributions.*  Plan obligations and expenses are based on existingretirement plan provisions. No assumption is made for future changes to benefitprovisions beyond those to which we are presently committed, for example,changes we might commit to in future labor contracts. In 2009, we made$28.4 million in contributions to our pension plans. We are required tocontribute $2.0 million to our pension plans in 2010.

 

We recognize thefunded status of our pension and other postretirement benefit plans on ourConsolidated Balance Sheet and recognize the actuarial and experience gains andlosses and the prior service costs and credits as a component of othercomprehensive income, net of tax, in our Consolidated Statement of Capital.Actual results that differ from assumptions are accumulated and amortized overfuture periods and, therefore, generally affect recognized expense in futureperiods. While we believe that the assumptions usedto measure our pension obligations are reasonable, differences in actualexperience or changes in assumptions may materially affect our pensionobligations and future expense.

 

We believe that theaccounting estimate related to pensions is a critical accounting estimate forall of our segments because it is highly susceptible to change from period toperiod. The future effects of pension plans on our financial position andresults of operations will depend on economic conditions, employeedemographics, mortality rates, retirement rates, investment performance, thepension regulatory environment, benefit plan design, and funding decisions, amongother factors. The following table presents selected assumptions used andexpected to be used in the measurement of pension expense in the followingperiods:

 
| ** **                             | ** ** | **Year Ending**                        | ** ** | ** **                      | ** ** | ** ** | ** ** |
|----------------------------------------|------------|----------------------------------------|------------|---------------------------------|------------|------------|------------|
| ** **                             | ** ** | **December 31,**                  | ** ** | **Year Ended December 31** | ** ** |
| ** **                             | ** ** | **2010**                               | ** ** | **2009**                        | ** ** | **2008**   | ** ** |
|                                   |       | **(millions, except for percentages)** |       |
| Pension expense                        |       | $                                      | 8.4        |                            | $          | 12.3       |       | $ | 17.1 |   |
| Discount rate (a)                      |       | 5.90                                   | %          | 6.90                            | %          | 6.40       | %          |
| Expected rate of return on plan assets |       | 7.25                                   | %          | 7.25                            | %          | 7.25       | %          |
| Rate of compensation increases (b)     |       | —                                 |       | —                          |       | 4.25       | %          |
|                                        |            |                                        |            |                                 |            |            |            |  |  |  |

 

----

(a)                                 We used a 6.1%discount rate to calculate 2009 pension expense. On March 18, 2009, thesalaried and nonqualified benefit plans were amended so that no future benefitswould accrue after December 31, 2009. For the amended plans, we remeasuredpension expense for the period of March 18, 2009, through December 31,2009, using a 6.9% discount rate. We continued to recognize expense for theplans that were not amended using the 6.1% discount rate.

 

(b)                                 In connectionwith the plan amendment on March 18, 2009, we changed the compensation increaseto zero due to the fact that the salaried and nonqualified benefits were frozenDecember 31, 2009, and there are currently no scheduled increases inpension benefit rates for past service in the plans covering our hourlyemployees.

 

41

----

Tableof Contents

 

A change of 0.25% in either direction to the discount rate,the expected rate of return on plan assets, or the rate of compensationincreases would have had the following effect on 2010 and 2009 pension expense.These sensitivities are specific to 2010 and 2009. The sensitivities may not beadditive, so the impact of changing multiple factors simultaneously cannot becalculated by combining the individual sensitivities shown.

 
| ** **                             | ** ** | ** **              | ** ** | **Increase (Decrease)  in Pension Expense** | ** ** |
|----------------------------------------|------------|-------------------------|------------|---------------------------------------------|------------|
| ** **                             | ** ** | **Base********Expense** | ** ** | **0.25 %******** Increase**            | ** ** | **0.25%******** Decrease** | ** ** |
| ** **                             | ** ** | **(millions)**          | ** ** |
| **2010 Expense**                       |       |                    |       |                                        |       |   |   |
| Discount rate                          |       | $                       | 8.4        |                                        | $          | (0.5 | ) | $ | 0.6 |   |
| Expected rate of return on plan assets |       | 8.4                     |       | (0.6                                        | )          | 0.6 |   |
| Rate of compensation increases         |       | 8.4                     |       | —                                      |       | — |   |
| ** **                             |       |                    |       |                                        |       |   |   |
| **2009 Expense**                       |       |                    |       |                                        |       |   |   |
| Discount rate                          |       | $                       | 12.3       |                                        | $          | (0.8 | ) | $ | 0.7 |   |
| Expected rate of return on plan assets |       | 12.3                    |       | (0.6                                        | )          | 0.6 |   |
| Rate of compensation increases         |       | 12.3                    |       | —                                      |       | — |   |

 

***Other-Than-TemporaryImpairment of Equity Method Investment***

 

In connection with the Sale, we received shares of Boise Inc. (seeNote 4, Investment in Equity Affiliate, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and Supplementary Data”of this Form 10-K). The ownership interest provided us with the ability toexercise significant influence, and we accounted for the investment under theequity method of accounting. We continuously monitor the value ofBoise Inc.’s stock and our carrying value. When the fair value of ourinvestment is less than the carrying value, the investment is impaired and weare required to evaluate items (i) through (iii) below to determinewhether the impairment is other than temporary:

 

(i)                                     The length of time and extent to which the fair valueof the investment is less than its carrying amount;

 

(ii)                                  The financial condition and near-term prospects of theequity method investee, including recent operating losses or specific eventsthat may negatively influence the future earnings potential of the investee;and

 

(iii)                               Whether we intend to sell the impaired equity methodinvestment before it recovers to its carrying amount.

 

Significant judgment is required for purposes ofdetermining other-than-temporary impairment. On March 31, 2009, and September 30, 2008, we concluded that ourinvestment in Boise Inc. met the definition of being other than temporarilyimpaired based primarily on the length of time and extent to which the fairvalue of our investment had been trading below its carrying value. As of September 30,2008, Boise Inc.’s stock had traded below our carrying value for over sixmonths, and as of March 31, 2009, Boise Inc.’s stock had traded belowour carrying value since we wrote the investment down in September 2008.Accordingly, we recorded a $43.0 million and $208.1 million impairmentcharge for the years ended December 31, 2009 and 2008, in “Impairment ofinvestment in equity affiliate” in our Consolidated Statements of Loss.

 

On December 31, 2009, our investment inBoise Inc. was not impaired. The fair value of our investment of$5.31 per share exceeded the carrying value of $3.22 per share onthat date. We will continue to monitor the value of Boise Inc.’s stock andour carrying value. Should market conditions and/or Boise Inc.’s financialperformance deteriorate, it is possible that we will be required to record anoncash impairment charge in our Consolidated Statements of Income (Loss). Asadditional information becomes known, we may change our estimates.

 

***Long-LivedAsset Impairment***

 

An impairment of along-lived asset exists when the carrying value of an asset exceeds its fairvalue and when the carrying value is not recoverable through futureundiscounted cash flows from operations. We review the carrying value oflong-lived assets for impairment when events or changes in circumstancesindicate that the carrying amount of assets may not be recoverable.

 

Long-lived assetimpairment is a critical accounting estimate, as it is susceptible to changefrom period to period. We estimate the fair value of an asset or asset groupbased on quoted market prices (the amount for which the asset(s) could bebought or sold in a current transaction with a third party) 

 

42

----

Tableof Contents

 

when available. Whenquoted market prices are not available, we use an undiscounted cash flow modelto estimate fair value. To measure future cash flows, we are required to makeassumptions about future production volumes, future product pricing, and futureexpenses to be incurred. Estimates of future cash flows may change based on theavailability of fiber, environmental requirements, capital spending, and otherstrategic management decisions.

 

During 2009, we took rolling curtailmentsat a number of our wood products operations to match production with marketdemand. In addition, we permanently closed our White City, Oregon, plywoodoperation and La Grande, Oregon, lumber operation. Although we expectmarket conditions during 2010 to remain difficult for at least part of theyear, we currentlybelieve we have adequate support for the carrying value of all of our assetsbased on anticipated undiscounted cash flows that will result from ourestimates of future demand, pricing, and production costs, assuming certainlevels of capital expenditures. However, should the markets for our productsdeteriorate further or should we decide to invest capital differently and shouldother cash flow assumptions change, it is possible that we will be required torecord noncash impairment charges in the near term that could have a materialimpact on our results of operations. We will continue to evaluate the long-term viability and value to ourbusiness strategy of our remaining operating facilities and may conclude thatfacilities should be closed or sold in response to market conditions. Thesedecisions may result in our recording an impairment of our long-lived assets. Due to the numerous variables associatedwith our judgments and assumptions relating to the valuation of assets and theeffects of changes on these valuations, both the precision and reliability ofour estimates are subject to uncertainty. As additional information becomesknown, we may change our estimates.

 

***Allowance for Doubtful Accounts***

 

We make ongoing estimates relating to thecollectability of our accounts receivable and maintain a reserve for estimatedlosses resulting from the inability of our customers to meet their financialobligations to us. At December 31, 2009 and 2008, we had $1.6 millionand $1.8 million recorded as allowances for doubtful accounts. Estimatingour allowance for doubtful accounts is a critical accounting estimate, as itinvolves complex judgments about our customers’ ability to pay. In determiningthe amount of the reserve, we consider our historical level of credit losses,customer concentrations, current economic trends, and changes in customerpayment tendencies. We also make judgments about the creditworthiness ofsignificant customers based on ongoing credit evaluations. The significantdecline in new residential construction in the U.S. and disruptions in thecapital markets have impacted the ability of our customers and our customers’customers to fund their operations, which makes it difficult for us to estimatefuture credit losses. Our actual future losses from uncollectible accounts maydiffer materially from our current estimates.

 

As additional information becomes known, we may changeour estimates. In the event we determine that a change in the reserve isappropriate, we will record a charge to “Selling and distribution expenses” inour Consolidated Statements of Income (Loss) in the period we make such adetermination.

 

***Goodwilland Intangible Asset Impairment***

 

Goodwill represents theexcess of the cost of an acquired business over the fair value of theidentifiable tangible and intangible assets acquired and liabilities assumed ina business combination. At December 31, 2009, we had $12.2 million ofgoodwill recorded on our Consolidated Balance Sheet, of which $5.6 millionwas recorded in our Building Materials Distribution segment and$6.6 million was recorded in our Wood Products segment. At December 31,2009, the net carrying amount of intangible assets with indefinite lives, whichrepresent our trade names and trademarks, was $8.9 million.

 

Wemaintain two reporting units for purposes of our goodwill and intangible assetimpairment testing, Building Materials Distribution and Wood Products, whichare the same as our operating segments discussed in Note 15, SegmentInformation, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K. We testthe goodwill and indefinite-lived intangible assets in each of our reportingunits for impairment annually in the fourth quarter or sooner if events orchanges in circumstances indicate that the carrying value of the asset mayexceed fair value. In conducting our impairment analysis, we utilize thediscounted cash flow approach that estimates the projected future cash flows tobe generated by our reporting units,**discountedto present value using a discount rate reflecting our estimated cost of funds. Differences in assumptions used inprojecting future operating cash flows and cost of funds could have asignificant impact on the 

 

43

----

Tableof Contents

 

determination of the fairvalue of our reporting units. The following assumptions are key to our estimateof fair value under the income approach:

 

*Businessprojections*.  Projections are based on five-year forecaststhat are developed internally by management for use in managing the businessand reviewed by the board of directors. These projections include significantassumptions such as estimates of future revenues, profits, working capitalrequirements, operating plans, and capital expenditures. Our forecasts aredriven by consensus estimates of key economic indicators that affect ouroperating results, most notably new residential and light commercialconstruction and repair-and-remodel activity. These economic indicators arethen used to estimate future production volumes, selling prices, and key inputcosts for our manufactured products. Our forecasts also take into considerationrecent sales data for existing products, planned timing of capital projects,and anticipated conversion and distribution expenses. Our pricing assumptionsare estimated based upon an assessment of industry supply and demand dynamicsfor our major products.

 

*Growthrates*.  A growth rate is used to calculate theterminal value of a reporting unit. The growth rate is the expected rate atwhich a reporting unit’s earnings stream is projected to grow beyond thefive-year forecast period.

 

*Discountrates. *Future cash flows are discounted at a rate that isconsistent with a weighted average cost of capital for a potential market participant.The weighted average cost of capital is an estimate of the overall after-taxrate of return required by equity and debt holders of a business enterprise.The discount rates selected for the reporting units are based on existingconditions within our industry and reflect adjustments for potential riskpremiums in those markets as well as weighting of the market cost of equityversus debt.

 

Based on the results of the first step of the goodwillimpairment test, we determined that the fair value of each of our reportingunits exceeded their carrying amounts and, therefore, no goodwill impairmentexisted. As a result, the second step of the goodwill impairment test was notrequired to be completed. If our estimates of projected future cash flows fromincome from operations were too high by 10%, there would be no impact on thereported value of goodwill on our Consolidated Balance Sheet. We also evaluatedthe remaining useful lives of our finite-lived purchased intangible assets anddetermined no adjustments to the useful lives were necessary.

 

We currently believe wehave adequate support for the carrying value of our goodwill and intangibleassets based on anticipated cash flows that will result from our estimates offuture demand, pricing, and production costs, assuming certain levels ofcapital expenditures. However,valuation analysis requires significant judgments and estimates to be made bymanagement. We cannot predict the occurrence of certain future events thatmight adversely affect the reported value of goodwill. Should themarkets for building products deteriorate further, should we make strategicdecisions in response to continued difficult economic and competitiveconditions, should we decide to invest capital differently, and should othercash flow assumptions change, it is reasonably possible that our determinationthat goodwill is not impaired could change in the near term. We will continue to perform a goodwill andintangible asset impairment test on an annual basis and on an interim basis ifindicators of impairment exist. As additional information becomes known,we may change our estimates.

 

***New and Recently Adopted Accounting Standards***

 

For information relatedto new and recently adopted accounting standards, see Note 2, Summary ofSignificant Accounting Policies, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” inthis Form 10-K.

 

***ITEM 7A.             QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK***

 

Information concerning quantitative and qualitativedisclosures about market risk is included under the caption “Disclosures ofFinancial Market Risks” in “Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations” of this Form 10-K.

 

44

----

Table of Contents

 

***ITEM 8.                FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA***

 

**Boise Cascade Holdings, L.L.C.**

**Consolidated Statements of Income (Loss)**

** **
| ** **                                                           | ** ** | **Year Ended December 31** | ** **  |
|----------------------------------------------------------------------|------------|---------------------------------|-------------|
| ** **                                                           | ** ** | **2009**                        | ** **  | **2008** | ** ** | **2007** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                 | ** **  |
| **Sales**                                                            |       | ** **                      | ** **  | ** ** | ** ** | ** ** | ** ** |
| Trade                                                                |       | $                               | 1,935,353   |   | $ | 2,831,283 |   | $ | 4,797,795 |   |
| Related  parties                                                     |       | 37,897                          |        | 146,215 |   | 615,661 |   |
|                                                                 |       | 1,973,250                       |        | 2,977,498 |   | 5,413,456 |   |
|                                                                 |       |                            |        |   |   |   |   |
| **Costs and expenses**                                               | ** ** | ** **                      | ** **  | ** ** | ** ** | ** ** | ** ** |
| Materials,  labor, and other operating expenses                      |       | 1,757,068                       |        | 2,620,113 |   | 4,705,325 |   |
| Materials,  labor, and other operating expenses from related parties |       | 29,915                          |        | 70,026 |   | — |   |
| Depreciation,  amortization, and depletion                           |       | 40,874                          |        | 36,258 |   | 123,909 |   |
| Selling  and distribution expenses                                   | * *   | 190,431                         | * *    | 231,545 |   | 285,633 |   |
| General  and administrative expenses                                 | * *   | 27,401                          |        | 36,556 | * * | 84,062 | * * |
| General  and administrative expenses from related party              |       | 10,169                          |        | 8,143 |   | — |   |
| Gain  on sale of Paper and Packaging & Newsprint assets     |       | —                          |        | (2,915 | ) | — |   |
| Other  (income) expense, net                                         |       | 842                             |        | 10,634 |   | (5,693 | ) |
|                                                                 |       | 2,056,700                       |        | 3,010,360 |   | 5,193,236 |   |
|                                                                 | ** ** | ** **                      | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Income (loss) from operations**                                    |       | (83,450                         | )           | (32,862 | ) | 220,220 |   |
|                                                                 |       |                            |        |   |   |   |   |
| Equity  in net income (loss) of affiliate                            |       | 79,729                          |        | (11,328 | ) | — |   |
| Gain  on sale of shares of equity affiliate                          |       | 42,752                          |        | — |   | — |   |
| Impairment  of investment in equity affiliate                        |       | (43,039                         | )           | (208,074 | ) | — |   |
| Foreign  exchange gain (loss)                                        |       | 1,025                           |        | (1,831 | ) | 4,451 |   |
| Change  in fair value of contingent value rights                     |       | 194                             |        | (507 | ) | — |   |
| Change  in fair value of interest rate swaps                         |       | —                          |        | (6,284 | ) | 3,733 |   |
| Gain  on repurchase of long-term debt                                |       | 6,026                           |        | — |   | — |   |
| Interest  expense                                                    |       | (22,520                         | )           | (34,313 | ) | (96,802 | ) |
| Interest  income                                                     |       | 886                             |        | 7,691 |   | 4,083 |   |
|                                                                 |       | 65,053                          |        | (254,646 | ) | (84,535 | ) |
|                                                                 |       |                            |        |   |   |   |   |
| **Income (loss) before income taxes**                                |       | (18,397                         | )           | (287,508 | ) | 135,685 |   |
| Income  tax provision                                                |       | (660                            | )           | (470 | ) | (7,988 | ) |
| **Net income (loss)**                                                | ** ** | **$**                           | **(19,057** | **)** | **$** | **(287,978** | **)** | **$** | **127,697** | ** ** |

 

See accompanying notes toconsolidated financial statements.

 

45

----

Table of Contents

 

**Boise Cascade Holdings, L.L.C.**

**Consolidated Balance Sheets**

** **
| ** **                                       | ** ** | **December 31** | ** **    |
|--------------------------------------------------|------------|----------------------|---------------|
| ** **                                       | ** ** | **2009**             | ** **    | **2008** | ** ** |
| ** **                                       | ** ** | **(thousands)**      | ** **    |
| **ASSETS**                                       |       |                 |          |   |   |
|                                             |       |                 |          |   |   |
| **Current**                                      |       |                 |          |   |   |
| Cash and cash equivalents                        |       | $                    | 287,101       |   | $ | 275,803 |   |
| Receivables                                      |       |                 |          |   |   |
| Trade, less allowances of $1,584 and $1,843 |       | 95,398               |          | 78,393 |   |
| Related parties                                  |       | 2,604                |          | 3,112 |   |
| Other                                            |       | 3,495                |          | 5,907 |   |
| Inventories                                      |       | 232,774              |          | 279,023 |   |
| Prepaid expenses and other                       |       | 1,870                |          | 1,296 |   |
|                                             |       | 623,242              |          | 643,534 |   |
|                                             |       |                 |          |   |   |
| **Property**                                     |       |                 |          |   |   |
| Property and equipment, net                      |       | 270,229              |          | 291,999 |   |
| Timber deposits                                  |       | 9,264                |          | 8,632 |   |
|                                             |       | 279,493              |          | 300,631 |   |
|                                             |       |                 |          |   |   |
| **Investment in equity affiliate**               |       | 62,967               |          | 20,985 |   |
| **Deferred financing costs**                     |       | 5,734                |          | 7,862 |   |
| **Goodwill**                                     |       | 12,170               |          | 12,170 |   |
| **Intangible assets, net**                       |       | 8,919                |          | 9,248 |   |
| **Other assets**                                 |       | 8,359                |          | 6,009 |   |
| **Total assets**                                 | ** ** | **$**                | **1,000,884** | ** ** | **$** | **1,000,439** | ** ** |

 

Seeaccompanying notes to consolidated financial statements.

 

46

----

Tableof Contents

 

**Boise Cascade Holdings, L.L.C.**

**Consolidated Balance Sheets (continued)**

 
| ** **                                                                                                                              | ** ** | **December 31** | ** **    |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|---------------|
| ** **                                                                                                                              | ** ** | **2009**             | ** **    | **2008** | ** ** |
| ** **                                                                                                                              | ** ** | **(thousands)**      | ** **    |
| **LIABILITIES AND CAPITAL**                                                                                                             |       |                 |          |   |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Current**                                                                                                                             |       |                 |          |   |   |
| Accounts payable                                                                                                                        |       |                 |          |   |   |
| Trade                                                                                                                                   |       | $                    | 89,253        |   | $ | 69,478 |   |
| Related parties                                                                                                                         |       | 2,449                |          | 2,195 |   |
| Accrued liabilities                                                                                                                     |       |                 |          |   |   |
| Compensation and benefits                                                                                                               |       | 27,887               |          | 38,228 |   |
| Interest payable                                                                                                                        |       | 3,644                |          | 3,930 |   |
| Other                                                                                                                                   |       | 16,695               |          | 30,893 |   |
| ** **                                                                                                                              |       | 139,928              |          | 144,724 |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Debt**                                                                                                                                |       |                 |          |   |   |
| Long-term debt                                                                                                                          |       | 303,146              |          | 315,000 |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Other**                                                                                                                               |       |                 |          |   |   |
| Compensation and benefits                                                                                                               |       | 113,290              |          | 172,275 |   |
| Other long-term liabilities                                                                                                             |       | 14,301               |          | 12,125 |   |
|                                                                                                                                    |       | 127,591              |          | 184,400 |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Redeemable equity units**                                                                                                             |       |                 |          |   |   |
| Series B equity units — 2,764,854 and 2,920,574 units  outstanding                                                       |       | 2,765                |          | 2,920 |   |
| Series C equity units — 16,270,616 and 11,016,668 units  outstanding                                                     |       | 5,202                |          | 3,037 |   |
|                                                                                                                                    |       | 7,967                |          | 5,957 |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Commitments and contingent liabilities**                                                                                              |       |                 |          |   |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Capital**                                                                                                                             |       |                 |          |   |   |
| Series A equity units — no par value; 66,000,000 units  authorized and outstanding                                       |       | 88,908               |          | 81,967 |   |
| Series B equity units — no par value; 550,000,000 units  authorized; 532,558,673 units and 532,414,853 units outstanding |       | 333,344              |          | 268,391 |   |
| Series C equity units — no par value; 44,000,000 units  authorized; 11,951,751 units and 11,183,000 units outstanding         |       | —               |          | — |   |
| **Total capital**                                                                                                                       |       | 422,252              |          | 350,358 |   |
|                                                                                                                                    |       |                 |          |   |   |
| **Total liabilities and capital**                                                                                                       | ** ** | **$**                | **1,000,884** | ** ** | **$** | **1,000,439** | ** ** |

 

Seeaccompanying notes to consolidated financial statements.

 

47

----

Tableof Contents

 

**Boise Cascade Holdings, L.L.C.**

**Consolidated Statements of Cash Flows**

** **
| ** **                                                                      | ** ** | **Year Ended December 31** | ** **  |
|---------------------------------------------------------------------------------|------------|---------------------------------|-------------|
| ** **                                                                      | ** ** | **2009**                        | ** **  | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                      | ** ** | **(thousands)**                 | ** **  |
| **Cash provided by (used for)  operations**                                     |       |                            |        |   |   |   |   |
| Net income (loss)                                                               |       | $                               | (19,057     | ) | $ | (287,978 | ) | $ | 127,697 |   |
| Items in net income (loss) not using (providing)  cash                          |       |                            |        |   |   |   |   |
| Equity in net (income) loss of affiliate                                        |       | (79,729                         | )           | 11,328 |   | — |   |
| Gain on sale of shares of equity affiliate                                      |       | (42,752                         | )           | — |   | — |   |
| Impairment of investment in equity affiliate                                    |       | 43,039                          |        | 208,074 |   | — |   |
| Depreciation, depletion, and amortizationof deferred financing costs  and other |       | 43,679                          |        | 37,783 |   | 129,289 |   |
| Related-party interest income                                                   |       | —                          |        | (2,760 | ) | — |   |
| Deferred income taxes                                                           |       | (4                              | )           | (142 | ) | 4,195 |   |
| Pension expense                                                                 |       | 12,315                          |        | 17,063 |   | 25,085 |   |
| Gain on changes in retiree healthcare programs                                  |       | —                          |        | — |   | (4,367 | ) |
| Change in fair value of contingent value rights                                 |       | (194                            | )           | 507 |   | — |   |
| Change in fair value of interest rate swaps                                     |       | —                          |        | 6,284 |   | (3,733 | ) |
| Management equity units expense, excluding expense  related to the Sale         |       | 2,736                           |        | 1,542 |   | 3,110 |   |
| Gain on repurchase of long-term debt                                            |       | (6,026                          | )           | — |   | — |   |
| (Gain) loss on sales of assets, net                                             |       | 158                             |        | (10,903 | ) | (2,354 | ) |
| Facility closure and curtailment costs                                          |       | 1,968                           |        | 10,796 |   | — |   |
| Loss on sale of note receivable from related party                              |       | —                          |        | 8,357 |   | — |   |
| Other                                                                           |       | (1,200                          | )           | 1,812 |   | (3,538 | ) |
| Decrease (increase) in working capital, net of  acquisitions and dispositions   |       |                            |        |   |   |   |   |
| Receivables                                                                     |       | (17,250                         | )           | 6,226 |   | 34,156 |   |
| Inventories                                                                     |       | 47,086                          |        | 62,994 |   | (29,397 | ) |
| Prepaid expenses and other                                                      |       | (569                            | )           | 5,501 |   | 679 |   |
| Accounts payable and accrued liabilities                                        |       | 11,441                          |        | (79,312 | ) | (31,804 | ) |
| Pension contributions                                                           |       | (28,385                         | )           | (20,417 | ) | (722 | ) |
| Current and deferred income taxes                                               |       | 198                             |        | (1,871 | ) | 1,077 |   |
| Other                                                                           |       | (2,678                          | )           | 681 |   | 718 |   |
| Cash provided by  (used for) operations                                         |       | (35,224                         | )           | (24,435 | ) | 250,091 |   |
|                                                                            |       |                            |        |   |   |   |   |
| **Cash provided by (used for)  investment**                                     |       |                            |        |   |   |   |   |
| Proceeds from sale of assets, net of cash  contributed                          |       | 467                             |        | 1,270,976 |   | 27,797 |   |
| Proceeds from sale of shares of equity affiliate,  net                          |       | 83,172                          |        | — |   | — |   |
| Proceeds from sale of note receivable from related  party, net             |       | —                          |        | 52,737 |   | — |   |
| Expenditures for property and equipment                                    |       | (16,806                         | )           | (51,867 | ) | (187,972 | ) |
| Acquisitions of businesses and facilities                                       |       | (4,598                          | )           | — |   | — |   |
| Increase in restricted cash                                                     |       | —                          |        | (183,290 | ) | (200,000 | ) |
| Decrease in restricted cash                                                     |       | —                          |        | 183,290 |   | 200,000 |   |
| Additional Consideration Agreement payment                                      |       | —                          |        | — |   | (32,542 | ) |
| Other                                                                           |       | 637                             |        | (402 | ) | 6,065 |   |
| Cash provided by (used for) investment                                          |       | 62,872                          |        | 1,271,444 |   | (186,652 | ) |
|                                                                            |       |                            |        |   |   |   |   |
| **Cash provided by (used for)  financing**                                      |       |                            |        |   |   |   |   |
| Issuances of long-term debt                                                     |       | 60,000                          |        | 240,000 |   | 1,085,000 |   |
| Payments of long-term debt                                                      |       | (65,627                         | )           | (1,085,563 | ) | (1,138,337 | ) |
| Short-term borrowings                                                           |       | —                          |        | (10,500 | ) | 7,300 |   |
| Tax distributions to members                                                    |       | (10,705                         | )           | (128,058 | ) | (2,753 | ) |
| Repurchase of management equity units                                           |       | (18                             | )           | (28,634 | ) | (993 | ) |
| Cash paid for termination of interest rate swaps                                |       | —                          |        | (11,918 | ) | — |   |
| Proceeds from changes to interest rate swaps                                    |       | —                          |        | — |   | 2,848 |   |
| Other                                                                           |       | —                          |        | (4,156 | ) | (4,050 | ) |
| Cash used for financing                                                         |       | (16,350                         | )           | (1,028,829 | ) | (50,985 | ) |
|                                                                            |       |                            |        |   |   |   |   |
| **Increase in cash and cash  equivalents**                                      |       | 11,298                          |        | 218,180 |   | 12,454 |   |
|                                                                            |       |                            |        |   |   |   |   |
| **Balance at beginning of the  period**                                         |       | 275,803                         |        | 57,623 |   | 45,169 |   |
| **Balance at end of the period**                                                | ** ** | **$**                           | **287,101** | ** ** | **$** | **275,803** | ** ** | **$** | **57,623** | ** ** |

 

See accompanying notes toconsolidated financial statements.

 

48

----

Tableof Contents

 

**Boise Cascade Holdings, L.L.C.**

**Consolidated Statements of Capital**

** **
| ** **                                                          | ** ** | **Series A********Equity Units** | ** ** | **Series B********Equity Units** | ** ** | **Series C********Equity Units** | ** **  | **Total**  | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|---------------------------------------|-------------|------------|------------|
| ** **                                                          | ** ** | **Units**                             | ** ** | **Amount**                            | ** ** | **Units**                             | ** **  | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Capital** | ** ** |
| ** **                                                          | ** ** | **(thousands)**                       | ** ** |
| Balance at  December 31, 2006                                  |       | 66,000                                |       | $                                     | 78,290     |                                  | 530,357     |       | $          | 724,988 |   | — |   | $ | 11,655 |   | $ | 814,933 |   |
|                                                                |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Net income (a)                                                      |       | —                                |       | —                                |       | —                                |        | 127,697    |       | — |   | — |   | 127,697 |   |
| Other  comprehensive income (loss), net of tax (a) (b)    |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Cash flow hedges                                                    |       | —                                |       | —                                |       | —                                |        | (3,070     | )          | — |   | — |   | (3,070 | ) |
| Unfunded  accumulated benefit obligation                            |       | —                                |       | —                                |       | —                                |        | 33,705     |       | — |   | — |   | 33,705 |   |
| Paid-in-kind  dividend                                              |       | —                                |       | 5,770                                 |       | —                                |        | (5,770     | )          | — |   | — |   | — |   |
| Tax distributions  to members                                       |       | —                                |       | (5,597                                | )          | —                                |        | (1,803     | )          | — |   | — |   | (7,400 | ) |
| Allocation of  profit interest from Series C equity units |       | —                                |       | —                                |       | —                                |        | 1,387      |       | — |   | (1,387 | ) | — |   |
| Other                                                               |       | —                                |       | —                                |       | —                                |        | (441       | )          | — |   | — |   | (441 | ) |
| Balance at  December 31, 2007                                  |       | 66,000                                |       | 78,463                                |       | 530,357                               |        | 876,693    |       | — |   | 10,268 |   | 965,424 |   |
| ** **                                                          | ** ** | ** **                            | ** ** | ** **                            | ** ** | ** **                            | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net loss (a)                                                        |       | —                                |       | —                                |       | —                                |        | (287,978   | )          | — |   | — |   | (287,978 | ) |
| Other  comprehensive income (loss), net of tax (a) (b)         |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Cash flow hedges                                                    |       | —                                |       | —                                |       | —                                |        | (133       | )          | — |   | — |   | (133 | ) |
| Unfunded  accumulated benefit obligation                            |       | —                                |       | —                                |       | —                                |        | (151,773   | )          | — |   | — |   | (151,773 | ) |
| Equity in other  comprehensive loss of equity affiliate             |       | —                                |       | —                                |       | —                                |        | (41,984    | )          | — |   | — |   | (41,984 | ) |
| Paid-in-kind  dividend                                              |       | —                                |       | 6,246                                 |       | —                                |        | (6,246     | )          | — |   | — |   | — |   |
| Tax distributions  to members                                       |       | —                                |       | (2,742                                | )          | —                                |        | (128,945   | )          | — |   | — |   | (131,687 | ) |
| Allocation of  profit interest from Series C equity units      |       | —                                |       | —                                |       | —                                |        | 10,268     |       | — |   | (10,268 | ) | — |   |
| Fair market value  adjustment of redeemable equity units       |       | —                                |       | —                                |       | —                                |        | (11,338    | )          | — |   | — |   | (11,338 | ) |
| Allocation of  redeemable equity units to Capital                   |       | —                                |       | —                                |       | 2,058                                 |        | 6,923      |       | 11,183 |   | — |   | 6,923 |   |
| Other                                                               |       | —                                |       | —                                |       | —                                |        | 2,904      |       | — |   | — |   | 2,904 |   |
| Balance at  December 31, 2008 (c)                         |       | 66,000                                |       | 81,967                                |       | 532,415                               |        | 268,391    |       | 11,183 |   | — |   | 350,358 |   |
|                                                                |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Net loss (a)                                                        |       | —                                |       | —                                |       | —                                |        | (19,057    | )          | — |   | — |   | (19,057 | ) |
| Other  comprehensive income (loss), net of tax (a) (b)    |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Unfunded  accumulated benefit obligation                            |       | —                                |       | —                                |       | —                                |        | 43,902     |       | — |   | — |   | 43,902 |   |
| Equity in other  comprehensive income of equity affiliate           |       | —                                |       | —                                |       | —                                |        | 5,201      |       | — |   | — |   | 5,201 |   |
| Impairment of  investment in equity affiliate                       |       | —                                |       | —                                |       | —                                |        | 40,824     |       | — |   | — |   | 40,824 |   |
| Paid-in-kind dividend                                               |       | —                                |       | 6,707                                 |       | —                                |        | (6,707     | )          | — |   | — |   | — |   |
| Tax  distributions, net                                             |       | —                                |       | 234                                   |       | —                                |        | 91         |       | — |   | — |   | 325 |   |
| Allocation of  redeemable equity units to Capital                   |       | —                                |       | —                                |       | 144                                   |        | 340        |       | 769 |   | — |   | 340 |   |
| Other                                                               |       | —                                |       | —                                |       | —                                |        | 359        |       | — |   | — |   | 359 |   |
| **Balance  at December 31, 2009**(c)                           | ** ** | **66,000**                            | ** ** | **$**                                 | **88,908** | ** **                            | **532,559** | ** ** | **$**      | **333,344** | ** ** | **11,952** | ** ** | **$** | **—** | ** ** | **$** | **422,252** | ** ** |

 

----

(a)                                  Total comprehensive income (loss) for theyears ended December 31, 2009, 2008, and 2007, was $70.9 million,$(481.9) million, and $158.3 million, respectively.

 

(b)                                 Total other comprehensive income (loss)for the years ended December 31, 2009, 2008, and 2007, was$89.9 million, $(193.9) million, and $30.6 million,respectively.

 

(c)                                  Accumulated other comprehensive loss at December 31,2009 and 2008, was $32.9 million and $122.8 million, respectively.

 

Seeaccompanying notes to consolidated financial statements.

 

49

----

Table of Contents

 

***Notesto Consolidated Financial Statements***

 

***1.             Nature ofOperations and Basis of Presentation***

 

*Nature of Operations*

 

We are a privately-heldbuilding products company headquartered in Boise, Idaho. Our operations beganon October 29, 2004 (inception), when we acquired the forest products andpaper assets of OfficeMax (the Forest Products Acquisition). As used in theseconsolidated financial statements, the terms “BC Holdings,” “we,” and “our”refer to Boise Cascade Holdings, L.L.C., and its consolidated subsidiaries. Ourwholly owned subsidiary, Boise Cascade, L.L.C., is a leading U.S. wholesaledistributor of building products and one of the largest producers of engineeredwood products and plywood in North America. We are also a shareholder ofBoise Inc., a publicly traded North American paper and packaging producer.We acquired our interest in Boise Inc. in connection with the sale of ourPaper and Packaging & Newsprint assets (the Sale) in February 2008.For more information related to the Sale and our investment in Boise Inc., seeNote 3, Sale of Our Paper and Packaging & Newsprint Assets, andNote 4, Investment in Equity Affiliate.

 

The following sets forth our corporatestructure and equity ownership at December 31, 2009 (based on votingpower):

 

 

*Basis of Presentation and Comparability of Data*

 

In connection with the Sale, we received both cash andsecurities. As a result of receiving stock in Boise Inc., we had asignificant indirect financial interest in the results of the sold businesses,and the equity interest we owned in Boise Inc. after the Sale representeda significant continuing involvement. As a result, the sold assets are notclassified as discontinued operations, and therefore, the results of the Paperand Packaging & Newsprint segments are included in the ConsolidatedStatements of Income (Loss) for the 

 

50

----

Table of Contents

 

period of January 1, 2008, through February 21,2008, and the year ended December 31, 2007, which affects thecomparability of the information between periods.

 

After the Sale, we operate our business in the followingthree reportable segments: Building Materials Distribution, Wood Products, andCorporate and Other. See Note 15, Segment Information, for additionalinformation about our reportable segments.

 

***2.             Summary ofSignificant Accounting Policies***

 

*Consolidation and Use ofEstimates*

 

The consolidated financial statements include theaccounts of BC Holdings and its subsidiaries after elimination ofintercompany balances and transactions. The preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions aboutfuture events. These estimates and the underlying assumptions affect theamounts of assets and liabilities reported, disclosures about contingent assetsand liabilities, and reported amounts of revenues and expenses. Such estimates include the evaluation of our investment inBoise Inc. for other-than-temporary impairment; the valuation of accountsreceivable, inventories, goodwill, intangible assets, and other long-livedassets; legal contingencies; guarantee obligations; indemnifications;assumptions used in retirement and other postemployment benefits; and customerincentives, among others. These estimates and assumptions are based onmanagement’s best estimates and judgment. Management evaluates its estimatesand assumptions on an ongoing basis using historical experience and otherfactors, including the current economic environment, which management believesto be reasonable under the circumstances. We adjust such estimates andassumptions when facts and circumstances dictate. Illiquid credit markets;volatile equity, foreign currency, and energy markets; and declines in consumerspending have combined to increase the uncertainty inherent in such estimatesand assumptions. As future events and their effects cannot be determined withprecision, actual results could differ significantly from these estimates.Changes in these estimates resulting from continuing changes in the economicenvironment will be reflected in the consolidated financial statements infuture periods.

 

# *Revenue Recognition*

# * *

We recognize revenue when the following criteria aremet:  persuasive evidence of an agreementexists, delivery has occurred or services have been rendered, our price to thebuyer is fixed or determinable, and collectability is reasonably assured.Delivery is not considered to have occurred until the customer takes title andassumes the risks and rewards of ownership. The timing of revenue recognitionis dependent on shipping terms. Revenue is recorded at the time of shipment forterms designated free on board (f.o.b) shipping point. For sales transactionsdesignated f.o.b destination, revenue is recorded when the product is deliveredto the customer’s delivery site. Fees for shipping and handling charged tocustomers for sales transactions are included in “Sales.” Costs related toshipping and handling are included in “Materials, labor, and other operatingexpenses.”

 

*Share-Based Compensation*

 

We recognizecompensation expense equal to the fair value of the equity awards on the datesthey are granted or modified. We recognize the cost of the equity awards overthe periods the awards vest. In 2009,2008, and 2007, we recognized $2.7 million, $6.6 million, and$3.1 million of compensation expense. See Note 13, Long-Term Incentive CompensationPlans, for a discussion of our Management Equity Agreements (Equity Plan).

 

# *AdvertisingCosts*

# * *

We expense the cost ofadvertising as incurred. For the years ended December 31, 2009, 2008, and2007, advertising expenses were $1.4 million, $6.1 million, and$9.4 million, respectively. These expenses are generally recorded in “Sellingand distribution expenses.”

 

51

----

# *Tableof Contents*

 

# *ForeignCurrency Translation*

# * *

Thefunctional currency for our operations outside the United States is the U.S.dollar. Nonmonetary assets and liabilities and related depreciation andamortization for these foreign operations are remeasured into U.S. dollarsusing historical exchange rates. Monetary assets and liabilities are remeasuredinto U.S. dollars using the exchange rates as of the Consolidated Balance Sheetdate. Revenue and expense items are remeasured into U.S. dollars using anaverage exchange rate prevailing during the year. The foreign exchange gains(losses) reported in the Consolidated Statements of Income (Loss) resulted fromthe remeasurements into the U.S. dollar.

 

*Cash and Cash Equivalents*

 

Cash equivalents consistof short-term investments that have a maturity of three months or less at thedate of purchase. Cash equivalents totaled $267.2 million and$244.6 million at December 31, 2009 and 2008, respectively. At December 31,2009, the majority of our cash and cash equivalents were invested in moneymarket funds that are broadly diversified and invest in high-quality,short-duration securities, including commercial paper, certificates of deposit,U.S. government agency securities, and similar instruments.

 

*Trade Accounts Receivables and Allowance for DoubtfulAccounts*

 

Trade accounts receivable are stated atthe amount we expect to collect. Trade accounts receivable do not bearinterest. We makeongoing estimates relating to the collectability of our accounts receivable andmaintain a reserve for estimated losses resulting from the inability of ourcustomers to meet their financial obligations to us. At December 31, 2009and 2008, we had $1.6 million and $1.8 million recorded as allowancesfor doubtful accounts. In determining the amount of the reserve, we considerour historical level of credit losses, customer concentrations, current economictrends, and changes in customer payment tendencies. We also make judgmentsabout the creditworthiness of significant customers based on ongoing creditevaluations. Adjustments to thevaluation allowance are charged to income. Trade accounts receivable balancesthat remain outstanding after we have used reasonable collection efforts arewritten off through a charge to the valuation allowance and a credit toaccounts receivable. We may at times insure or arrange for guarantees on ourreceivables.

 

The significant decline in new residentialconstruction in the U.S. and disruptions in the capital markets impacted theability of our customers and our customers’ customers to fund their operations,which makes it more difficult for us to estimate future credit losses. Ouractual future losses from uncollectible accounts may differ materially from ourcurrent estimates. As additional information becomes known, we may change ourestimates. In the event we determine that a change in the reserve isappropriate, we will record a charge to “Selling and distribution expenses” inour Consolidated Statements of Income (Loss) in the period we make such adetermination.

 

*Financial Instruments*

 

Our financial instrumentsare cash and cash equivalents, accounts receivable, accounts payable, andlong-term debt. Our cash and cash equivalents are recorded at cost, whichapproximates fair value. In the fair value hierarchy set forth in U.S.generally accepted accounting principles, our cash and cash equivalents areclassified within Level 1, as the fair value is based on observable inputssuch as quoted prices in active markets. The recorded values of accountsreceivable and accounts payable approximate fair values based on theirshort-term nature. After the Sale, our debt is predominately fixed-rate.

 

We are exposed torisks such as changes in interest rates, energy prices, and foreign currencyexchange rates. We employ a variety of practices to manage these risks,including operating and financing activities and, where deemed appropriate, theuse of derivative instruments. At December 31, 2009 and 2008, we had nomaterial derivative instruments.

 

# *Vendor and Customer Rebates and Allowances*

# * *

We receive rebates and allowances from our vendorsunder a number of different programs, including vendor marketing programs. At December 31,2009 and 2008, we had $1.9 million and $3.0 million, respectively, ofvendor rebates and allowances recorded in “Receivables, Other” on theConsolidated Balance Sheets. Rebates and allowances received from our vendorsare recognized as a

 

52

----

Table of Contents

 

reduction of “Materials, labor, and other operatingexpenses” when the product is sold, unless the rebates and allowances arelinked to a specific incremental cost to sell a vendor’s product. Amountsreceived from vendors that are linked to specific selling and distributionexpenses are recognized as a reduction of “Selling and distribution expenses”in the period the expense is incurred.

 

We also provide rebates to our customers based on thevolume of their purchases. We provide the rebates to increase the sell-throughof our products. The rebates are recorded as a decrease in “Sales, Trade.” At December 31,2009 and 2008, we had $9.9 million and $11.4 million, respectively,of rebates payable to our customers recorded in “Accrued liabilities, Other” onour Consolidated Balance Sheets.

 

*InventoryValuation*

 

Inventories are valued at thelower of cost or market. Cost is based on the average cost or first-in,first-out (FIFO) method of inventory valuation. Manufactured inventoriesinclude costs for materials, labor, and factory overhead. Log inventoriesinclude the costs of harvesting the timber.

 

Inventories include the following:

 
| ** **                         | ** ** | **December 31** | ** **  |
|------------------------------------|------------|----------------------|-------------|
| ** **                         | ** ** | **2009**             | ** **  | **2008** | ** ** |
| ** **                         | ** ** | **(thousands)**      | ** **  |
| Finished goods and work in process |       | $                    | 187,215     |   | $ | 211,051 |   |
| Logs                               |       | 29,302               |        | 50,930 |   |
| Other raw materials and supplies   |       | 16,257               |        | 17,042 |   |
| ** **                         | ** ** | **$**                | **232,774** | ** ** | **$** | **279,023** | ** ** |

 

*Propertyand Equipment, Net*

 

Property and equipment,net, are recorded at cost. Cost includes expenditures for major improvementsand replacements and the amount of interest cost associated with significantcapital additions. For the years ended December 31, 2009, 2008, and 2007,capitalized interest was not material. We expense all repair and maintenancecosts as incurred. When property and equipment are retired, sold, or otherwisedisposed of, the asset’s carrying amount and related accumulated depreciationare removed from the accounts and any gain or loss is included in income(loss). In all periods presented, we used the straight-line method ofdepreciation.

 

Property andequipment, net, consisted of the following asset classes and the followinggeneral range of estimated useful lives:

 
| ** **                    | ** ** | **Year  Ended December 31** | ** **  | **General Range of  Estimated Useful** | ** ** |
|-------------------------------|------------|----------------------------------|-------------|-------------------------------------------------------|------------|
| ** **                    | ** ** | **2009**                         |        | **2008**                                              | ** ** | **Lives in Years** | ** ** |
|                          |       | **(thousands)**                  |        |                                                  |       |
| Land and land improvements    |       | $                                | 36,618      |                                                  | $          | 36,089 |   | 10-20 |   |
| Buildings and improvements    |       | 110,268                          |        | 106,966                                               |       | 10-40 |   |
| Machinery and equipment       |       | 279,455                          |        | 252,952                                               |       | 2-20 |   |
| Construction in progress      |       | 4,156                            |        | 20,954                                                |       | N/A |   |
| ** **                    |       | 430,497                          |        | 416,961                                               |       |   |   |
| Less accumulated depreciation |       | (160,268                         | )           | (124,962                                              | )          | N/A |   |
|                          | ** ** | **$**                            | **270,229** | ** **                                            | **$**      | **291,999** |   |   |   |

 

*Timber Deposits*

 

We are a party to anumber of long-term log and fiber supply agreements. At December 31, 2009,our total obligation for log and fiber purchases under contracts with thirdparties was approximately $313.8 million based on contract terms or firstquarter 2010 pricing. Under most of these log and fiber supply agreements, wehave the right to cancel or reduce commitments in the event of a millcurtailment or shutdown. Future purchase prices under most of these agreementswill be set quarterly or semiannually based on regional market prices. Our logand fiber obligations are subject to change based

 

53

----

Table of Contents

 

on, among other things, the effect of governmentallaws and regulations, our manufacturing operations not operating in the normalcourse of business, log and fiber availability, and the status of environmentalappeals. Except for deposits required pursuant to wood supply contracts, theseobligations are not recorded in our consolidated financial statements untilcontract payment terms take effect.

 

*Long-Lived Asset Impairment*

 

Animpairment of long-lived assets exists when the carrying value of an assetexceeds its fair value and when the carrying value is not recoverable throughfuture undiscounted cash flows from operations. We review the carrying value oflong-lived assets for impairment when events or changes in circumstancesindicate that the carrying amount of assets may not be recoverable.

 

*Goodwill*

 

Wemaintain two reporting units for purposes of our goodwill impairment testing,Building Materials Distribution and Wood Products, which are the same as ouroperating segments in Note 15, Segment Information. We test the goodwillin each of our reporting units for impairment annually and/or when factorsindicating impairment are present. We completed our annual assessment in fourth quarter2009 and determined that there was no impairment. See Note 9, Goodwill andIntangible Assets, for additional information.

 

# *AssetRetirement Obligations*

# * *

We accrue for asset retirement obligationsin the period in which they are incurred if sufficient information is availableto reasonably estimate the fair value of the obligation. When we record theliability, we capitalize the cost by increasing the carrying amount of therelated long-lived asset. Over time, the liability is accreted to itssettlement value, and the capitalized cost is depreciated over the useful lifeof the related asset. Upon settlement of the liability, we will recognize again or loss for any difference between the settlement amount and the liabilityrecorded.

 

At December 31, 2009 and 2008, we had$0.7 million and $0.6 million of asset retirement obligationsrecorded in “Other, Other long-term liabilities,” on our Consolidated BalanceSheets. At December 31, 2009, these liabilities related primarily tolandfill closure costs. The liabilities are based on the best estimate ofcurrent costs and are updated periodically to reflect current technology, lawsand regulations, inflation, and other economic factors. We do not have anyassets legally restricted for purposes of settling asset retirementobligations.

 

We have additional asset retirementobligations with indeterminate settlement dates. The fair value of these assetretirement obligations cannot be estimated due to the lack of sufficientinformation to estimate the settlement dates of the obligations. These assetretirement obligations include, for example, (i) removal and disposal ofpotentially hazardous materials on equipment and/or an operating facility ifthe equipment and/or facility were to undergo major maintenance, renovation, ordemolition; (ii) wastewater treatment ponds that may be required to bedrained and/or cleaned if the related operating facility is closed; and (iii) storagesites or owned facilities for which removal and/or disposal of chemicals andother related materials are required if the operating facility is closed. Wewill recognize a liability in the period in which sufficient informationbecomes available to reasonably estimate the fair value of these obligations.

 

*Pensionand Other Postretirement Benefits*

 

We record pension andpostretirement net periodic benefit cost and liabilities in accordance withFinancial Accounting Standards Board (FASB) Accounting Standards Codification(FASB ASC) 715, *Compensation - RetirementBenefits*. Several estimates and assumptions are required to recordthese costs and liabilities, including discount rate, return on assets, salaryincreases, and longevity and service lives of employees. Generally, we reviewand update these assumptions annually, unless a plan curtailment or other eventoccurs requiring we update the estimates on an interim basis. See Note 12,Retirement and Benefit Plans, for additional information related to our pensionand other postretirement benefit plans. While we believe that the assumptions used to measure our pensionobligations are reasonable, differences in actual experience or changes inassumptions may materially affect our pension obligations and future expense.

 

54

----

Table ofContents

 

*DeferredSoftware Costs*

 

We defer internal-use software costs that benefit futureyears. These costs are amortized using the straight-line method over theexpected life of the software, typically three to five years. “Otherassets” in the Consolidated Balance Sheets includes $3.1 million and$2.7 million of deferred software costs at December 31, 2009 and2008, respectively. For the years ended December 31, 2009, 2008, and 2007,amortization of deferred software costs was not material.

 

*Taxes Collected*

 

We present taxes collected from customersand remitted to governmental authorities on a net basis in our ConsolidatedStatements of Income (Loss).

 

*Labor Concentration*

 

As of December 31, 2009, we had approximately4,230 employees. Approximately 1,450, or 34%, of these employees workpursuant to collective bargaining agreements. As of December 31, 2009, wehad 12 collective bargaining agreements, of which one, representing 24employees, is up for renewal in 2010. We do not expect material workinterruptions or increases in our costs during the course of the negotiationswith our collective bargaining units. Nevertheless, if our expectations are notaccurate, we could experience a material labor disruption or significantlyincreased labor costs at one or more of our facilities, any of which couldprevent us from meeting customer demand or reduce our sales and profitability.

 

*New andRecently Adopted Accounting Standards*

 

In October 2009, the FASB issued AccountingStandards Update (ASU) 2009-12, *Fair ValueMeasurements and Disclosures (Topic 820): Investments in Certain Entities ThatCalculate Net Asset Value per Share (or Its Equivalent)*. This ASUallows investors to use net asset value as a practical expedient to estimatefair value of investments in investment companies that do not have readilydeterminable fair values. The ASU also sets forth disclosure requirements forinvestments within its scope. We adopted ASU 2009-12 in December 2009, andthe adoption did not have a material impact on our financial position orresults of operations.

 

In August 2009, theFASB issued ASU 2009-05, *MeasuringLiabilities at Fair Value*. This ASU provides amendments to FASBASC 820, *Fair Value Measurements andDisclosure,* for the fair value measurement of liabilities when aquoted price in an active market is not available. We adopted ASU 2009-05 on October 1,2009, and the adoption did not have a material impact on our financial positionor results of operations.

 

In June 2009, theFASB issued Statement of Financial Accounting Standards (SFAS) No. 168(ASU 2009-01), *The FASB Accounting Standards CodificationTM**and theHierarchy of Generally Accepted Accounting Principles,*approving theFASB Accounting Standards Codification(Codification), which states that the Codification is the exclusiveauthoritative reference for U.S. generally accepted accounting principles(GAAP). The Codification does not change U.S. GAAP. We adopted ASU 2009-01 on September 15,2009, and the adoption did not have a material impact on our financial positionor results of operations.

 

In June 2009, theFASB issued SFAS No. 167 (ASU 2009-17), *Amendmentsto FASB Interpretation No. 46(R) *(FASB ASC 810), whichamends the consolidation guidance applicable to variable-interest entities(VIEs). SFAS No. 167 requires that entities evaluate former qualifiedspecial-purpose entities for consolidation, changes the approach to determininga VIE’s primary beneficiary from a quantitative assessment to a qualitativeassessment, and increases the frequency of required reassessment to determinewhether a company is the primary beneficiary of a VIE. It also requiresadditional year-end and interim disclosures. We adopted ASU 2009-17 on January 1,2010, and the adoption did not have a material impact on our financial positionor results of operations.

 

In December 2008,FASB issued FASB Staff Position (FSP) FAS 132(R)-1, *Employer’s Disclosures About Postretirement BenefitPlan Assets*(FASB ASC 715*).* This FSP amends SFAS No. 132(revised 2003), *Employers’ Disclosures AboutPensions and Other Postretirement Benefits,*to provide guidance onan employer’s disclosures about plan assets of a defined benefit pension orother

 

55

----

Table of Contents

 

postretirement benefitplan. We have incorporated the required disclosures in this Form 10-K. Theadoption affected our disclosures only and had no impact on our financialposition or results of operations.

 

In December 2007,the FASB issued SFAS No. 141(R), *BusinessCombinations*(FASB ASC 805)*,*and SFAS No. 160, *Accounting and Reporting of Noncontrolling Interestsin Consolidated Financial Statements, an Amendment of Accounting ResearchBulletin No. 51*(FASBASC 810)*.* These newstandards significantly change the accounting for and reporting of businesscombination transactions and noncontrolling (minority) interests inconsolidated financial statements. SFAS No. 141(R) could also affectthe assessment of goodwill for impairment. We adopted SFAS Nos. 141(R) and 160on January 1, 2009, and the adoption did not have a material impact on ourfinancial position or results of operations.

 

There were no otheraccounting standards recently issued that had or are expected to have amaterial impact on our financial position or results of operations.

 

*Subsequent Events*

 

We evaluated events and transactionssubsequent to December 31, 2009, and up to the date these consolidatedfinancial statements and notes were included in this Form 10-K and filedwith the Securities and Exchange Commission. Except as disclosed in these Notesto Consolidated Financial Statements, we have not identified any other eventsthat would require recognition or disclosure in the consolidated financialstatements and notes to the financial statements.

 

*Reclassifications*

 

Certain amounts in prioryears’ consolidated financial statements have been reclassified to conform withthe current year’s presentation.

 

***3.******             Sale of Our Paper and Packaging & NewsprintAssets***

 

On February 22, 2008, Boise Cascade,L.L.C., our wholly owned direct subsidiary, sold its Paper and Packaging &Newsprint assets and most of its Corporate and Other assets (the Sale) toBoise Inc. (formerly Aldabra 2 Acquisition Corp.) for$1,277.2 million of cash consideration, $285.2 million of net stockconsideration, and a $41.0 million paid-in-kind promissory notereceivable. In connection with the Sale, we recorded a $5.7 million gain,of which we recognized $2.9 million in our 2008 Consolidated Statement ofLoss. We deferred $2.8 million of the gain as a reduction of our investmentin Boise Inc.

 

Immediately following the Sale, BoiseCascade, L.L.C., distributed the stock and paid-in-kind note receivable to us.Subsequent to the distribution to us, the note receivable from Boise Inc.increased $17.3 million for working capital adjustments, and in June 2008,we sold the note receivable for $52.7 million after selling expenses. Formore information, see Note 5, Transactions With Related Parties. As aresult, we had a significant indirect financial interest in the results of thesold businesses. Weaccounted for our interest in Boise Inc. using the equity method ofaccounting. See Note 4, Investment in Equity Affiliate, for moreinformation related to our investment in Boise Inc.

 

*Use of Sale Proceeds*

 

In 2008, with the proceeds from the Sale and an initial borrowing under ourfive-year senior secured asset-based revolving credit facility (the RevolvingCredit Facility), we repaid $1,085.6 million of our long-term debt; paid$11.9 million to unwind all of our interest rate swaps; made $120.7 million of taxdistributions to our equity holders to permit the equity holders to pay aportion of the income taxes related to the gain on the Sale (in 2009, we paidan additional $10.7 million for our final expected tax distributionrelated to the gain on the Sale); and paid $18.3 million to repurchaseequity units from management investors that terminated employment with us inconnection with the Sale. In 2009, we paid $2.6 million of the original$4.4 million accrued under the deferred compensation agreements foremployees terminated in connection with the Sale.

 

56

----

Tableof Contents

 

***4.             Investmentin Equity Affiliate***

 

In connection with theSale, we received 37.9 million, or 49%, of Boise Inc.’s shares of commonstock. We recorded our investment in “Investment in equity affiliate” on ourConsolidated Balance Sheet. The ownership interest provided us with the abilityto exercise significant influence. Accordingly, we accounted for our investmentunder the equity method of accounting. We adjusted the amount of our investmentmonthly for our proportionate share of Boise Inc.’s net income or loss andour share of other comprehensive income or loss based on the most recentlyavailable financial statements. Our ownership interest, and consequently ourproportionate share of Boise Inc.’s net income or loss, changed when we orBoise Inc. engaged in transactions of Boise Inc. common stock with thirdparties. At December 31, 2009 and 2008, we owned 18.3 million and37.9 million shares, or 23.5% and 49%, of Boise Inc. Assuming thevesting of all of Boise Inc.’s restricted stock, our ownership percentage on December 31,2009 and 2008, was 21.7% and 47.5% on a fully diluted basis, respectively. Thedecrease in ownership percentage in 2009 is primarily due to our selling sharesof Boise Inc. as described in the section “Gain on Sale of Shares ofEquity Affiliate” below. Changes in ownership interest may also result in ourrecording an ownership interest dilution gain or loss.

 

In February 2010, we sold13.1 million Boise Inc. shares for expected net proceeds of approximately $61million. All of the sales will be settled by March 3, 2010. At February 28,2010, we owned less than 10% of Boise Inc. and we will account for theremaining investment under the cost method. We expect to sell our remaining 5.2million Boise Inc. shares under the trading plan adopted in fourth quarter2009.

 

In 2009 and 2008, werecorded $79.4 million of income, net, and $219.4 million of netexpense related to our investment in Boise Inc. in our ConsolidatedStatements of Loss, as follows:

 
| ** **                                                   | ** ** | **Year  Ended  December 31** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                   | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| ** **                                                   | ** ** | **(thousands)**                   | ** ** |
| Equity in net  income (loss) of Boise Inc. (a)          |       | $                                 | 59,370     |   | $ | (22,836 | ) |
| Amortization of  basis differential (b)                      |       | 21,384                            |       | 5,328 |   |
| Adjustment for  impairment recognized by Boise Inc. (c) |       | —                            |       | 6,180 |   |
| Loss on shares  issued for settlement of CVR liability (d)   |       | (1,025                            | )          | — |   |
| Equity in net  income (loss) of affiliate                    |       | 79,729                            |       | (11,328 | ) |
| Gain on sale of  shares of equity affiliate (e)              |       | 42,752                            |       | — |   |
| Impairment of  investment in equity affiliate (f)            |       | (43,039                           | )          | (208,074 | ) |
| Total                                                        | ** ** | **$**                             | **79,442** | ** ** | **$** | **(219,402** | **)** |

 

----

*(a)*  *Equityin net income (loss) of Boise Inc.*

 

In 2009, our “Equity in net income of affiliate”included approximately $50 million of income, net of expenses and taxes,for refundable tax credits arising from Boise Inc.’s use of alternativefuels, partially offset by approximately $15 million of expenses, net oftax benefits, related to Boise Inc.’s extinguishment of debt in 2009. Theprovision in the U.S. Internal Revenue Code allowing for the alternative fueltax credits expired on December 31, 2009.

 

*(b)  Amortization of BasisDifferential*

 

At December 31,2009, the carrying value of our investment in Boise Inc. was approximately$103.9 million less than our share of Boise Inc.’s underlying equityin net assets. The difference is due to write-downs of our investment inBoise Inc. We have been amortizing the difference to income on astraight-line basis over the weighted average useful life of Boise Inc’s assets.The amortization of the basis differential resulted in our recognizing$21.4 million and $5.3 million of income in “Equity in net income(loss) of affiliate” in our Consolidated Statements of Loss for the years endedDecember 31, 2009 and 2008.

 

*(c) Adjustment for Impairment Recognized by Boise Inc.*

 

In2008, we allocated the $208.1 million impairment charge to Boise Inc.’slong-lived assets on a pro rata basis based on the net book values assigned totheir assets on September 30, 2008. Subsequent to our recording animpairment of our investment, Boise Inc. recognized a $19.8 million chargefor the impairment of long-lived assets, of which we were allocated 49% when werecorded our proportionate share of Boise Inc.’s net loss. Based on ourallocation of the $208.1 million charge to 

 

57

----

Table ofContents

 

Boise Inc.’slong-lived assets, we concluded we had already expensed $6.2 million ofthe $19.8 million charge Boise Inc. recorded for long-lived assetimpairment. Accordingly, we adjusted our equity in net loss of Boise Inc.for the $6.2 million we had already expensed.

 

*(d)  Loss on Shares Issuedfor CVR Settlement*

 

In 2009, we settled ourobligation related to the contingent value rights (CVRs) we issued to holdersof Boise Inc. common stock. In connection with the settlement, wetransferred ownership of 0.8 million Boise Inc. shares and recorded a$1.0 million loss in “Equity in net income (loss) of affiliate” in ourConsolidated Statement of Loss for the difference between the market price onthe date we settled our obligation with the shares and the carrying amount ofthe shares recorded on our Consolidated Balance Sheet. For more information,see Note 11, Financial Instrument Risk.

 

*(e) Gain on Sale of Shares of Equity Affiliate*

 

In2009, we sold 18.8 million Boise Inc. shares for net proceeds of$83.2 million, and we recorded a $42.8 million gain on the sale ofthe shares in our Consolidated Statement of Loss. In connection with the sale,we decreased our investment in Boise Inc. $41.1 million, and wereduced by $0.7 million our accumulated other comprehensive loss relatedto our investment in Boise Inc. Under the terms of the indenture governing our 7.125% senior subordinatednotes due 2014, we are required to use the net proceeds from the sale of theBoise Inc. shares within one year to repay senior indebtedness, acquireadditional assets, or make a tender offer at par for a portion of the seniorsubordinated notes.

 

*(f)  Impairment of Investment in EquityAffiliate*

 

Quarterly, we compare the fair value of the Boise Inc.stock price with the carrying value of our investment to assess forother-than-temporary impairment. The fair value of our investment inBoise Inc. is calculated based on the number of Boise Inc. shares weown and Boise Inc.’s stock price on the respective balance sheet date. Thecarrying value of our investment is calculated as the sum of (1) theamount recorded in “Investment in equity affiliate” on our Consolidated BalanceSheet and (2) the amount of accumulated other comprehensive income relatedto our investment in Boise Inc. recorded within “Series B equityunits” on our Consolidated Balance Sheet.

 

On March 31, 2009,and September 30, 2008, we concluded that our investment in Boise Inc. metthe definition of other than temporarily impaired. We made theother-than-temporary-impairment determination based primarily on the length oftime and extent to which the fair value of our investment had been tradingbelow its carrying value. As of September 30, 2008, Boise Inc.’sstock had traded below our carrying value for over six months, and as of March 31,2009, Boise Inc.’s stock had traded below our carrying value since wewrote the investment down in September 2008. Accordingly, we recorded a$43.0 million impairment charge for the year ended December 31, 2009,and a $208.1 million impairment charge for the year ended December 31,2008, in “Impairment of investment in equity affiliate” in our ConsolidatedStatements of Loss. For the year ended December 31, 2009, we reduced by$40.8 million our accumulated other comprehensive loss related to ourinvestment in Boise Inc. (which was accumulated monthly from recording ourproportionate share of Boise Inc.’s other comprehensive income or loss). Inaddition, we decreased “Investment in equity affiliate” $2.2 million toreduce the aggregate carrying value of our investment recorded on ourConsolidated Balance Sheet to its fair value on March 31, 2009, of$0.61 per share.

 

On December 31,2009, we evaluated whether our investment in Boise Inc. was other than temporarilyimpaired and concluded that it was not. The fair value of our investment of$5.31 per share exceeded the carrying value of $3.22 per share onthat date. We will continue to monitor the value of Boise Inc.’s stock andour carrying value. Should market conditions and/or Boise Inc.’s financialperformance deteriorate, it is possible that we will be required to record anoncash impairment charge. As additional information becomes known, we maychange our estimates.

 

58

----

Table of Contents

 

***5.             Transactions With Related Parties***

 

*Sales*

 

During the years ended December 31, 2009 and2008, we sold $21.5 million and $45.3 million of fiber toBoise Inc. We also sell fiber to Louisiana Timber ProcurementCompany, L.L.C. (LTP), an unconsolidated variable-interest entity that is50% owned by Boise Cascade, L.L.C., and 50% owned by Boise Inc.,at prices designed to approximate market. LTP procures saw timber, pulpwood,residual chips, and other residual wood fiber to meet the wood and fiberrequirements of Boise Inc. and Boise Cascade, L.L.C. Boise Inc. isthe primary beneficiary of LTP, as it absorbs more of its indirect operatingexpenses and is most closely associated with LTP. Accordingly, Boise Inc.consolidates LTP’s results in its financial statements. During the years ended December 31,2009 and 2008, we sold $16.4 million and $10.8 million of fiber toLTP. The sales to Boise Inc. and LTP are chip and pulpwood sales from ourWood Products segment and are included in “Sales, Related parties” in theConsolidated Statements of Loss.

 

Prior to the Sale,we sold paper and paper products to OfficeMax at sales prices that weredesigned to approximate market prices. For the years ended December 31,2008 and 2007, sales to OfficeMax were $90.1 million and$615.7 million. These sales are included in “Sales, Related parties” inthe Consolidated Statements of Income (Loss).

 

*Costs and Expenses*

 

During the years ended December 31,2009 and 2008, we purchased $25.5 million and $64.9 million of fiberfrom LTP. During the years ended December 31, 2009 and 2008, we purchased$2.3 million and $3.4 million of transportation services fromBoise Inc. We purchased the fiber and transportation services at pricesthat approximated market prices. These costs are recorded in “Materials, labor,and other operating expenses from related parties” in our ConsolidatedStatements of Income (Loss).

 

In connection with the Sale, we entered into an OutsourcingServices Agreement under which Boise Inc. provides a number of corporate staffservices to us at cost. These services include information technology,accounting, and human resource services. The initial term of the agreement wasfor three years with expiration scheduled on February 22, 2011. Theagreement automatically renews for successive one-year terms unless eitherparty provides notice of termination to the other party at least 12 monthsin advance of the expiration date. Because neither party gave notice oftermination to the other party in February 2010, the term of the agreementhas been extended to February 22, 2012. The Outsourcing Services Agreementalso gives us (but not Boise Inc.) the right to terminate all or any portion ofthe services provided to us on 30 days’ notice, subject to payment of anabsorption fee. The remaining absorption fee of $1.0 million, effective February 2010,is allocated among the services provided under the contract and declines tozero in total and on an allocable basis through February 22, 2011. Duringthe years ended December 31, 2009 and 2008, we recognized expenses relatedto the Outsourcing Services Agreement in our Consolidated Statements of Income(Loss) as follows:

 
| ** **                                                           | ** ** | **Year  Ended  December 31** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                           | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                   | ** ** |
| Materials,  labor, and other operating expenses from related parties |       | $                                 | 2,099      |   | $ | 1,693 |   |
| Selling and  distribution expenses                                   |       | 2,670                             |       | 2,256 |   |
| General and  administrative expenses from related party              |       | 10,169                            |       | 8,143 |   |
|                                                                 | ** ** | **$**                             | **14,938** | ** ** | **$** | **12,092** | ** ** |

 

*NoteReceivable*

 

In connection with the Sale, we received a 15.75% $41.0 millionpaid-in-kind promissory note receivable from Boise Inc. After the Sale, thenote receivable increased $17.3 million for working capital adjustments.During 2008, we recorded approximately $2.8 million of interest income inour Consolidated Statement of Loss. In 2008, we sold the note receivable for$52.7 million after selling expenses and 

 

59

----

Table of Contents

 

recorded an $8.4 million loss on the sale in “Other(income) expense, net” in our Consolidated Statement of Loss. As permitted bythe indenture governing our 7.125% senior subordinated notes due 2014, we usedthe net proceeds from the sale of the note receivable to make capitalexpenditures and repay senior indebtedness.

 

*TaxDistributions*

 

We are a limitedliability company, and the majority of our businesses and assets are held andoperated by limited liability companies, which are not subject to entity-levelfederal or state income taxation. We make cash distributions to permit themembers of BC Holdings and affiliates to pay income taxes. During theyears ended December 31, 2009 and 2008, we made $10.7 million and$128.1 million of cash tax distributions, which in both years primarilyrelated to the net taxable gain on the Sale. During the years ended December 31,2009, 2008, and 2007, we paid Forest Products Holdings, L.L.C. (FPH)$8.1 million, $105.1 million, and zero. For the years ended December 31,2009 and 2008, FPH in turn paid $5.2 million and $94.3 million toMadison Dearborn Partners (MDP), our equity sponsor; $2.9 million and$10.4 million to management investors; and in 2008, $0.4 million tononmanagement affiliates. During the years ended December 31, 2009, 2008,and 2007, we also paid $2.6 million, $23.0 million, and$2.8 million to OfficeMax to fund their tax obligations related to theirinvestments in us.

 

***6.             Other (Income) Expense, Net***

 

“Other(income) expense, net” includes miscellaneous income and expense items. Thecomponents of “Other (income) expense, net” in the Consolidated Statements ofIncome (Loss) are as follows:

 
| ** **                                                           | ** ** | **Year  Ended December 31** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                           | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                  | ** ** |
| Facility closures and curtailments (a)                               |       | $                                | 3,184      |   | $ | 9,927 |   | $ | — |   |
| Changes in pension plans (See Note 12)                          |       | (747                             | )          | — |   | — |   |
| Loss on sale of note receivable from related party (See Note 5) |       | —                           |       | 8,357 |   | — |   |
| Sales of assets, net (b)                                             |       | 151                              |       | (7,906 | ) | (2,257 | ) |
| Changes in retiree healthcare programs (See Note 12)            |       | —                           |       | — |   | (4,367 | ) |
| Other, net                                                           |       | (1,746                           | )          | 256 |   | 931 |   |
| ** **                                                           | ** ** | **$**                            | **842**    | ** ** | **$** | **10,634** | ** ** | **$** | **(5,693** | **)** |

 

----

(a)                                  In 2009, weclosed the lumber manufacturing facility in La Grande, Oregon, andrecorded $3.1 million of expense in “Other (income) expense, net,”$5.2 million of accelerated depreciation in “Depreciation, amortization,and depletion,” and $0.6 million of expenses in “Materials, labor, andother operating expenses” in our Consolidated Statement of Loss.

 

In 2008, we recorded$9.3 million of expense related to closing our veneer operations inSt. Helens, Oregon, and our plywood manufacturing facility inWhite City, Oregon, in “Other (income) expense, net” and $2.0 millionof expense for the write-down of log inventories in “Materials, labor, andother operating expenses” in our Consolidated Statement of Loss.

 

(b)                                 In 2008, we soldour indirect wholly owned subsidiary in Brazil, Boise Cascade do Brasil LTDA.,to Aracruz Celulose, S.A., for $45.5 million after selling expenses, andwe recorded a $5.7 million net gain on the sale.

 

***7.             Leases***

 

We lease a portion of ourdistribution centers as well as other property and equipment under operatingleases. For purposes of determining straight-line rent expense, the lease termis calculated from the date we first take possession of the facility, includingany periods of free rent and any option periods we are reasonably assured ofexercising. Straight-line rent expense is also adjusted to reflect anyallowances or reimbursements provided by the lessor. Rental expense foroperating leases was $13.1 million, $15.3 million, and$25.9 million for the years ended December 31, 2009, 2008, and 2007.Sublease rental income was not material in any of the periods presented.

 

60

----

Table of Contents

 

For noncancelableoperating leases with remaining terms of more than one year, the minimum leasepayment requirements are $10.9 million in 2010, $10.0 million in2011, $9.1 million in 2012, $7.9 million in 2013, and$6.8 million in 2014, with total payments thereafter of$31.8 million. These future minimum lease payment requirements have notbeen reduced by sublease rentals due in the future under noncancelablesubleases. Minimum sublease income received in the future is not expected to bematerial.

 

Substantially all lease agreements have fixed payment terms based on thepassage of time. Some lease agreements provide us with the option to purchasethe leased property. Additionally, some agreements contain renewal optionsaveraging approximately two years, with fixed payment terms similar tothose in the original lease agreements.

 

In 2007, we sold our newly constructed building materials distributioncenter in Milton, Florida, for $10.1 million, net of related fees andexpenses. The gain recognized on this sale was not material. The proceeds wereused to make debt repayments. In connection with the sale, we leased back thefacility over a 15-year lease term. The lease is accounted for as an operatinglease. The minimum lease payment requirements related to the transaction areincluded in the minimum lease payments disclosed above.

 

***8.             Income Taxes***

 

*TaxDistributions*

 

We are a limitedliability company, and the majority of our businesses and assets are held andoperated by limited liability companies, which are not subject to entity-levelfederal or state income taxation. The income taxes with respect to theseoperations are payable by our equity holders in accordance with theirrespective ownership percentages. We make cash distributions to permit themembers of BC Holdings and affiliates to pay these taxes. For the yearsended December 31, 2009, 2008, and 2007, we made $10.7 million, $128.1 million,and $2.8 million of cash distributions, respectively, to permit our equityholders to pay these taxes. Relative to 2009 and 2007, the larger 2008distributions related to the net taxable gain on the Sale. Both our seniorcredit facilities and the indenture governing our notes permit thesedistributions.

 

*Income Tax (Provision) Benefit*

 

Our income tax provision generally consists of income taxes payable tostates that do not allow for the income tax liability to be passed through toour equity holders, as well as income taxes payable by our separatesubsidiaries that are taxed as corporations. For the year ended December 31,2009, income tax expense was $0.7 million,compared with $0.5 million in 2008 and $8.0 million in 2007. Relativeto 2007, the decrease in income tax expense is primarily related to no incometax expense related to cash flow hedges in 2008 and 2009. Duringthe years ended December 31, 2009, 2008, and 2007, our effective tax ratesfor our separate subsidiaries that are taxed as corporations were 30.6%, 43.9%,and 40.3%. Thedecrease in our 2009 effective tax rate is primarily due to the effects of theseparate subsidiaries of the Paper and Packaging & Newsprintbusinesses on the effective tax rates in 2008 and 2007. At December 31,2009 and 2008, we had zero and $0.2 million of deferred tax assets relatedto our taxable subsidiaries recorded on our Consolidated Balance Sheets.

 

At December 31, 2009 and 2008, our tax basis was $140.7 millionand $384.5 million higher than the reported amount of net assets recordedon our Consolidated Balance Sheets. The difference related primarily to changesin pension obligations and the fact that we were not able to write down thevalue of our investment in Boise Inc. for tax purposes in 2009 and 2008.

 

Boise Building Solutions Manufacturing Holdings Corp., a wholly owned,fully consolidated operating entity, has an investment in foreign subsidiaries.At December 31, 2009 and 2008, the foreign subsidiaries had$11.4 million and $15.2 million, respectively, of deferred taxassets. The deferred tax assets resulted primarily from net operating lossesand were fully offset by a valuation allowance.In addition, Boise Building SolutionsManufacturing Holdings Corp. had $16.0 million of deferred tax assetsrelated to the capital loss carryforward from the sale of our subsidiaries inBrazil and the United Kingdom. The capital loss carryforward was fully offsetby a valuation allowance, because it is more likely than not that we will notbe able to utilize the capital loss carryforward before it expires in 2013.

 

61

----

Table of Contents

 

In 2009, 2008, and 2007, we paid $0.4 million, $0.8 million,and $3.3 million of income taxes, net of other refunds received.

 

*Income Tax Uncertainties*

 

BC Holdings, or oneof our subsidiaries, files federal income tax returns in the U.S. and Canadaand various state and foreign income tax returns in the major statejurisdictions of Alabama, California, Idaho, Oregon, Texas, and Washington. Weare subject to tax examinations from October 29, 2004 (our inception) topresent. In 2008, the United States Internal Revenue Service completed an auditof BC Holdings’ 2005 and 2006 tax years and issued a final audit reportwith a proposed adjustment. We have responded with a request to appeal theadjustment. If we do not prevail in appeals, any incremental tax owed from theadjustment would be payable by our equity holders in accordance with theirrespective ownership percentages. We do not expect any cash distributions tomembers of BC Holdings and affiliates resulting from the adjustment, ifany, to be significant. Additionally, in third quarter 2007, the Canadian RevenueAgency began an audit of Boise AllJoist for tax years 2005 and 2006, whichremains pending.

 

We recognize tax liabilities and adjust theseliabilities when our judgment changes as a result of the evaluation of newinformation not previously available or as new uncertainties occur. For theyear ended December 31, 2009, we increased the amount of our unrecognizedtax benefit by $5.8 million as a result of uncertainty surrounding theaudit of the 2005 Canadian tax return of our operating subsidiary in Canada. Wecharged the $5.8 million of unrecognized tax liabilities to income taxexpense, with an offsetting adjustment to the valuation allowances on deferredtax assets related to Boise AllJoist’s net operating losses. As a result, thenet impact on the 2009 Consolidated Statement of Loss was zero, and because ofsufficient net operating loss carryforwards from prior years, we do not expectto pay any cash taxes related to the uncertainty.

 

A reconciliation of theunrecognized tax benefits is as follows:

 
| ** **                                             | ** ** | **December 31** | ** ** |
|--------------------------------------------------------|------------|----------------------|------------|
| ** **                                             | ** ** | **2009**             | ** ** | **2008** | ** ** |
| ** **                                             | ** ** | **(thousands)**      | ** ** |
| Unrecognized  tax benefits, beginning of year          |       | $                    | —     |   | $ | 235 |   |
| Gross  increases related to prior-period tax positions |       | 5,792                |       | — |   |
| Unrecognized  tax benefits transferred in Sale         |       | —               |       | (235 | ) |
| Unrecognized  tax benefits, end of year                | ** ** | **$**                | **5,792**  | ** ** | **$** | **—** | ** ** |

 

While it is likely that the amount of the unrecognizedtax benefit will change in the next 12 months as the Canadian RevenueAgency completes its audit, we do not expect the change, if any, to bematerial.

 

For the years ended December 31,2009, 2008, and 2007, we recognized an insignificant amount of interest andpenalties related to taxes.

 

***9.******                                     ******Goodwill and IntangibleAssets***

 

Goodwill represents theexcess of the purchase price and related costs over the value assigned to thenet tangible and intangible assets of businesses acquired. At both December 31,2009 and 2008, we had $12.2 million of goodwill recorded on ourConsolidated Balance Sheet, of which $5.6 million was recorded in ourBuilding Materials Distribution segment and $6.6 million was recorded inour Wood Products segment.

 

We test goodwill and intangible assets with indefinitelives for impairment when events or changes in circumstances indicate that thecarrying value of the asset may exceed fair value. Additionally, we test forimpairment annually in the fourth quarter of each year using a discounted cashflow approach. We also evaluate the remaining useful lives of our finite-livedpurchased intangible assets to determine whether any adjustments to the usefullives are necessary. We maintain two reporting units for purposes of ourgoodwill and intangible asset impairment testing, Building MaterialsDistribution and Wood Products, which are the same as our operating segmentsdiscussed in Note 15, Segment Information. We

 

62

----

Table of Contents

 

completed our annual assessment in fourth quarter 2009and determined there was no impairment. In conducting our impairment analysis,we utilize the discounted cash flow approach that estimates the projectedfuture cash flows to be generated by our reporting units, discounted to presentvalue using a discount rate reflecting our estimated cost of funds. The impairmentanalysis requires significant judgments and estimates to be made by management,including estimates of future cash flows that will result from our estimates offuture demand, pricing, and production costs, assuming certain levels ofcapital expenditures. As these factors change in future periods, we will updateour impairment analyses to reflect our latest estimates and projections. Shouldthe markets for building products deteriorate further, should we make strategicdecisions in response to continued difficult economic and competitiveconditions, should we decide to invest capital differently, and should othercash flow assumptions change, it is reasonably possible that our determinationthat goodwill is not impaired could change in the near term. As additionalinformation becomes known, we may change our estimates.

 

Thecarrying amount of our goodwill by segment is as follows:

 
| ** **                                 | ** ** | **Building  Materials  Distribution** | ** ** | **Wood********Products** | ** ** | **Corporate  and  Other** | ** ** | **Total** | ** ** |
|--------------------------------------------|------------|---------------------------------------|------------|--------------------------|------------|---------------------------|------------|-----------|------------|
| ** **                                 | ** ** | **(thousands)**                       | ** ** |
| Balance at December 31, 2009 and 2008 | ** ** | **$**                                 | **5,593**  | ** **               | **$**      | **6,577**                 | ** ** | **$**     | **—** | ** ** | **$** | **12,170** | ** ** |
|                                            |            |                                       |            |                          |            |                           |            |           |            |  |  |  |  |

 

At December 31, 2009 and 2008, intangible assets represent the valuesassigned to trade names and trademarks, customer relationships, and anoncompete agreement. The trade names and trademarks have indefinite lives andare not amortized. Customer relationships are amortized over five years, andthe noncompete agreement is amortized over two years.

 

Intangible assets consisted of the following:

 
| ** **                 | ** ** | **December 31, 2009**            | ** ** |
|----------------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **Gross Carrying********Amount** | ** ** | **Accumulated********Amortization** | ** ** | **Net Carrying********Amount** | ** ** |
| ** **                 | ** ** | **(thousands)**                       | ** ** |
| Trade names and trademarks |       | $                                     | 8,900      |   | $ | — |   | $ | 8,900 |   |
| Customer relationships     |       | 2,100                                 |       | (2,100 | ) | — |   |
| Noncompete agreement       |       | 25                                    |       | (6 | ) | 19 |   |
| ** **                 | ** ** | **$**                                 | **11,025** | ** ** | **$** | **(2,106** | **)** | **$** | **8,919** | ** ** |

 
| ** **                 | ** ** | **December 31, 2008**            | ** ** |
|----------------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **Gross Carrying********Amount** | ** ** | **Accumulated********Amortization** | ** ** | **Net Carrying********Amount** | ** ** |
| ** **                 | ** ** | **(thousands)**                       | ** ** |
| Trade names and trademarks |       | $                                     | 8,900      |   | $ | — |   | $ | 8,900 |   |
| Customer relationships     |       | 2,100                                 |       | (1,752 | ) | 348 |   |
| ** **                 | ** ** | **$**                                 | **11,000** | ** ** | **$** | **(1,752** | **)** | **$** | **9,248** | ** ** |

 

Intangible assetamortization expense was $0.4 million in both 2009 and 2008 and$3.9 million in 2007. Amortization expense is not expected to besignificant after 2009.

 

63

----

Table of Contents

 

***10.          Debt***

 

At December 31, 2009 and 2008, our long-term debtwas as follows:

 
| ** **                                      | ** ** | **December 31** | ** **  |
|-------------------------------------------------|------------|----------------------|-------------|
| ** **                                      | ** ** | **2009**             | ** **  | **2008** | ** ** |
| ** **                                      | ** ** | **(thousands)**      | ** **  |
| Asset-based revolving credit facility, due 2013 |       | $                    | 75,000      |   | $ | 75,000 |   |
| 7.125% senior subordinated notes, due 2014      |       | 228,146              |        | 240,000 |   |
| Total long-term debt                            | ** ** | **$**                | **303,146** | ** ** | **$** | **315,000** | ** ** |

 

*Asset-Based Revolving CreditFacility*

 

On February 22, 2008, Boise Cascade, L.L.C., andits principal operating subsidiaries, Boise Building Solutions Manufacturing,L.L.C., and Boise Building Solutions Distribution, L.L.C., acting asborrowers, entered into a five-year $350 million senior securedasset-based revolving credit facility with Bank of America (Revolving CreditFacility). As part of the syndication process, the Revolving Credit Facilitywas amended in April 2008 to revise the pricing and incorporate additionalcovenants. In May 2009, we repaid, and subsequently reborrowed,$60.0 million of outstanding borrowings under the Revolving CreditFacility, and we amended the Revolving Credit Facility to permanently reducethe lending commitments by $60 million, bringing the total commitments to$290 million. At both December 31, 2009 and 2008, we had$75.0 million of borrowings outstanding under the Revolving CreditFacility.

 

Interest rates under the Revolving Credit Facility arebased on either the prime rate or the London Interbank Offered Rate (LIBOR).Pricing is subject to quarterly adjustment based on the average availabilityunder the Revolving Credit Facility during the prior quarter. The range of borrowingcosts under the pricing grid is:  (i) primeplus 1.00% to 1.50% or (ii) LIBOR plus 2.50% to 3.00%. For the yearsended December 31, 2009 and 2008, the average interest rates for ourborrowings under the Revolving Credit Facility were 2.9% and 5.0%. Letters ofcredit are subject to a 0.125% fronting fee payable to the issuing bank and afee payable to the lenders equal to the product of the interest rate spreadapplicable to LIBOR borrowings under the Revolving Credit Facility and thedaily average amount available for drawing under the outstanding letters ofcredit.

 

The borrowings under the Revolving Credit Facilityranged from a low of $15.0 million to a high of $75.0 million duringthe year ended December 31, 2009. The weighted average amount ofborrowings outstanding under the Revolving Credit Facility during the yearended December 31, 2009, was $74.0 million. The Revolving CreditFacility provides for a commitment fee of 0.50% per annum payable to thelenders on the average daily unused portion of the Revolving Credit Facility.The Revolving Credit Facility is guaranteed by our domestic subsidiaries (otherthan the three borrowers noted above) and is secured by a first-prioritysecurity interest in the stock of our foreign subsidiaries and substantiallyall of our domestic assets, except for property, plant, and equipment.

 

Borrowings under the Revolving Credit Facility areconstrained by a borrowing base formula dependent upon levels of eligibleinventory and receivables reduced by outstanding letters of credit and, whenour fixed-charge coverage ratio is below 1:1, as it was on December 31,2009, by a further requirement that we maintain a combination of unrestrictedcash and borrowing base, less outstanding loans, at or in excess of the greaterof $45 million or 15% of the borrowing base determined under the RevolvingCredit Facility. At December 31, 2009, our aggregate liquidity fromunrestricted cash and cash equivalents and unused borrowing capacity under theRevolving Credit Facility totaled $299.6 million.

 

In addition, theRevolving Credit Facility contains a restriction on capital investments that isapplicable when a minimum availability threshold is not met. That covenant wasnot applicable on December 31, 2009. The Revolving Credit Facility alsocontains customary nonfinancial covenants, including a negative pledge covenantand restrictions on distributions to equity holders, acquisitions, anddivestitures. These covenants will become more restrictive if a minimumavailability threshold is not maintained.

 

64

----

Table of Contents

 

*Letters of Credit*

 

At December 31, 2009 and 2008, we had$16.5 million and $14.2 million of letters of credit outstanding,respectively. These letters of credit reduce our borrowing capacity under theRevolving Credit Facility.

 

*SeniorSubordinated Notes*

 

In October 2004,Boise Cascade, L.L.C., issued $400.0 million of 7.125% senior subordinatednotes due in 2014. Net proceeds from the notes were used to fund a portion ofthe Forest Products Acquisition. In July 2005, we completed an exchangeoffer whereby all of our senior subordinated notes were exchanged forregistered securities with identical terms (other than terms relating toregistration rights) to the notes issued in October 2004. We may redeemall or part of the notes at any time at redemption prices set forth in theindenture. If we sell specific assets or experience specific kinds of changesin control, we must offer to purchase the notes. In connection with the Sale, we repurchased $160.0 million of thenotes at par in April 2008. In 2009, we repurchased $11.9 million ofsenior subordinated notes and recorded a $6.0 million gain in “Gain onrepurchase of long-term debt” in our Consolidated Statement of Loss.

 

We are obligated to usethe net proceeds (as defined in the Indenture) from the sale of Boise Inc.shares (see Note 4, Investment in Equity Affiliate) within one year to repaysenior indebtedness, acquire additional assets, or make a tender offer at parfor a portion of the senior subordinated notes. At December 31, 2009, andFebruary 28, 2010, approximately $78 million and $137 million of cash wasgoverned by the Indenture.  

 

*Other*

 

At December 31, 2009 and 2008, we had$5.7 million and $7.9 million of costs recorded in “Deferredfinancing costs” on our Consolidated Balance Sheets. In connection withrepurchasing $11.9 million of senior subordinated notes, we expensedapproximately $0.2 million of deferred financing costs in 2009. Werecorded the charges in “Gain on repurchase of long-term debt” in ourConsolidated Statement of Loss.

 

For the years ended December 31,2009, 2008, and 2007, cash payments for interest, net of interest capitalized,were $20.0 million, $36.0 million, and $96.1 million,respectively.

 

At December 31,2009, the book value of fixed-rate debt was $228.1 million, and the fairvalue was estimated to be $205.6 million. The difference between bookvalue and fair value is derived from the difference between the period-endmarket interest rate and the stated rate of our fixed-rate, long-term debt. Weestimated the fair value based on quoted market prices for similar obligationswith like maturities.

 

***11.          Financial Instrument Risk***

 

In the normal course of business, we are exposed tofinancial risks such as changes in interest rates, credit risk, and foreigncurrency exchange rates. We do not use derivative instruments for speculativepurposes. If any derivative instruments are purchased to minimize risk, theymay not qualify for hedge accounting.

 

*Interest Rate Risk*

 

We are exposed to interest rate risk arising from fluctuations in interestrates on our cash and cash equivalents and bank credit facility. In 2009, we didnot use any interest rate swap contracts to manage this risk.

 

In 2008, we significantly decreased our variable-rate debt with theproceeds from the Sale. As a result, we terminated all of our interest rateswap agreements for approximately $11.9 million. The interest rate swaps were consideredeconomic hedges.During 2008, we recorded the fair valueof the interest rate swaps, or $6.3 million of expense, in “Change in fairvalue of interest rate swaps” in our Consolidated Statement of Loss.

 

*Concentration of Credit Risk*

 

We are exposed to credit risk related to customeraccounts receivable. In order to reduce this risk, we consider customerconcentrations and current economic trends and monitor the creditworthiness ofsignificant customers based on ongoing credit evaluations. At December 31,2009 and 2008, the

 

65

----

Table of Contents

 

receivables from a single customer accounted for approximately14% and 18% of total receivables, respectively. No other customer accounted for10% or more of total receivables.

 

*Foreign Currency Risk*

 

We have manufacturing operations in the United Statesand Canada. As a result, we are exposed to movements in the foreign currencyexchange rate in Canada. At December 31, 2009, we had no foreign currencyhedges.

 

*ContingentValue Rights*

 

Aspart of the Sale, Terrapin Partners Venture Partnership and Boise Cascade,L.L.C., issued 21.2 million contingent value rights (CVRs) to holders ofBoise Inc. stock. During 2009, we settled our obligation related to the CVRsusing 0.8 million of Boise Inc. shares and recorded a$1.0 million loss in “Equity in net income (loss) of affiliate” in ourConsolidated Statement of Loss for the difference between the market price onthe date we settled our obligation with shares and the carrying amount of theshares recorded on our Consolidated Balance Sheet.

 

In 2008, we recorded thefair value of the CVR liability and associated expense based on a simulationanalysis that considered the likelihood of Boise Inc. investors receivingpayment under the Contingent Value Rights Agreement. We updated the simulationmodel each quarter and revalued the liability based on the results. During 2008,we recognized $0.5 million of expense in “Change in fair value ofcontingent value rights” in our Consolidated Statement of Loss.

 

***12.          Retirement and Benefit Plans***

 

Our retirement plans consist of noncontributorydefined benefit pension plans, including supplemental nonqualified pensionplans for certain salaried employees, contributory defined contribution savingsplans, a deferred compensation plan, and postretirement benefit plans.

 

*Defined Benefit Plans*

 

Some of our employees are covered by noncontributorydefined benefit pension plans. On March 18, 2009, we amended our definedbenefit pension plan for salaried employees (Salaried Plan) to freeze theSalaried Plan so that no future benefits accrue after December 31, 2009.The amendment also froze benefits in our nonqualified salaried pension plans.As such, only certain hourly employees continue to accrue benefits after December 31,2009. When frozen, the pension benefit for salaried employees was basedprimarily on the employees’ years of service and highest five-year averagecompensation (years of service and compensation for active employees to bedetermined as of December 31, 2009). The benefit for hourly employees isgenerally based on a fixed amount per year of service.

 

In connection with the amendment to the Salaried Plan,we recognized a net $0.7 million noncash curtailment gain, primarilyrelated to our nonqualified salaried pension plans. We recorded the gain in “Other(income) expense, net” in our Consolidated Statement of Loss for the year endedDecember 31, 2009. Because the Salaried Plan has unrecognized losses, thecurtailment gain associated with the amendment to the Salaried Plan was appliedto partially offset the losses in the plan, resulting in no immediate gainrecognition related to the Salaried Plan freeze.

 

*Defined Contribution Plans*

 

We also sponsorcontributory defined contribution savings plans for most of our salaried andhourly employees, and we generally provide matching contributions to thesavings plans. However, to manage labor costs in the uncertain economicenvironment in which we are operating, effective April 1, 2009, wesuspended the $0.70 match component of our savings plan for salaried employees.Expenses related to company matching contributions to our defined contributionsavings plans for the years ended December 31, 2009, 2008, and 2007, were$3.5 million, $9.0 million, and $16.4 million.

 

We announced a redesign of the company matchprovisions to the savings plan for salaried employees effective March 1,2010. Under the redesign, we will contribute 4% of an employee’s eligible wages(base salary and short-term incentive compensation). In addition, for the yearsthat certain performance targets are 

 

66

----

Table of Contents

 

met, we will contribute an additional amount that willrange from zero to 4% of the employee’s eligible wages, depending on theemployee’s years of service.

 

*Deferred Compensation Plan*

 

We sponsor adeferred compensation plan through which our key managers and nonaffiliateddirectors are able to irrevocably elect to defer a portion of their base salaryand bonus or director’s fees until termination of employment or beyond. In late2008, however, Congress passed tax legislation that required participants inour deferred compensation plan to recognize income (and therefore be taxed) ontheir deferrals of income earned in 2009 and beyond and earnings thereon. Weamended the plan to require distribution before year-end 2009 of all deferralsto, and earnings of, the plan which were taxable under the new legislation. Asa result, we distributed $1.1 million of deferrals and related earnings toparticipants in 2009. For the years ended December 31, 2008 and 2007,participant deferrals were $2.3 million and $2.9 million,respectively. Deferrals, company match, and interest on contributions made tothe plan on or before December 31, 2008, were not affected by the changes.As long as contributions to the plan are taxable under the new legislation,there will be no future contributions to the deferred compensation plan, butparticipant account balances remaining after the distributions will continue toaccrue earnings in accordance with the terms of the plan.

 

The deferredcompensation plan is unfunded; therefore, benefits are paid from our generalassets. For both the years ended December 31, 2009 and 2008, we recognized$0.9 million of interest expense related to the plan, compared with $0.6 millionduring the year ended December 31, 2007. At December 31, 2009 and2008, we had $11.2 million and $12.9 million of liabilities relatedto the plans recorded on our Consolidated Balance Sheets.

 

*PostretirementBenefit Plans*

 

We also have postretirement healthcare benefit plans. Our postretirementhealthcare plans are unfunded. In 2007, we communicated to our employeeschanges to our retiree healthcare programs. We discontinued healthcare coveragefor most of our post-65 retirees. In addition, we eliminated the companysubsidy for some of our pre-65 hourly retirees. This change shifted retireemedical costs to the plan participants. As a result of this change, we recordeda $4.4 million gain in our Consolidated Statements of Income for the yearended December 31, 2007. Following the Sale, our postretirement healthcareplans are not subsidized by us, so we have no related liabilities or expensesfor these plans.

 

Certain executives participate in our SupplementalLife Plan, which provides them with an insured death benefit during theiremployment with us. The plan provides the officer with a target death benefitequal to two times his or her base salary while employed and a targetpostretirement death benefit equal to one times his or her final base salary,in each case less any amount payable under our group term life insurancepolicy. At both December 31, 2009 and 2008, our benefit obligationsrelated to the Supplemental Life Plan were $0.2 million.

 

67

----

Table of Contents

 

*Obligations and Funded Status*

 

The following table, which includes only company-sponsored plans,reconciles the beginning and ending balances of our projected benefitobligation. It also shows the fair value of plan assets and aggregate fundedstatus of our plans. The funded status changes from year to year based on theinvestment return from plan assets, contributions, benefit payments, and thediscount rate used to measure the liability.

 
| ** **                                                      | ** ** | **Pension  Benefits** | ** **   |
|-----------------------------------------------------------------|------------|-----------------------|--------------|
| ** **                                                      | ** ** | **2009**              | ** **   | **2008** | ** ** |
| ** **                                                      | ** ** | **(thousands)**       | ** **   |
| Change in benefit obligation                                    | ** ** | ** **            |         |   |   |
| Benefit obligation at beginning of year                         |       | $                     | 343,952      |   | $ | 672,133 |   |
| Service cost                                                    |       | 9,688                 |         | 12,574 |   |
| Interest cost                                                   |       | 19,923                |         | 21,914 |   |
| Amendments                                                      |       | 102                   |         | 163 |   |
| Actuarial loss                                                  |       | 10,188                |         | 19,535 |   |
| Special termination benefits                                    |       | 1,691                 |         | 2,685 |   |
| Closure and curtailments                                        |       | (22,965               | )            | 1,582 |   |
| Plan sponsorship transferred in Sale                            |       | —                |         | (378,347 | ) |
| Benefits paid                                                   |       | (10,244               | )            | (8,287 | ) |
| Benefit obligation at end of year                               |       | 352,335               |         | 343,952 |   |
|                                                            | ** ** | ** **            | ** **   | ** ** | ** ** |
| Change in plan assets                                           |       |                  |         |   |   |
| Fair value of plan assets at beginning of year             |       | 181,311               |         | 585,213 |   |
| Actual return (loss) on plan assets                             |       | 50,260                |         | (92,275 | ) |
| Employer contributions                                          |       | 28,385                |         | 20,301 |   |
| Plan sponsorship transferred in Sale                            |       | —                |         | (323,641 | ) |
| Benefits paid                                                   |       | (10,244               | )            | (8,287 | ) |
| Fair value of plan assets at end of year                        |       | 249,712               |         | 181,311 |   |
| Underfunded status                                              | ** ** | **$**                 | **(102,623** | **)** | **$** | **(162,641** | **)** |
|                                                            | ** ** | ** **            | ** **   | ** ** | ** ** |
| Amounts recognized on our Consolidated Balance Sheets           | ** ** | ** **            | ** **   | ** ** | ** ** |
| Current liabilities                                             |       | $                     | (590         | ) | $ | (590 | ) |
| Noncurrent liabilities                                          |       | (102,033              | )            | (162,051 | ) |
| Net liability                                                   | ** ** | **$**                 | **(102,623** | **)** | **$** | **(162,641** | **)** |
|                                                            | ** ** | ** **            | ** **   | ** ** | ** ** |
| Amounts recognized in accumulated other comprehensive loss |       |                  |         |   |   |
| Net loss                                                        |       | $                     | 35,731       |   | $ | 79,569 |   |
| Prior service cost                                              |       | 1,150                 |         | 1,261 |   |
| Net amount recognized                                           | ** ** | **$**                 | **36,881**   | ** ** | **$** | **80,830** | ** ** |

 

Theaccumulated benefit obligation for all defined benefit pension plans was$352.3 million and $313.9 million at December 31, 2009 and 2008.All of our defined benefit pension plans have accumulated benefit obligationswhich exceed the fair value of plan assets.

 

68

----

Table of Contents

 

*Net Periodic Benefit Cost andOther Comprehensive (Income) Loss*

 

The components of netperiodic benefit cost and other amounts recognized in other comprehensive(income) loss are as follows:

 
| ** **                                                                                          | ** ** | **Pension  Benefits** | ** **  |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|
| ** **                                                                                          | ** ** | **2009**              | ** **  | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                          | ** ** | **(thousands)**       | ** **  |
| Service cost                                                                                        |       | $                     | 9,688       |   | $ | 12,574 |   | $ | 23,179 |   |
| Interest cost                                                                                       |       | 19,923                |        | 21,914 |   | 38,294 |   |
| Expected return on plan assets                                                                      |       | (18,553               | )           | (21,619 | ) | (38,386 | ) |
| Amortization of actuarial (gain) loss                                                               |       | (388                  | )           | (308 | ) | 520 |   |
| Amortization of prior service costs and other                                                       |       | 181                   |        | 319 |   | 1,190 |   |
| Plan settlement/curtailment (gain) expense                                                          |       | 1,464                 |        | 4,068 |   | (181 | ) |
| Company-sponsored plans                                                                             |       | 12,315                |        | 16,948 |   | 24,616 |   |
| Multiemployer pension plans                                                                         |       | —                |        | 115 |   | 469 |   |
| Net periodic benefit cost                                                                           |       | 12,315                |        | 17,063 |   | 25,085 |   |
|                                                                                                | ** ** | ** **            | ** **  | ** ** | ** ** | ** ** | ** ** |
| Net periodic benefit recognized in connection with the Sale                                         |       | —                |        | (17,555 | ) | — |   |
|                                                                                                |       |                  |        |   |   |   |   |
| Changes in plan assets and benefit obligationsrecognized in other  comprehensive (income) loss |       |                  |        |   |   |   |   |
| Net (gain) loss                                                                                     |       | (44,226               | )           | 162,718 |   | (38,988 | ) |
| Prior service (credit) cost                                                                         |       | 70                    |        | (11,330 | ) | 7,473 |   |
| Amortization of actuarial gain (loss)                                                               |       | 388                   |        | 308 |   | (520 | ) |
| Amortization of prior service cost and other                                                        |       | (181                  | )           | (319 | ) | (1,190 | ) |
| Total recognized in other comprehensive (income) loss                                          |       | (43,949               | )           | 151,377 |   | (33,225 | ) |
|                                                                                                | ** ** | ** **            | ** **  | ** ** | ** ** | ** ** | ** ** |
| Total recognized in net periodic cost (benefit) and  other comprehensive (income) loss         | ** ** | **$**                 | **(31,634** | ) | **$** | **150,885** | ** ** | **$** | **(8,140** | **)** |

 

In 2010, we estimate net periodic pension expense willbe approximately $8 million. We estimate the 2010 net periodicpension expense will include $0.7 million of net loss and$0.2 million of prior service cost that will be amortized from accumulatedother comprehensive loss.

 

# *Assumptions*

# * *

The assumptions used inaccounting for our plans are estimates of factors that will determine, amongother things, the amount and timing of future benefit payments. The followingtable presents the assumptions used in the measurement of our benefitobligations:

 
| ** **                                           | ** ** | **Pension Benefits** | ** ** |
|------------------------------------------------------|------------|----------------------|------------|
| ** **                                           | ** ** | **2009**             | ** ** | **2008** | ** ** |
|                                                 | ** ** | ** **           | ** ** | ** ** | ** ** |
| Weighted average  assumptions as of December 31 |       |                 |       |   |   |
| Discount rate                                        |       | 5.90                 | %          | 6.10 | % |
| Rate of  compensation increases                      |       | —               |       | 4.25 | % |

 

The following tablepresents the assumptions used in the measurement of net periodic benefit cost:

* *
| ** **                                                               | ** ** | **Pension  Benefits** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                               | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Weighted average assumptions as of the last day in the presented  period |       |                  |       |   |   |   |   |
| Discount rate (a)                                                   |       | 6.90                  | %          | 6.40 | % | 5.90 | % |
| Expected long-term rate of return on plan assets                         |       | 7.25                  | %          | 7.25 | % | 7.25 | % |
| Rate of compensation increases (b)                                       |       | —                |       | 4.25 | % | 4.25 | % |

 

----

(a)                                  We used a 6.1%discount rate to calculate 2009 pension expense. On March 18, 2009, thesalaried and nonqualified benefit plans were amended so that no future benefitswould accrue after December 31, 2009. In connection with the amendment, weremeasured pension expense for the amended plans for the period of March 18,2009, through December 31, 2009 using a 6.9% discount rate. We continuedto recognize expense for the plans that were not amended using the 6.1%discount rate.

 

69

----

Table of Contents

 

(b)                                 In connectionwith the plan amendment on March 18, 2009, we changed the compensationincrease to zero due to the fact that the salaried and nonqualified benefitswere frozen December 31, 2009, and there are currently no scheduledincreases in pension benefit rates for past service in the plans covering ourhourly employees.

 

*DiscountRate Assumption*.  The discount rate reflects the current rateat which the pension obligations could be settled based on the measurement dateof the plans — December 31. In all years presented, the discount rateswere determined by matching the expected plan benefit payments against a spotrate yield curve constructed to replicate Aa-graded corporate bonds.

 

*Asset Return Assumption*. We base our expected long-term rate of return on plan assets on a weightedaverage of our expected returns for the major asset classes (equities andfixed-income securities) in which we invest. Expected returns for the assetclasses are based on long-term historical returns, inflation expectations,forecasted gross domestic product, earnings growth, and other economic factors.The weights we assign each asset class are based on our investment strategy.The weighted average expected return on plan assets we will use in ourcalculation of 2010 net periodic benefit cost is 7.25%.

 

*Rate ofCompensation Increases. *Generally, this assumption reflects ourlong-term actual experience, the near-term outlook, and assumed inflation. Formore information, see footnote (b) to the table above.

 

*InvestmentPolicies and Strategies*

 

AtDecember 31, 2009, 61% of our pension plan assets were invested in equitysecurities, and 39% were invested in fixed-income securities. The generalinvestment objective for all of our plan assets is to optimize growth of thepension plan trust assets, while minimizing the risk of significant losses inorder to enable the plans to satisfy their benefit payment obligations overtime. The objectives take into account the long-term nature of the benefitobligations, the liquidity needs of the plans, and the expected risk/returntrade-offs of the asset classes in which the plans may choose to invest. TheRetirement Funds Investment Committee is responsible for establishing andoverseeing the implementation of our investment policy. Russell Investments(Russell) oversees the active management of our pension investments through itsmanager of managers program in order to achieve broad diversification in acost-effective manner. At December 31, 2009, our investment policygoverning our relationship with Russell allocated 39% to large-capitalizationU.S. equity securities, 7% to small- and mid-capitalization U.S. equitysecurities, 14% to international equity securities, and 40% to long-durationfixed-income securities. Our arrangement with Russell requires monthlyrebalancing to the policy targets noted above.

 

Investment securities, in general, are exposed tovarious risks, such as interest rate, credit, and overall market volatilityrisk, all of which are subject to change. In addition, our overall investmentstrategy and related allocations between equity and fixed-income securities maychange from time to time based on market conditions, external economic factors,and the funded status of our plans. Due to the level of risk associated withcertain investment securities, it is reasonably possible that changes in thevalues of investment securities will occur in the near term, and such changescould materially affect the reported amounts.

 

*Fair Value Measurements of PlanAssets*

 

The defined benefit planshold an interest in the Boise Cascade, L.L.C., Master Trust (Master Trust). Theassets in the Master Trust are invested in common and collective trusts thathold several mutual funds invested in U.S. equities, international equities,and fixed-income securities managed by Russell Trust Company.

 

70

----

Table of Contents

 

FASB ASC 820, *Fair Value Measurements and Disclosures,* establishes athree-level fair value hierarchy that prioritizes the inputs used to measurefair value. The fair value hierarchy gives the highest priority to quotedmarket prices (Level 1) and the lowest priority to unobservable inputs (Level3). The following table sets forth by level, within the fair valuehierarchy, the pension plan assets, by major asset category, at fair value at December 31,2009:

 
| ** **                                     | ** ** | **Quoted Prices in  Active Market for  Identical Assets********(Level 1)** | ** ** | **Significant Other  Observable  Inputs********(Level 2) (a)** | ** ** | **Significant  Unobservable  Inputs********(Level 3)** | ** ** | **Total** | ** **  |
|------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------|-------------|
| ** **                                     | ** ** | **(thousands)**                                                                                          | ** ** |
| Equity securities                              |       |                                                                                                     |       |                                                                          |       |                                                        |       |      |        |
| Large-cap  U.S. equity securities (b)          |       | $                                                                                                        | —     |                                                                          | $          | 98,752                                                      |       | $         | —      |   | $ | 98,752 |   |
| Small-  and mid-cap U.S. equity securities (c) |       | —                                                                                                   |       | 18,317                                                                        |       | —                                                      |       | 18,317    |        |
| International  equity securities (d)           |       | —                                                                                                   |       | 34,628                                                                        |       | —                                                      |       | 34,628    |        |
| Fixed-income  securities (e)                   |       | —                                                                                                   |       | 97,395                                                                        |       | —                                                      |       | 97,395    |        |
| Total investments at fair  value               | ** ** | **$**                                                                                                    | **—** | ** **                                                                    | **$**      | **249,092**                                                 | ** ** | **$**     | **—**  |   | 249,092 |   |
| Receivables and accrued  expenses, net         |       |                                                                                                     |       |                                                                          |       |                                                        |       | 620       |        |
| Fair value of plan assets                      | ** ** | ** **                                                                                               | ** ** | ** **                                                                    | ** ** | ** **                                                  | ** ** | **$**     | **249,712** | ** ** |

 

----

(a)                                  Represent mutualfunds managed by Russell Trust Company. The funds are valued at the net assetvalue (NAV) provided by Russell Trust Company, the administrator of the funds.The NAV is based on the value of the assets owned by the fund, less liabilitiesat year-end. While the underlying assets are actively traded on an exchange,the funds are not.

 

(b)                                 Invested in the Russell Equity I Fund. The fund seeks higher long-term returns that exceed theRussell 1000 Index by investing in common stocks that rank among the largest1,000 companies in the U.S. stock market.

 

(c)                                  Invested in the Russell Equity II Fund. The fund seeks high,long-term returns that exceed the Russell 2500 Index by investing in thesmaller capitalization stocks of the U.S. stock market.

 

(d)                                 Invested in the Russell International Fund. The fund benchmarks againstthe Morgan Stanley Capital International Europe, Australasia, and Far East(MSCI EAFE) Index and seeks high, long-term returns comparable to the broadinternational stock market by investing in non-U.S. companies from thedeveloped countries around the world. The fund participates primarily in thestock markets of Europe and the Pacific Rim. The strategy involves selection ofstocks within various countries and industries worldwide.

 

(e)                                  Invested in the Russell Long Duration Fixed Income Fund. The fund seeksto achieve above-average consistency (relative to the Barclays Capital U.S.Long Government/Credit Bond Index) in performance by combining manager stylesand strategies with different payoffs over various phases of an investmentcycle. The fund is designed to provide maximum total return through diversifiedstrategies including sector rotation, modest interest rate timing, securityselection, and tactical use of high-yield and emerging market bonds.

 

*Cash Flows*

 

For the years ended December 31,2009, 2008, and 2007, we made cash contributions to our pension plans totaling$28.4 million, $20.4 million, and $0.7 million. We are requiredto contribute $2.0 million to our pension plans in 2010.

 

The following benefit payments are expected to be paidto plan participants. Qualified pension benefit payments are paid from planassets, while nonqualified pension benefit payments are paid by the company.

 
| ** **      | ** ** | **Pension Benefits** | ** ** |
|-----------------|------------|---------------------------|------------|
| ** **      | ** ** | **(thousands)**           | ** ** |
| 2010            |       | $                         | 12,371     |   |
| 2011            |       | 14,153                    |       |
| 2012            |       | 16,090                    |       |
| 2013            |       | 17,913                    |       |
| 2014            |       | 19,685                    |       |
| Years 2015-2019 |       | 122,094                   |       |
|                 |            |                           |            |  |

 

***13.          Long-Term Incentive Compensation Plans***

 

*Long-Term Incentive Cash Plan*

 

In October 2009, our compensation committeeadopted a new long-term incentive plan (LTIP) that pays awards in cash. TheLTIP provides an annual award notice to participants granting them theopportunity to earn a cash award that is based on a target percentage of theparticipant’s base salary and

 

71

----

Table of Contents

 

the company’s achievement against corporate goals,both of which are set annually. Under the LTIP, the award, if any, will be paidin three equal installments due no later than March 15 of the three yearsfollowing the year the award was granted with continued employment as aprecondition for receipt of each award installment. We will recognizecompensation expense based on the probability of the performance goals being metover the vesting period.

 

*Management Equity Agreement*

 

Key managers and unaffiliated directors of Boise Cascade, L.L.C. (each amanagement investor) have purchased or been awarded, pursuant to the terms ofseparate Management Equity Agreements or Director Equity Agreements(collectively the Equity Plan), equity units in FPH at prices (with respect to Series BUnits) that approximated fair value on the date of purchase. Those whopurchased the FPH Series B equity units received grants of FPH Series Cequity units (profit interests) that represent the right to participate inprofits after capital is returned to the holders of the FPH Series Bequity units. In addition, FPH hasissued Series C equity units to key managers and nonaffiliated directorsfor no consideration.

 

*Repurchase and Amendment*

 

In 2008, FPH entered into a RepurchaseAgreement and Amendment No. 1 to our Management Equity Agreement (the 2008Amendment Agreements) with each management investor. Under the redemptionprovisions of the 2008 Amendment Agreements, FPH repurchased 48.5% of eachmanagement investor’s Series B equity units for an amount equal to suchmanager’s original investment in FPH, totaling $9.7 million of cash. Therepurchase was at the electionof the individual participant and was offered for a short period of time.Accordingly, we accounted for the repurchase as a “short-term inducement” underFASB ASC 718, *Compensation — StockCompensation*. During 2008, we recognized $0.4 million ofcompensation expense for the amount that the repurchase exceeded the fair valueof the awards.

 

The 2008 AmendmentAgreements amended the vesting provisions of the Series C equity units asdescribed under “Vesting” below. The amendments had no impact on the vestingprovisions governing the Series B equity units. We measured the value ofthe award before and after the modification, and as a result, we will recognizean incremental $2.0 million of compensation expense related to themodification. Of the $2.0 million of incremental compensation expense, werecognized approximately $0.7 million and $0.6 million in 2009 and2008, and we will recognize the remaining $0.7 million prospectively overthe remaining vesting period.

 

*Vesting*

 

Under the original Equity Plan, the FPH Series Bequity units and 50% of the Series C equity units issued in 2004 and 2006(service-condition vesting equity units) were to vest on a pro rata basisbetween December 31, 2004, and December 31, 2009, for the 2004 Series Cequity units and between April 3, 2006, and December 31, 2009, forthe 2006 Series C equity units. The other 50% of the Series C equityunits issued in 2004 and 2006 (market-condition vesting units) were to vest atthe end of 2009 if specific criteria tied to internal rates of return were met.Accelerated vesting, in whole or in part, was provided for in specificcircumstances.

 

The 2008 Amendment Agreements, revised the Equity Plan such that:  (i) 62.9% of the market-condition Series C equityunits issued in 2004 and 2006 were converted to service-condition vesting unitsand vest on a daily basis from February 22, 2008, through December 31,2010; (ii) 37.1% of the market-condition Series C equity units issuedin 2004 and 2006 remain subject to the Equity Plan’s internal rate-of-returnformula, but the vesting period was extended one year to December 2010;and (iii) the vesting period for the service-condition vesting Series Cequity units issued in 2004 and 2006 that were not vested as of February 22,2008, was reset to provide ratable daily vesting from February 22, 2008,through December 31, 2010.

 

The 9.0 million Series C equity units issuedin February 2009, all of which were service-condition vesting units, veston a daily pro rata basis through December 1, 2010. In August 2009,2.9 million of these units were forfeited.

 

72

----

Table of Contents

 

Upon either the sale of the company, asdefined in the Equity Plan, or an initial public offering, vesting is fullyaccelerated for all management investors (subject to satisfaction of applicablemarket-based vesting conditions for units subject to market conditions).

 

For management investors whose employment terminated as the result of thesale of a division, such management investors’ Series B equity unitsvested on a daily pro rata basis through the date of termination calculated onthe basis of an aggregate vesting period running from December 31, 2004,through December 31, 2009, and their service-condition vesting Series Cequity units that were not vested on February 22, 2008, vest on a dailypro rata basis calculated through the date of termination on the basis of anaggregate vesting period running from February 22, 2008, through December 31,2010. In addition, in such circumstance, their market-condition vesting Series Cequity units vest on the same basis as their service-condition vesting Series Cunits without regard to any calculation of an applicable market return.

 

Other events may accelerate vesting forspecifically affected management investors, but none of these events are withinthe control of the investor. The vesting schedules are shortened for thoseinvestors who were at least 60 years old as of the grant date, so that theunits fully vest by December 31 of the year in which the investor reachesage 65 and at least two vesting periods have been met. Vesting does nottrigger a right or obligation on the part of FPH or us to repurchase equityunits held by management investors.

 

*CompensationExpense*

 

We did not recognize compensation expenseon the date of grant for the Series B equity units, because the fair valueof the units issued by FPH was equal to or less than the amount each employeewas required to pay. The Series C equity units are accounted for asrestricted stock. We recognize compensation expense for the Series Cequity units based on the fair value on the date of the grant and/or the awardmodification date. Compensation expense is recognized ratably over the vestingperiod for the Series C equity units that vest over time and ratably overthe award period for the units that vest based on internal rates of return.During the years ended December 31, 2009, 2008, and 2007, we recognized$2.7 million, $6.6 million, and $3.1 million of compensationexpense. In 2009 and 2007, most of the compensation costs were recorded in “Generaland administrative expenses.” Of the $6.6 million of compensation expenserecognized in 2008, we recorded $5.1 million in “Gain on sale of Paper and Packaging &Newsprint Assets,” and most of the other costs were recorded in “General and administrative expenses” in our ConsolidatedStatement of Loss.

 

*FairValue Measurement — Series C Equity Units*

 

The fair value of the Series C equityunits as of the grant date and/or award modification date was estimated byanalyzing our possible future events, the paths to liquidity for the holders ofthe Series C equity units, and how these paths may affect the valuation ofthe Series C equity units. These possible future events included a sale ofthe company, an initial public offering, and remaining a private company. Weestimated probabilities of these events occurring based on our strategies ateach of the grant and/or award modification dates. A decision tree analysisthat incorporated these event outcomes and the likelihood of their occurrenceswas created. Payoffs to the holders of the Series C equity units wereconstructed at each event outcome on the decision tree. Based on thisframework, a simulation analysis was run to arrive at the fair values of the Series Cequity units.

 

We perform different valuation calculations for equity grants that have aservice condition and equity grants that have a market condition. Series Cequity units that vest over time are service-condition awards. The fair valueof these awards is measured assuming that all conditions have been met or as ifthey were fully vested on the grant date. Compensation expense is recognizedover the vesting period and adjusted if the service condition is not met.

 

The Series C equity units that vest based on internal rates of returnare market-condition grants. The valuation of market-condition awards considersthe likelihood that the market condition will be satisfied rather than assumingthat the award is vested on the award date. Because the internal rate of returnrepresents a more difficult threshold to meet before payout, with greateruncertainty that the market condition will be satisfied, these awards have alower fair value than those that vest based solely on the passage of time.However, compensation expense is required to be recognized under FASBASC 718 for an award regardless of when, if ever, the market condition issatisfied.

 

73

----

Table of Contents

 

*RedemptionProvisions*

 

The FPH Series B and Series C equity units held by managementinvestors are redeemable at FPH’s option upon termination of the managementinvestor’s employment (or membership on the company’s board of directors) andat the option of the holder in the event of death or disability or the sale ofa division resulting in the termination of his or her employment. The 7.125%senior subordinated notes and our Revolving Credit Facility contain arestricted payments covenant with a specific exception for equity unitredemptions up to $5 million in any year, subject to a two-yearcarryforward and carryback provision that provides an aggregate limit in any oneyear of $15 million. Additional exceptions to the covenant may also beutilized to permit equity unit redemptions. Redemptions made pursuant to theSale and the 2008 Amendment Agreements (described above) were permitted by suchprovisions.

 

Except in the event of death or disability, we believe that the redemptionof these units is within our control due to the interlocking boards of FPH andBC Holdings and because FPH was organized solely for the purpose ofestablishing BC Holdings to complete the Forest Products Acquisition.Repurchases under the Equity Plan have been funded by mirror-image redemptionsof Series B and C equity units held by FPH in its subsidiaries. Theredemption of the FPH Series B and Series C equity units and theexpected parallel redemptions of our Series B and Series C equityunits are a contingent event outside the employee’s control. However, becauseFPH units are subject to mandatory redemption in an event that is outside ourcontrol (death or disability), we are required to classify these units outsideof permanent equity on our Consolidated Balance Sheets at fair value as of thegrant date and/or award modification date. Accordingly, at December 31,2009 and 2008, we had $8.0 million and $6.0 million recorded in “Redeemableequity units” on our Consolidated Balance Sheet.

 

In the event that a management investor’s employment with us is terminatedor his service as a director terminates, as the case may be, FPH holds anoption, pursuant to the Equity Plan, to reacquire its equity units held bydeparting management investors at prices provided for in such agreements.During 2009, 2008, and 2007, FPH voluntarily redeemed some of the Series Band Series C equity units of departing management investors. Except forredemptions arising from the sale of a division or the death or disability of amanagement investor, we do not currently expect to redeem immature equity units(a unit for which the investor has not been subject to the risks and rewards ofownership for at least six months after vesting occurs).

 

FPH’s equity unit redemptions were funded by redemption by its subsidiariesof an identical number of redeemable Series B equity units or redeemable Series Cequity units. FPH subsidiaries redeemed 11 thousand, 11.6 million,and 0.5 million redeemable Series B equity units during 2009, 2008,and 2007. In 2009, 2008, and 2007, FPH redeemed 11 thousand,10.3 million, and 0.1 million redeemable Series C equity units.The total cash paid by FPH subsidiaries during 2009, 2008, and 2007 for parallelredemptions of redeemable Series B and Series C units was$18 thousand, $28.6 million, and $1.0 million.

 

*Impact ofthe Sale on Our Equity Plan*

 

In connection with the Sale, approximately75 participants in our Management Equity Plan terminated employment withus. These employees collectively held 6.6 million Series B and16.1 million Series C units. In March 2008, we paid$18.3 million to repurchase their equity units.

 

In connection with the Sale, for the year ended December 31,2008, we recorded $3.1 million of expense to adjust the value of theimmature equity units (units that have not been at risk for at least sixmonths) to redemption value and $2.0 million of expense related tononrefundable tax distributions paid to management investors in connection withtheir investments in us that will not vest. We recorded the charges in “Gain onsale of Paper and Packaging & Newsprint Assets” in our ConsolidatedStatement of Loss. In addition, during 2008, pursuant to the Sale, we recordeda $6.3 million adjustment to the value of the mature equity units (vestedunits and units that had been at risk for at least six months) to reflectredemption value in the capital section of our Consolidated Balance Sheet andConsolidated Statement of Capital.

 

74

----

Table of Contents

 

*Activity of Redeemable Equity Units*

 

The following summarizes the activity of ourredeemable equity units, based on the fair value of the equity units as of thegrant date or the date the awards were modified per the 2008 AmendmentAgreements.

 
| ** **                                              | ** ** | **Series B********Equity Units** | ** ** | **Series C********Equity Units** | ** ** | **Total  Redeemable** | ** ** |
|---------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|-----------------------|------------|
| ** **                                              | ** ** | **Units**                             | ** ** | **Amount**                            | ** ** | **Units**             | ** ** | **Amount** | ** ** | **Equity** | ** ** |
| ** **                                              | ** ** | **(thousands)**                       | ** ** |
| Balance at December 31, 2007                       | ** ** | **16,622**                            | ** ** | **$**                                 | **16,992** | ** **            | **39,069** | ** ** | **$** | **9,489** | ** ** | **$** | **26,481** | ** ** |
|                                                    |       |                                  |       |                                  |       |                  |       |   |   |   |   |
| Management equity units expense                         |       | —                                |       | —                                |       | —                |       | 634 |   | 634 |   |
| Fair market value adjustment of redeemable equity units |       | —                                |       | 9,415                                 |       | —                |       | 4,984 |   | 14,399 |   |
| Allocation of redeemable equity units to Capital        |       | (2,058                                | )          | (2,058                                | )          | (11,182               | )          | (4,865 | ) | (6,923 | ) |
| Repurchase of management equity units                   |       | (11,644                               | )          | (21,429                               | )          | (10,293               | )          | (7,205 | ) | (28,634 | ) |
| Forfeitures                                             |       | —                                |       | —                                |       | (6,577                | )          | — |   | — |   |
| Balance at December 31, 2008                       | ** ** | **2,920**                             | ** ** | **2,920**                             | ** ** | **11,017**            | ** ** | **3,037** | ** ** | **5,957** | ** ** |
|                                                    |       |                                  |       |                                  |       |                  |       |   |   |   |   |
| Granted                                                 |       | —                                |       | —                                |       | 8,973                 |       | — |   | — |   |
| Management equity units expense                         |       | —                                |       | —                                |       | —                |       | 2,366 |   | 2,366 |   |
| Allocation of redeemable equity units to Capital        |       | (144                                  | )          | (144                                  | )          | (769                  | )          | (196 | ) | (340 | ) |
| Forfeitures                                             |       | —                                |       | —                                |       | (2,940                | )          | — |   | — |   |
| Repurchase of management equity units and other         |       | (11                                   | )          | (11                                   | )          | (11                   | )          | (5 | ) | (16 | ) |
| Balance at December 31, 2009                       | ** ** | **2,765**                             | ** ** | **$**                                 | **2,765**  | ** **            | **16,270** | ** ** | **$** | **5,202** | ** ** | **$** | **7,967** | ** ** |

 

The following summarizes the activity of our outstanding service- andmarket-condition equity units awarded under the Equity Plan as of December 31,2009, 2008, and 2007, and changes during the years ended December 31, 2009and 2008:

 
| ** **                                                         | ** ** | **Service Condition**                                   | ** ** | **Market Condition**                                                 | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Series B********Redeemable********Equity Units** | ** ** | **Series C********Redeemable********Equity Units**              | ** ** | **Series C********Redeemable********Equity Units** | ** ** |
| **Outstanding Units**                                         | ** ** | **Units**                                               | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** | **Units** | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** | **Units** | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** |
| ** **                                                         | ** ** | **(thousands)**                                         | ** ** | ** **                                                           | ** ** | **(thousands)** | ** ** | ** ** | ** ** | **(thousands)** | ** ** | ** ** | ** ** |
| Outstanding at  December 31, 2007 (a)               | ** ** | **16,622**                                              | ** ** | **$**                                                                | **1.02**   | ** ** | **19,547** | ** ** | **$** | **0.39** | ** ** | **19,522** | ** ** | **$** | **0.21** | ** ** |
|                                                               |       |                                                    |       |                                                                 |       |   |   |   |   |   |   |   |   |
| Granted                                                            |       | —                                                  |       | —                                                               |       | — |   | — |   | — |   | — |   |
| Repurchased (b)                                                    |       | (11,644                                                 | )          | 1.03                                                                 |       | (5,216 | ) | 0.34 |   | (5,077 | ) | 0.13 |   |
| Forfeited (c)                                                      |       | —                                                  |       | —                                                               |       | (3,365 | ) | 0.33 |   | (3,212 | ) | 0.13 |   |
| Market-condition awards converted to  service-condition awards (d) |       | —                                                  |       | —                                                               |       | 3,354 |   | 0.74 |   | (3,354 | ) | 0.14 |   |
| Allocation of redeemable equity units to  Capital (e)              |       | (2,058                                                  | )          | 1.00                                                                 |       | (5,591 | ) | 0.46 |   | (5,591 | ) | 0.41 |   |
| Outstanding at  December 31, 2008 (a)               | ** ** | **2,920**                                               | ** ** | **1.00**                                                             | ** ** | **8,729** | ** ** | **0.53** | ** ** | **2,288** | ** ** | **0.14** | ** ** |
|                                                               |       |                                                    |       |                                                                 |       |   |   |   |   |   |   |   |   |
| Granted (f)                                                        |       | —                                                  |       | —                                                               |       | 8,973 |   | 0.34 |   | — |   | — |   |
| Repurchased                                                        |       | (11                                                     | )          | 1.00                                                                 |       | (11 | ) | 0.46 |   | — |   | — |   |
| Forfeited (f)                                                      |       | —                                                  |       | —                                                               |       | (2,926 | ) | 0.34 |   | (14 | ) | 0.15 |   |
| Allocation of redeemable equity units to  Capital (e)              |       | (144                                                    | )          | 1.00                                                                 |       | (513 | ) | 0.24 |   | (256 | ) | 0.18 |   |
| Outstanding at  December 31, 2009 (a)               | ** ** | **2,765**                                               | ** ** | **$**                                                                | **1.00**   | ** ** | **14,252** | ** ** | **$** | **0.46** | ** ** | **2,018** | ** ** | **$** | **0.14** | ** ** |

 

----

(a)                                  Outstanding units include both vested andnonvested units, as units outstanding are reduced only through repurchase ofunits by us or through forfeiture of units by employees.

 

(b)                                 In 2008, FPHrepurchased 6.6 million Series B and 10.2 million Series Cequity units from management investors that terminated employment with us inconnection with the Sale. In addition, under the provisions of the 2008Amendment Agreements, FPH repurchased 4.7 million Series B equityunits.

 

75

----

Table of Contents

 

(c)                                  In 2008,management investors forfeited 5.9 million Series C units when theyterminated employment with us in connection with the Sale.

 

(d)                                 Under theprovisions of the 2008 Amendment Agreements, 62.9%, or 3.4 million of themarket-condition Series C equity units were converted to service-conditionvesting units. The table includes the increase in fair value of the equity unitsafter the plan modification.

 

(e)                                  In 2009 and2008, we reclassified certain redeemable equity units into “Capital” on ourConsolidated Balance Sheet. The reclassifications resulted from employeeretirements or terminations causing the equity units to no longer be subject tomandatory redemption in an event that is outside of our control.

 

(f)                                    In 2009, FPHgranted 9.0 million Series C equity units, of which 2.9 millionunits were forfeited in 2009.

 

The following summarizes the activity ofour nonvested service- and market-condition equity units awarded under theEquity Plan as of December 31, 2009, 2008, and 2007, and changes duringthe years ended December 31, 2009 and 2008:

 
| ** **                                                         | ** ** | **Service Condition**                                   | ** ** | **Market Condition**                                                 | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Series B********Redeemable********Equity Units** | ** ** | **Series C********Redeemable********Equity Units**              | ** ** | **Series C********Redeemable********Equity Units** | ** ** |
| **Nonvested Units**                                           | ** ** | **Units**                                               | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** | **Units** | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** | **Units** | ** ** | **Weighted********Average********Grant-Date********Fair Value** | ** ** |
| ** **                                                         | ** ** | **(thousands)**                                         | ** ** | ** **                                                           | ** ** | **(thousands)** | ** ** | ** ** | ** ** | **(thousands)** | ** ** | ** ** | ** ** |
| Nonvested at December 31, 2007                           | ** ** | **4,978**                                               | ** ** | **$**                                                                | **1.03**   | ** ** | **5,373** | ** ** | **$** | **0.37** | ** ** | **13,475** | ** ** | **$** | **0.13** | ** ** |
|                                                               |       |                                                    |       |                                                                 |       |   |   |   |   |   |   |   |   |
| Granted                                                            |       | —                                                  |       | —                                                               |       | — |   | — |   | — |   | — |   |
| Repurchased                                                        |       | (2,539                                                  | )          | 1.05                                                                 |       | — |   | — |   | — |   | — |   |
| Vested                                                             |       | (1,319                                                  | )          | 1.01                                                                 |       | (1,906 | ) | 0.57 |   | (5,077 | ) | 0.13 |   |
| Forfeited (a)                                                      |       | —                                                  |       | —                                                               |       | (3,365 | ) | 0.35 |   | (3,212 | ) | 0.13 |   |
| Market-condition awards converted to  service-condition awards (b) |       | —                                                  |       | —                                                               |       | 3,354 |   | 0.74 |   | (3,354 | ) | 0.14 |   |
| Nonvested at December 31, 2008                           | ** ** | **1,120**                                               | ** ** | **1.00**                                                             | ** ** | **3,456** | ** ** | **0.63** | ** ** | **1,832** | ** ** | **0.14** | ** ** |
|                                                               |       |                                                    |       |                                                                 |       |   |   |   |   |   |   |   |   |
| Granted (c)                                                        |       | —                                                  |       | —                                                               |       | 8,973 |   | 0.34 |   | — |   | — |   |
| Repurchased                                                        |       | —                                                  |       | —                                                               |       | — |   | — |   | — |   | — |   |
| Vested                                                             |       | (1,120                                                  | )          | 1.00                                                                 |       | (4,888 | ) | 0.44 |   | — |   | — |   |
| Forfeited (c)                                                      |       | —                                                  |       | —                                                               |       | (2,926 | ) | 0.34 |   | (14 | ) | 0.15 |   |
| Nonvested at  December 31, 2009 (d)                 | ** ** | **—**                                              | ** ** | **$**                                                                | **—** | ** ** | **4,615** | ** ** | **$** | **0.45** | ** ** | **1,818** | ** ** | **$** | **0.14** | ** ** |

 

----

(a)                                  In 2008,management investors forfeited 5.9 million Series C equity units whenthey terminated employment with us in connection with the Sale.

 

(b)                                 Under theprovisions of the 2008 Amendment Agreements, 62.9%, or 3.4 million of themarket-condition Series C equity units were converted to service-conditionvesting units. The table includes the increase in fair value of the equityunits after the plan modification.

 

(c)                                  In 2009, FPHgranted 9.0 million Series C equity units, of which 2.9 millionunits were forfeited in 2009.

 

(d)           Theweighted average remaining vesting period is approximately 1.0 year.

 

At December 31, 2009, we had approximately $1.7 million of totalunrecognized compensation cost related to the nonvested Series Credeemable equity units granted under the Equity Plan. The cost will be recognizedin 2010. In 2009, we recognized $2.7 million of compensation expense,$2.3 million related to service-condition awards vested through 2009 and$0.1 million related to the market-condition awards that generally vest onDecember 31, 2010. In addition, we recognized approximately$0.3 million of compensation expense related to nonrefundable taxdistributions paid to management investors in connection with their investmentsin us that we estimate will not vest.

 

76

----

Table of Contents

 

***14.          Capital***

 

Excluding the Series Band Series C redeemable equity units included in “Redeemable equity units”on our Consolidated Balance Sheets at December 31, 2009 and 2008, BCHoldings was capitalized with $422.3 million and $350.4 million ofequity capital allocated among three series of equity units as follows:

 
| ** **        | ** ** | **Units  Outstanding** | ** ** | **Amount** | ** ** |
|-------------------|------------|------------------------|------------|------------|------------|
| **Equity  Units** | ** ** | **2009**               | ** ** | **2008**   | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **        | ** ** | **(thousands)**        | ** ** |
| Series A     |       |                   |       |       |       |   |   |   |   |
| OfficeMax         |       | 66,000                 |       | 66,000     |       | $ | 88,908 |   | $ | 81,967 |   |
|              |       |                   |       |       |       |   |   |   |   |
| Series B     |       |                   |       |       |       |   |   |   |   |
| FPH (a)           |       | 423,559                |       | 423,415    |       | 265,118 |   | 213,444 |   |
| OfficeMax         |       | 109,000                |       | 109,000    |       | 68,226 |   | 54,947 |   |
| ** **        |       |                   |       |       |       |   |   |   |   |
| Series C     |       |                   |       |       |       |   |   |   |   |
| FPH (a)           |       | 11,952                 |       | 11,183     |       | — |   | — |   |
| ** **        | ** ** | ** **             | ** ** | ** ** | ** ** | **$** | **422,252** | ** ** | **$** | **350,358** | ** ** |

 

----

(a)                    In 2009 and2008, we reclassified certain redeemable equity units into “Capital” on ourConsolidated Balance Sheet. The reclassifications resulted from employeeretirements or terminations causing the equity units to no longer be subject tomandatory redemption in an event that is outside of our control. All other Series Cequity units issued and outstanding are disclosed under Redeemable Equity Unitson our Consolidated Balance Sheet. For more information, see Note 13,Long-Term Incentive Compensation Plans.

 

*Description of Equity Units*

 

*Series AEquity Units. *The Series A equity units have novoting rights. They accrue dividends daily at a rate of 8% per annum,compounded semiannually, on the holder’s capital contributions and accumulateddividends (net of any distributions previously received by such holder).Accrued and unpaid dividends accumulate on the Series A equity units on June 30and December 31 of each year. At December 31, 2009 and 2008,$25.9 million and $19.2 million, respectively, of dividends wereaccrued on our Consolidated Balance Sheets as an increase in the value of the Series Aequity units. Series A equity units participate in distributions asdescribed below. Other than through accrual and receipt of dividends, the Series Aequity units do not participate in the earnings of the company.

 

*Series BEquity Units. *The Series B equity units entitle eachholder to one vote on matters to be voted on by the members of BC Holdings. TheSeries B equity units participate in distributions as described in “EquityDistributions” below.

 

*Series CEquity Units*.  The Series C equity units have no votingrights. Series C equity units were issued to FPH in 2004 (the 2004 Series Cunits), 2006 (the 2006 Series C units), and 2009 (the 2009 Series Cunits) without capital contributions. When the relevant threshold fordistributions to Series C units has been met, they participate as outlinedbelow. At both December 31, 2009 and 2008, we had zero accrued Series Cprofit interests recorded on our Consolidated Balance Sheets.

 

*Equity Distributions*

 

Equity distributions among the three series of equityunits are made as follows under the provisions of the Securityholders Agreementand Operating Agreement:

 

·                  First to Series A equity unit and Series Bequity unit holders ratably, based on the number of units outstanding, untileach has received distributions in an amount equal to his or her capitalcontributions (plus, in the case of Series A equity unit holders,accumulated dividends and accrued and unpaid dividends);

 

·                  Then to Series B equity unit and2004 Series C equity unit holders ratably, based on the number of units ofeach series outstanding (exclusive of 2006 Series C units), until totaldistributions to the Series B equity unit holders have reached $1.30 perunit outstanding;

 

77

----

Table of Contents

 

·                  Then to Series B equity unit and2004 and 2009 Series C equity unit holders until total distributions tothe Series B equity unit holders have reached $2.00 per unit; and

 

·                  Thereafter, ratably to all Series Bequity unit and Series C equity unit holders in proportion to their respectiveholdings of such equity units.

 

*Tax Distributions*

 

The BC Holdings OperatingAgreement provides for tax distributions to be made annually (or quarterly atthe discretion of the board of directors) to the holders of its equity units ofall classes in an amount equal to the estimated combined federal and stateincome taxes incurred by such holders on their allocable share of the taxableincome of BC Holdings for such period (see Note 8, Income Taxes). Taxdistributions are considered in determining the allocation of otherdistributions.

 

*Accumulated Other Comprehensive Income (Loss)*

 

Accumulated othercomprehensive income (loss) includes the following:

* *
| ** **                                     | ** ** | **Cash**               | ** ** | **Equity  in Other  Comprehensive  Loss of** | ** ** | **Unfunded  Accumulated  Benefit Obligation** | ** ** | **Accumulated  Other**             | ** **  |
|------------------------------------------------|------------|------------------------|------------|----------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------|-------------|
| ** **                                     | ** ** | **Flow********Hedges** | ** ** | **Equity********Affiliate**                  | ** ** | **Actuarial********Gain**                     | ** ** | **Prior Service********Cost** | ** **  | **Comprehensive********Income (Loss)** | ** ** |
| ** **                                     | ** ** | **(thousands)**        | ** ** |
| Balance at December 31, 2007,net of taxes |       | $                      | 133        |                                         | $          | —                                        |       | $                                  | 83,878      |   | $ | (12,910 | ) | $ | 71,101 |   |
|                                           | ** ** | ** **             | ** ** | ** **                                   | ** ** | ** **                                    | ** ** | ** **                         |        |   |   |
| Current-period changes, before taxes           |       | 80                     |       | (41,984                                      | )          | (163,101                                      | )          | 11,330                             |        | (193,675 | ) |
| Reclassifications to earnings, before taxes    |       | (259                   | )          | —                                       |       | (320                                          | )          | 319                                |        | (260 | ) |
| Income taxes                                   |       | 46                     |       | —                                       |       | —                                        |       | —                             |        | 46 |   |
| Balance at December 31, 2008,net of taxes |       | —                 |       | (41,984                                      | )          | (79,543                                       | )          | (1,261                             | )           | (122,788 | ) |
|                                           | ** ** | ** **             | ** ** | ** **                                   | ** ** | ** **                                    | ** ** | ** **                         |        |   |   |
| Current-period changes, before taxes           |       | —                 |       | 46,025                                       |       | 44,169                                        |       | (70                                | )           | 90,124 |   |
| Reclassifications to earnings, before taxes    |       | —                 |       | —                                       |       | (378                                          | )          | 181                                |        | (197 | ) |
| Income taxes                                   |       | —                 |       | —                                       |       | —                                        |       | —                             |        | — |   |
| Balance at December 31, 2009,net of taxes | ** ** | **$**                  | **—** | ** **                                   | **$**      | **4,041**                                     | ** ** | **$**                              | **(35,752** | **)** | **$** | **(1,150** | **)** | **$** | **(32,861** | ) |

 

*Securityholders Agreement with OfficeMax*

 

In connection with the Forest Products Acquisition, we entered into aSecurityholders Agreement with OfficeMax. This agreement describes the rightsand responsibilities regarding OfficeMax’s equity ownership in BC Holdings.Specifically, under the agreement, OfficeMax has the right to appoint onedirector to our board of directors. The agreement also requires that OfficeMaxobtain our consent before transferring its equity interest in our company. Theagreement grants “tag-along” rights, which entitle OfficeMax to participate insales of equity interests to third parties. In addition, the agreement grants “drag-along”rights, which entitle OfficeMax to require the other equity holders toparticipate in sales of all or substantially all of the equity interests in ourcompany. If we propose to issue additional equity securities, we will generallybe required to offer OfficeMax a pro rata portion of the securities issued insuch a transaction. The agreement will terminate in a liquidation ordissolution of the company, in an initial public offering, or in a sale of allor substantially all of the company’s stock or assets.

 

*RegistrationRights Agreement with FPH and OfficeMax*

 

Inconnection with the Forest Products Acquisition, we entered into a RegistrationRights Agreement with FPH and OfficeMax with respect to the equity intereststhey own in us. Under the Registration Rights Agreement, (i) FPH has theright to demand that we effect an unlimited number of registrations of itsequity interests, whether pursuant to a long-form registration statement or ashort-form registration, and pay all expenses, other than underwritingdiscounts and commissions, related to such registrations and (ii) afterthe earlier of the fifth anniversary of the completion of the Forest ProductsAcquisition or completion of an initial public offering by us, OfficeMax hasthe right to demand that we

 

78

----

Table ofContents

 

effect (a) sevenregistrations of its equity interests on a long-form registration statement andpay all expenses, other than underwriting discounts and commissions, related toany two of such registrations (with OfficeMax paying all expenses relating tothe other five such registrations) and (b) an unlimited number ofregistrations of its equity interests on a short-form registration statementand pay all expenses, other than underwriting discounts and commissions,related to such registrations. In addition, FPH and OfficeMax have the right toparticipate in registrations of our equity interests effected by us, whethersuch registrations relate to an offering by us or by our equity holders. FPH andOfficeMax have agreed not to effect any public sale or private placement of anyof our equity interests during the period beginning seven days prior to andending 180 days after the effective date of the registration statement forany underwritten public offering of our equity interests.

 

***15.******                              ******SegmentInformation***

 

We operate our business using three reportablesegments:  Building MaterialsDistribution, Wood Products, and Corporate and Other. Prior to the Sale, weoperated our business using five reportable segments:  Building Materials Distribution, WoodProducts, Paper, Packaging & Newsprint, and Corporate and Other. Thesesegments represent distinct businesses that are managed separately because ofdiffering products and services. Each of these businesses requires distinctoperating and marketing strategies. Management reviews the performance of thecompany based on these segments. The equity interest we owned inBoise Inc. after the Sale represented a significant continuinginvolvement, and the sold assets are not classified as discontinued operations*.*As a result, the Paper and Packaging & Newsprintsegment results are included in the Consolidated Statements of Income (Loss)for the period of January 1, 2008 through February 22, 2008, and theyear ended December 31, 2007.

 

Our Building MaterialsDistribution segment is a leading national stocking wholesale distributor ofbuilding materials. We distribute a broad line of building materials, includingengineered wood products (EWP), oriented strand board (OSB), plywood, lumber,and general line items such as framing accessories, composite decking, roofing,siding, and insulation. We purchase most of these building materials fromthird-party suppliers and market them primarily to customers that resell buildingmaterials to professional builders in the residential, light commercialconstruction, and repair-and-remodeling markets.

 

Our Wood Products segment manufactures and sells EWP,consisting of laminated veneer lumber (LVL), a high-strength engineered lumberoften used in beams; I-joists, a structural support typically used in floorsand roofs; and laminated beams. We also produce plywood, particleboard,dimension lumber, and high-quality ponderosa pine lumber, a premium lumbergrade sold primarily to manufacturers of specialty wood windows, moldings, anddoors. Our wood products are used primarily in residential, light commercialconstruction, and repair-and-remodeling markets. Most of these products aresold to wholesalers, major retailers, and industrial converters or through ourBuilding Materials Distribution segment. During 2009, approximately 47% of thewood products we manufactured, including approximately 67% of our EWP, was soldto our Building Materials Distribution segment.

 

Our Corporate and Othersegment includes primarily corporate support staff services, related assets andliabilities, and foreign exchange gains and losses. These support servicesinclude, but are not limited to, finance, accounting, legal, informationtechnology, and human resource functions. Since the Sale, we have purchasedmany of these services from Boise Inc. under an Outsourcing ServicesAgreement, under which Boise Inc. provides a number of corporate staffservices to us at cost. See Note 5, Transactions With Related Parties, formore information. Prior to the Sale, this segment also included certain railand truck transportation businesses and related assets. During the years ended December 31,2008 and 2007, segment sales of $8.6 million and $58.9 million,respectively, related to our rail and truck transportation businesses.

 

The segments’ profits and losses are measured onoperating profits before the investment in our affiliate, changes in fair valueof interest rate swaps and contingent value rights, interest expense, andinterest income. Specified expenses are allocated to the segments. For many ofthese allocated expenses, the related assets and liabilities remain in theCorporate and Other segment. Our investment in Boise Inc. is held byBC Holdings and is not held by any of our reportable segments.

 

The segmentsfollow the accounting principles described in Note 2, Summary ofSignificant Accounting Policies.

 

79

----

Table of Contents

 

For the year ended December 31,2009, sales to one customer accounted for $227.6 million, or approximately12%, of total sales. Sales to this customer of $171.3 million and$56.3 million were recorded in our Building Materials Distribution andWood Products segments, respectively. In 2008 and 2007, sales to OfficeMax were$90.1 million and $615.7 million, representing 3% and 11% of totalsales. Sales to OfficeMax were primarily recorded in our Paper segment. Noother single customer accounted for 10% or more of consolidated trade sales orof total sales.

 

Export sales to foreignunaffiliated customers were $25.8 million, $83.7 million, and$237.8 million for the years ended December 31, 2009, 2008, and 2007,respectively.

 

At December 31, 2009, 2008, and 2007, and for theyears then ended, long-lived assets located in foreign countries and net salesoriginating in foreign countries were not material.

 

Segment sales to externalcustomers, including related parties, by product line are as follows:

 
| ** **                       | ** ** | **Year  Ended December 31** | ** **  |
|----------------------------------|------------|----------------------------------|-------------|
| ** **                       | ** ** | **2009**                         | ** **  | **2008** | ** ** | **2007** | ** ** |
| ** **                       | ** ** | **(millions)**                   | ** **  |
| Building Materials Distribution  |       |                             |        |   |   |   |   |
| Structural panels                |       | $                                | 259.6       |   | $ | 340.3 |   | $ | 375.9 |   |
| Engineered wood products         |       | 174.4                            |        | 249.3 |   | 375.5 |   |
| Lumber                           |       | 370.9                            |        | 515.7 |   | 612.1 |   |
| Particleboard                    |       | 17.2                             |        | 23.2 |   | 20.6 |   |
| Building supplies and other      |       | 787.1                            |        | 980.0 |   | 1,179.5 |   |
| ** **                       |       | 1,609.2                          |        | 2,108.5 |   | 2,563.6 |   |
|                             |       |                             |        |   |   |   |   |
| Wood Products                    |       |                             |        |   |   |   |   |
| Plywood and veneer               |       | 174.6                            |        | 249.4 |   | 263.1 |   |
| Engineered wood products         |       | 61.2                             |        | 90.5 |   | 169.4 |   |
| Lumber                           |       | 53.3                             |        | 71.9 |   | 101.2 |   |
| Particleboard                    |       | 29.4                             |        | 37.6 |   | 48.9 |   |
| Other                            |       | 45.6                             |        | 71.1 |   | 15.0 |   |
| ** **                       |       | 364.1                            |        | 520.5 |   | 597.6 |   |
|                             |       |                             |        |   |   |   |   |
| Paper                            |       |                             |        |   |   |   |   |
| Uncoated free sheet              |       | —                           |        | 224.2 |   | 1,392.1 |   |
| Containerboard (medium)          |       | —                           |        | 0.1 |   | 1.5 |   |
| Market pulp and other            |       | —                           |        | 20.2 |   | 139.3 |   |
| ** **                       |       | —                           |        | 244.5 |   | 1,532.9 |   |
|                             |       |                             |        |   |   |   |   |
| Packaging & Newsprint   |       |                             |        |   |   |   |   |
| Containerboard (linerboard)      |       | —                           |        | 16.5 |   | 104.3 |   |
| Newsprint                        |       | —                           |        | 29.8 |   | 217.1 |   |
| Corrugated containers and sheets |       | —                           |        | 53.1 |   | 364.5 |   |
| Other                            |       | —                           |        | 2.8 |   | 19.2 |   |
|                             |       | —                           |        | 102.2 |   | 705.1 |   |
|                             |       |                             |        |   |   |   |   |
| Corporate and Other              |       |                             |        | 1.8 |   | 14.3 |   |
| ** **                       | ** ** | **$**                            | **1,973.3** | ** ** | **$** | **2,977.5** | ** ** | **$** | **5,413.5** | ** ** |

 

80

----

Table of Contents

 

An analysis of ouroperations by segment is as follows:

 
| ** **                                          | ** ** | **Sales**      | ** **        | **Income********(Loss)** | ** ** | **Depreciation,********Amortization,** | ** ** | ** ** | ** **       | **Capital**             | ** ** | ** **               | ** ** |
|-----------------------------------------------------|------------|----------------|-------------------|--------------------------|------------|----------------------------------------|------------|------------|------------------|-------------------------|------------|--------------------------|------------|
| ** **                                          | ** ** | **Trade**      | ** **        | **Related  Parties**     | ** ** | **Inter-  segment**                    | ** ** | **Total**  | ** **       | **Before********Taxes** | ** ** | **and********Depletion** | ** ** | **EBITDA********(m)** | ** ** | **Expenditures********(e)** | ** ** | **Assets** | ** ** |
| ** **                                          | ** ** | **(millions)** | ** **        |
| **Year Ended****December 31, 2009**            | ** ** | ** **     | ** **        | ** **               | ** ** | ** **                             | ** ** | ** ** | ** **       | ** **              | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                     |       | $              |  1,609.2     |                     | $          |  —                           |       | $          |  0.6        |                    | $          |  1,609.8            |       | $ |  8.0 |   | $ |  7.6 |   | $ |  15.5 |   | $ |  5.4 |   | $ |  321.2 |   |
| Wood Products (a)                                   |       | 326.2          |              | 37.9                     |       | 186.7                                  |       | 550.8      |             | (77.3                   | )          | 33.0                     |       | (44.3 | ) | 16.0 |   | 328.3 |   |
| Corporate and Other                                 |       | —         |              | —                   |       | —                                 |       | —     |             | (13.1                   | )          | 0.3                      |       | (12.8 | ) | — |   | 1,184.5 |   |
|                                                |       | 1,935.4        |              | 37.9                     |       | 187.3                                  |       | 2,160.6    |             | (82.4                   | )          | 40.9                     |       | (41.6 | ) | 21.4 |   | 1,834.0 |   |
| Intersegment eliminations                           |       | —         |              | —                   |       | (187.3                                 | )          | (187.3     | )                | —                  |       | —                   |       | — |   | — |   | (833.1 | ) |
| Equity in net income of affiliate (See Note 4) |       | —         |              | —                   |       | —                                 |       | —     |             | 79.7                    |       | —                   |       | 79.7 |   | — |   | — |   |
| Gain on sale of shares of equity affiliate (b)      |       | —         |              | —                   |       | —                                 |       | —     |             | 42.8                    |       | —                   |       | 42.8 |   | — |   | — |   |
| Impairment of investment in equity affiliate (c)    |       | —         |              | —                   |       | —                                 |       | —     |             | (43.0                   | )          | —                   |       | (43.0 | ) | — |   | — |   |
| Change in fair value of contingent value rights     |       | —         |              | —                   |       | —                                 |       | —     |             | 0.2                     |       | —                   |       | 0.2 |   | — |   | — |   |
| Gain on repurchase of long-term debt (d)            |       | —         |              | —                   |       | —                                 |       | —     |             | 6.0                     |       | —                   |       | 6.0 |   | — |   | — |   |
| Interest expense                                    |       | —         |              | —                   |       | —                                 |       | —     |             | (22.5                   | )          | —                   |       | — |   | — |   | — |   |
| Interest income                                     |       | —         |              | —                   |       | —                                 |       | —     |             | 0.9                     |       | —                   |       | — |   | — |   | — |   |
| ** **                                          | ** ** | **$**          | ** 1,935.4** | ** **               | **$**      | ** 37.9**                         | ** ** | **$**      | ** —** | ** **              | **$**      | ** 1,973.3**        | ** ** | **$** | ** (18.4** | **)** | **$** | ** 40.9** | ** ** | **$** | ** 44.1** | ** ** | **$** | ** 21.4** | ** ** | **$** | ** 1,000.9** | ** ** |

** **
| ** **                                       | ** ** | **Sales**  | ** **        | **Income********(Loss)** | ** ** | **Depreciation,********Amortization,** | ** ** | ** ** | ** **       | ** **              | ** ** | ** **               | ** ** |
|--------------------------------------------------|------------|------------|-------------------|--------------------------|------------|----------------------------------------|------------|------------|------------------|-------------------------|------------|--------------------------|------------|
| ** **                                       | ** ** | **Trade**  | ** **        | **Related  Parties**     | ** ** | **Inter-  segment**                    | ** ** | **Total**  | ** **       | **Before********Taxes** | ** ** | **and********Depletion** | ** ** | **EBITDA********(m)** | ** ** | **Capital  Expenditures** | ** ** | **Assets** | ** ** |
| ** **                                       | ** ** | ** ** | ** **        | ** **               | ** ** | ** **                             | ** ** | ** ** | ** **       | **(millions)**          | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Year Ended** **December 31,  2008**  | ** ** | ** ** | ** **        | ** **               | ** ** | ** **                             | ** ** | ** ** | ** **       | ** **              | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                  |       | $          |  2,108.5     |                     | $          |  —                           |       | $          |  0.9        |                    | $          |  2,109.4            |       | $ |  19.5 |   | $ |  7.7 |   | $ |  27.2 |   | $ |  5.1 |   | $ |  316.2 |   |
| Wood Products (f)                                |       | 464.4      |              | 56.1                     |       | 275.4                                  |       | 795.9      |             | (55.1                   | )          | 27.7                     |       | (27.4 | ) | 34.6 |   | 381.2 |   |
| Paper (g)                                        |       | 154.4      |              | 90.1                     |       | 9.0                                    |       | 253.5      |             | 20.7                    |       | 0.3                      |       | 21.1 |   | 5.0 |   | — |   |
| Packaging & Newsprint (g)               |       | 102.2      |              | —                   |       | 11.3                                   |       | 113.5      |             | 5.7                     |       | 0.1                      |       | 5.7 |   | 5.2 |   | — |   |
| Corporate and Other (h)                          |       | 1.8        |              | —                   |       | 6.8                                    |       | 8.6        |             | (25.5                   | )          | 0.5                      |       | (25.0 | ) | 2.0 |   | 1,146.0 |   |
|                                             |       | 2,831.3    |              | 146.2                    |       | 303.4                                  |       | 3,280.9    |             | (34.7                   | )          | 36.3                     |       | 1.6 |   | 51.9 |   | 1,843.4 |   |
| Intersegment eliminations                        |       | —     |              | —                   |       | (303.4                                 | )          | (303.4     | )                | —                  |       | —                   |       | — |   | — |   | (843.0 | ) |
| Equity in net loss of affiliate                  |       | —     |              | —                   |       | —                                 |       | —     |             | (11.3                   | )          | —                   |       | (11.3 | ) | — |   | — |   |
| Impairment of investment in equity affiliate (c) |       | —     |              | —                   |       | —                                 |       | —     |             | (208.1                  | )          | —                   |       | (208.1 | ) | — |   | — |   |
| Change in fair value of contingent value rights  |       | —     |              | —                   |       | —                                 |       | —     |             | (0.5                    | )          | —                   |       | (0.5 | ) | — |   | — |   |
| Change in fair value of interest rate swaps      |       | —     |              | —                   |       | —                                 |       | —     |             | (6.3                    | )          | —                   |       | — |   | — |   | — |   |
| Interest expense                                 |       | —     |              | —                   |       | —                                 |       | —     |             | (34.3                   | )          | —                   |       | — |   | — |   | — |   |
| Interest income                                  |       | —     |              | —                   |       | —                                 |       | —     |             | 7.7                     |       | —                   |       | — |   | — |   | — |   |
| ** **                                       | ** ** | **$**      | ** 2,831.3** | ** **               | **$**      | ** 146.2**                        | ** ** | **$**      | ** —** | ** **              | **$**      | ** 2,977.5**        | ** ** | **$** | ** (287.5** | **)** | **$** | ** 36.3** | ** ** | **$** | ** (218.3** | **)** | **$** | ** 51.9** | ** ** | **$** | ** 1,000.4** | ** ** |

 

81

----

Tableof Contents

 
| ** **                                            | ** ** | **Sales**      | ** **        | **Income********(Loss)** | ** ** | **Depreciation,********Amortization,** | ** ** | ** ** | ** **       | ** **              | ** ** | ** **               | ** ** |
|-------------------------------------------------------|------------|----------------|-------------------|--------------------------|------------|----------------------------------------|------------|------------|------------------|-------------------------|------------|--------------------------|------------|
| ** **                                            | ** ** | **Trade**      | ** **        | **Related  Parties**     | ** ** | **Inter-  segment**                    | ** ** | **Total**  | ** **       | **Before********Taxes** | ** ** | **and********Depletion** | ** ** | **EBITDA********(m)** | ** ** | **Capital  Expenditures** | ** ** | **Assets** | ** ** |
| ** **                                            | ** ** | **(millions)** | ** **        |
| **Year Ended****December 31, 2007**              | ** ** | ** **     | ** **        | ** **               | ** ** | ** **                             | ** ** | ** ** | ** **       | ** **              | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                       |       | $              |  2,563.6     |                     | $          |  —                           |       | $          |  0.4        |                    | $          |  2,564.0            |       | $ |  51.8 |   | $ |  7.4 |   | $ |  59.2 |   | $ |  18.1 |   | $ |  374.9 |   |
| Wood Products                                         |       | 597.6          |              | —                   |       | 412.6                                  |       | 1,010.2    |             | 23.6                    |       | 30.0                     |       | 53.7 |   | 23.5 |   | 463.5 |   |
| Paper (i)                                             |       | 917.2          |              | 615.7                    |       | 63.3                                   |       | 1,596.2    |             | 132.3                   |       | 45.0                     |       | 177.3 |   | 103.4 |   | 1,269.8 |   |
| Packaging & Newsprint (i)               |       | 705.1          |              | —                   |       | 78.0                                   |       | 783.1      |             | 40.1                    |       | 37.7                     |       | 77.8 |   | 38.2 |   | 579.0 |   |
| Corporate and Other (i) (j)                      |       | 14.3           |              | —                   |       | 44.6                                   |       | 58.9       |             | (23.1                   | )          | 3.8                      |       | (19.4 | ) | 4.8 |   | 168.4 |   |
|                                                  |       | 4,797.8        |              | 615.7                    |       | 598.9                                  |       | 6,012.4    |             | 224.7                   |       | 123.9                    |       | 348.6 |   | 188.0 |   | 2,855.6 |   |
| Intersegment eliminations                             |       | —         |              | —                   |       | (598.9                                 | )          | (598.9     | )                | —                  |       | —                   |       | — |   | — |   | (81.4 | ) |
| Change in fair value of interest rate  swaps (k) |       | —         |              | —                   |       | —                                 |       | —     |             | 3.7                     |       | —                   |       | — |   | — |   | — |   |
| Interest expense (l)                        |       | —         |              | —                   |       | —                                 |       | —     |             | (96.8                   | )          | —                   |       | — |   | — |   | — |   |
| Interest income                                       |       | —         |              | —                   |       | —                                 |       | —     |             | 4.1                     |       | —                   |       | — |   | — |   | — |   |
| ** **                                            | ** ** | **$**          | ** 4,797.8** | ** **               | **$**      | ** 615.7**                        | ** ** | **$**      | ** —** | ** **              | **$**      | ** 5,413.5**        | ** ** | **$** | ** 135.7** | ** ** | **$** | ** 123.9** | ** ** | **$** | ** 348.6** | ** ** | **$** | ** 188.0** | ** ** | **$** | ** 2,774.2** | ** ** |

 

----

(a)                                  Included$8.9 million of expense in income (loss) before taxes related to the June 2009closure of our lumber manufacturing facility in La Grande, Oregon, ofwhich $3.7 million was included in EBITDA and $5.2 million wasaccelerated depreciation recorded in “Depreciation, amortization, anddepletion.”

 

(b)                                 Included $42.8million gain on the sale of 18.8 million shares of Boise Inc. stock. SeeNote 4, Investment in Equity Affiliate, for more information.

 

(c)                                  In 2009 and2008, we concluded that our investment in Boise Inc. met the definition ofother than temporarily impaired. Accordingly, we recorded a $43.0 million and$208.1 million write-down in “Impairment of investment in equity affiliate”in our Consolidated Statements of Loss. See Note 4, Investment in EquityAffiliate, for more information.

 

(d)                                 Included a$6.0 million gain on the repurchase of $11.9 million of seniorsubordinated notes.

 

(e)                                  Capital spendingfor Building Materials Distribution includes $0.9 million of cash paid forthe purchase of a truss assembly operation and EWP sales office in Saco andBiddeford, Maine, respectively. Capital spending for Wood Products includes$3.7 million of cash paid for the purchase of a sawmill in Pilot, Rock,Oregon.

 

(f)                                    Included a$5.7 million net gain related to the sale of our wholly owned subsidiaryin Brazil.

 

Included$11.3 million of expenses related to closing our veneer operations inSt. Helens, Oregon, and our plywood manufacturing facility inWhite City, Oregon.

 

(g)                                 Included theresults of the Paper and Packaging & Newsprint segments through February 21,2008.

 

(h)                                 Included an$8.4 million loss on the sale of the note receivable from Boise Inc.See Note 5, Transactions With Related parties, for more information.

 

Included a $2.9 million gain on the Sale. SeeNote 3, Sale of Our Paper and Packaging & Newsprint Assets, formore information.

 

(i)                                     We hadapproximately $21.7 million, $19.1 million, and $1.0 million oflower depreciation and amortization expense in our Paper, Packaging &Newsprint, and Corporate and Other segments as a result of discontinuingdepreciation and amortization on the assets recorded as held for sale.

 

(j)                                     Included a$4.4 million gain for changes in our retiree healthcare programs.

 

(k)                                  Included approximately $8.4 millionof income related to the change in the fair value of interest rate swaps inconnection with the repayment of some of our variable-rate debt, partiallyoffset by $4.6 million of expense related to changes in the fair value ofour interest rate swaps that we accounted for as economic hedges.

 

82

----

Table of Contents

 

(l)                                     Included $6.3 million of expenserelated to the write-off of deferred financing costs in connection with therepayment of debt.

 

(m)                               EBITDA representsincome (loss) before interest (interest expense, interest income, and change infair value of interest rate swaps), income taxes, and depreciation,amortization, and depletion. EBITDA is the primary measure used by our chiefoperating decision makers to evaluate segment operating performance and todecide how to allocate resources to segments. We believe EBITDA is usefulto investors because it provides a means to evaluate the operating performanceof our segments and our company on an ongoing basis using criteria that areused by our internal decision makers and because it is frequently used byinvestors and other interested parties in the evaluation of companies. Webelieve EBITDA is a meaningful measure because it presents a transparent view ofour recurring operating performance and allows management to readily viewoperating trends, perform analytical comparisons, and identify strategies toimprove operating performance. For example, we believe that the inclusion ofitems such as taxes, interest expense, and interest income distorts management’sability to assess and view the core operating trends in our segments. EBITDA,however, is not a measure of our liquidity or financial performance undergenerally accepted accounting principles (GAAP) and should not be considered asan alternative to net income (loss), income (loss) from operations, or anyother performance measure derived in accordance with GAAP or as an alternativeto cash flow from operating activities as a measure of our liquidity. The useof EBITDA instead of net income (loss) or segment income (loss) has limitationsas an analytical tool, including the inability to determine profitability; theexclusion of interest expense, interest income, change in fair value ofinterest rate swaps, and associated significant cash requirements; and theexclusion of depreciation, amortization, and depletion. Management compensatesfor these limitations by relying on our GAAP results. Our measures ofEBITDA are not necessarily comparable to other similarly titled captions ofother companies due to potential inconsistencies in the methods of calculation.

 

The following is a reconciliation of net income (loss) to EBITDA:

 
| ** **                                  | ** ** | **Year  Ended December 31** | ** **     |
|---------------------------------------------|------------|----------------------------------|----------------|
| ** **                                  | ** ** | **2009**                         | ** **     | **2008** | ** ** | **2007** | ** ** |
| ** **                                  | ** ** | ** **                       | ** **     | **(millions)** | ** ** | ** ** | ** ** |
| Net income (loss)                           |       | $                                |  (19.1    | ) | $ |  (288.0 | ) | $ |  127.7 |   |
| Change in fair value of interest rate swaps |       | —                           |           | 6.3 |   | (3.7 | ) |
| Interest expense                            |       | 22.5                             |           | 34.3 |   | 96.8 |   |
| Interest income                             |       | (0.9                             | )              | (7.7 | ) | (4.1 | ) |
| Income tax provision                        |       | 0.7                              |           | 0.5 |   | 8.0 |   |
| Depreciation, amortization, and depletion   |       | 40.9                             |           | 36.3 |   | 123.9 |   |
| EBITDA                                      | ** ** | **$**                            | ** 44.1** | ** ** | **$** | ** (218.3** | **)** | **$** | ** 348.6** | ** ** |

 

83

----

Table of Contents

 

***16.          Commitments andGuarantees***

 

*Commitments*

 

We have commitments for leases and long-term debt thatare discussed further in Note 7, Leases, and Note 10, Debt. Inaddition we have purchase obligations for goods and services, capitalexpenditures, and raw materials entered into in the normal course of business.

 

We are a party to a number of long-term log and fibersupply agreements. At December 31, 2009, our total obligation for log andfiber purchases under contracts with third parties was approximately$313.8 million based on contract terms or first quarter 2010 pricing.Under most of these log and fiber supply agreements, we have the right tocancel or reduce our commitments in the event of a mill curtailment orshutdown. Future purchase prices under most of these agreements will be setquarterly or semiannually based on regional market prices. Our log and fiberobligations are subject to change based on, among other things, the effect ofgovernmental laws and regulations, our manufacturing operations not operatingin the normal course of business, log and fiber availability, and the status ofenvironmental appeals. Except for deposits required pursuant to wood supplycontracts, these obligations are not recorded in our consolidated financialstatements until contract payment terms take effect.

 

We enter into utility contracts for the purchase ofelectricity and natural gas. We also purchase these services under utilitytariffs. The contractual and tariff arrangements include multiple-yearcommitments and minimum annual purchase requirements. At December 31,2009, we had approximately $7.2 million of utility purchase commitments.These payment obligations were valued at prices in effect on December 31,2009, or contract language, if applicable. Because we consume the energy in themanufacture of our products, these obligations represent the face value of thecontracts, not resale value.

 

# *Guarantees*

# * *

We provide guarantees, indemnifications, andassurances to others.

 

Our three principaloperating subsidiaries (Boise Cascade, L.L.C.; Boise Building SolutionsManufacturing, L.L.C.; and Boise Building Solutions Distribution, L.L.C.) actas co-borrowers under our Revolving Credit Facility, described in Note 10,Debt. Their obligations are guaranteed by each of our remaining domesticsubsidiaries.

 

Boise Cascade, L.L.C., and its wholly ownedsubsidiary, Boise Cascade Finance Corporation, have jointly issued$400.0 million of 7.125% senior subordinated notes due in 2014. At December 31,2009, $228.1 million of the notes were outstanding. The subordinated notesare guaranteed on a subordinated basis by each of our domestic subsidiaries,other than Boise Cascade, L.L.C., and Boise Cascade Finance Corporation. SeeNote 10, Debt, for more information.

 

Boise Cascade, L.L.C., issued guaranteesto a limited number of trade creditors of one or more of its principaloperating subsidiaries, Boise Building Solutions Distribution, L.L.C.; BoiseBuilding Solutions Manufacturing, L.L.C.; Boise White Paper, L.L.C.;and Boise Packaging & Newsprint, L.L.C., for trade creditobligations arising in the ordinary course of the business of such operatingsubsidiaries. These included guarantees of the obligations of both Boise WhitePaper, L.L.C., and Boise Building Solutions Manufacturing, L.L.C.,with respect to present and future timber sale agreements and several facilityand rolling stock leases entered into by such subsidiaries. Boise Cascade, L.L.C.,also guarantees the performance and payment obligations of Boise BuildingSolutions Distribution, L.L.C., with respect to several facility leases. Ourexposure under these agreements is limited to future timber purchases and theminimum lease payment requirements under the agreements. We also enter intoguarantees of various raw material or energy supply agreements arising in theordinary course of business. Under the terms of the Purchase and Sale Agreementgoverning the Sale, the purchaser is obligated to use reasonable best effortsto obtain a release of our obligations under guarantees of obligations of theentities sold in such transaction or to indemnify us for all liability incurredas a result of any such guarantee not so released.

 

All letters of credit and most suretybonds supporting obligations of subsidiaries sold or liabilities assumed byBoise Inc. in connection with the Sale have been replaced by new lettersof credit or surety bonds issued without our credit support. The principalexception is letters of credit supporting workers’ compensation obligationsassumed by Boise Inc., which as a matter of state law must remain in ourname 

 

84

----

Table of Contents

 

even though the underlying liabilities andexposures have been assumed by Boise Inc. Again, we are entitled to anindemnification from the purchaser for liabilities with respect to such lettersof credit arising from workers’ compensation claims assumed by Boise Inc.and for our costs of maintaining Boise Inc.’s share of any such letter ofcredit.

 

We enter into a widerange of indemnification arrangements in the ordinary course of business. Theseinclude tort indemnifications, tax indemnifications, financing transactions,indemnifications against third-party claims arising out of arrangements toprovide services to us, and indemnifications in merger and acquisitionagreements. At December 31, 2009, we are unable to estimate the maximumpotential liability under these indemnifications. At December 31, 2009, wewere not aware of any material liabilities arising from these indemnifications.

 

***17.          Legal Proceedings andContingencies***

 

We are a party to routine legal proceedings that arisein the ordinary course of our business. We are not currently a party to anylegal proceedings or environmental claims that we believe would have a materialadverse effect on our financial position, results of operations, or cash flows.

 

***18.          Quarterly Results of Operations(unaudited)***

*** ***
| ** **                     | ** ** | **2009**                     | ** ** |
|--------------------------------|------------|------------------------------|------------|
| ** **                     | ** ** | **First********Quarter (a)** | ** ** | **Second********Quarter (b)** | ** ** | **Third********Quarter (c)** | ** ** | **Fourth********Quarter (d)** | ** ** |
| ** **                     | ** ** | **(millions)**               | ** ** |
| Net sales                      |       | $                            | 413.4      |   | $ | 521.2 |   | $ | 579.0 |   | $ | 459.6 |   |
| Income (loss) from  operations |       | (48.3                        | )          | (15.7 | ) | 1.7 |   | (21.2 | ) |
| Net income (loss)              |       | (88.2                        | )          | 9.3 |   | 26.2 |   | 33.6 |   |
|                                |            |                              |            |  |  |  |  |  |  |  |  |  |  |

*** ***
| ** **                     | ** ** | **2008**                     | ** ** |
|--------------------------------|------------|------------------------------|------------|
| ** **                     | ** ** | **First********Quarter (e)** | ** ** | **Second********Quarter (f)** | ** ** | **Third********Quarter (g)** | ** ** | **Fourth********Quarter (h)** | ** ** |
| ** **                     | ** ** | **(millions)**               | ** ** |
| Net sales                      |       | $                            | 976.6      |   | $ | 757.2 |   | $ | 727.1 |   | $ | 516.6 |   |
| Income (loss) from  operations |       | 9.7                          |       | (4.3 | ) | 1.7 |   | (39.9 | ) |
| Net loss                       |       | (24.4                        | )          | (15.4 | ) | (207.6 | ) | (40.5 | ) |
|                                |            |                              |            |  |  |  |  |  |  |  |  |  |  |

 

----

(a)                                  Included$7.5 million of expense related to the closure of our lumber manufacturingfacility in La Grande, Oregon.

 

Included $3.0 millionfor our equity in the net income of Boise Inc.

 

Included a $43.0 millionwrite-down of our investment in Boise Inc., as we concluded that ourinvestment in Boise Inc. met the definition of other than temporarilyimpaired.

 

Included a $6.0 million gainon the repurchase of $11.9 million of senior subordinated notes.

 

(b)                                 Included$1.7 million of expense related to the closure of our lumber manufacturingfacility in La Grande, Oregon.

 

Included $30.3 millionfor our equity in the net income of Boise Inc.

 

(c)                                  Included$0.3 million of income related to the closure of our lumber manufacturingfacility in La Grande, Oregon.

 

Included $28.2 millionfor our equity in the net income of Boise Inc.

 

Included a $1.0 million gainon the sale of 1.2 million shares of Boise Inc. stock.

 

(d)                                 Included$18.2 million for our equity in the net income of Boise Inc.

 

Included a $41.8 million gainon the sale of 17.6 million shares of Boise Inc. stock.

 

85

----

Table of Contents

 

(e)                                  Included the results of the Paper andPackaging & Newsprint segments through February 21, 2008.

 

Included $8.6 million of expense for our equityin the net loss of Boise Inc.

 

Included a $7.5 millionnet gain on asset sales.

 

Included$6.3 million of expense related to changes in the fair value of ourinterest rate swaps, which were terminated in February 2008.

 

Included$4.8 million of expense related to the fair value of the contingent valuerights (CVRs) that we and Terrapin Partners Venture Partnership granted tocertain Boise Inc. investors.

 

(f)                                    Included a $12.4 million net losson asset sales.

 

Included$8.8 million of expense for our equity in the net loss of Boise Inc.

 

(g)                                 Included a $208.1 million write-downof our investment in Boise Inc., as we concluded that our investment in BoiseInc. met the definition of other than temporarily impaired.

 

Included a $5.2 millionnet gain on asset sales, partially offset by $2.8 million of expense relatedto closing our veneer operations in St. Helens, Oregon.

 

Included$2.1 million for our equity in the net income of Boise Inc.

 

(h)                                 Included $8.6 million of netexpenses primarily related to closing our veneer operations in St. Helens,Oregon, and our plywood manufacturing facility in White City, Oregon.

 

Included$3.9 million of income for our equity in the net income of Boise Inc.

 

***19.          Consolidating Guarantor and Nonguarantor FinancialInformation***

 

The following consolidating financial informationpresents the Statements of Income (Loss), Balance Sheets, and Cash Flowsrelated to our business. Certain amounts in prior periods’ consolidatingfinancial statements have been reclassified to conform to the current-periodpresentation. The senior subordinated notes are guaranteed on a seniorsubordinated basis jointly and severally by BC Holdings and each of itsexisting and future subsidiaries (other than: (i) the co-issuers, Boise Cascade, L.L.C., and Boise CascadeFinance Corporation; (ii) our foreign subsidiaries; and (iii) BirchCreek Investments L.L.C., which was dissolved on March 31, 2008). Otherthan the consolidated financial statements and footnotes for BC Holdings,financial statements and other disclosures concerning the guarantors have notbeen presented because management believes that such information is notmaterial to investors.

 

86

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingStatements of Income (Loss)**

**F****or the Year Ended December 31,2009**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **  | **Boise  Cascade,******** L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|-------------|-----------------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** **  |
| **Sales**                                                                            |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                                |       | $                                                           | —      |                                    | $          | —                      |       | $                                 | 1,925,610   |             | $          | 9,743            |       | $ | — |   | $ | 1,935,353 |   |
| Intercompany                                                                         |       | —                                                      |        | —                                  |       | 63                          |       | 9,360                             |        | (9,423           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |        | —                                  |       | 37,897                      |       | —                            |        | —           |       | 37,897           |       |
|                                                                                 |       | —                                                      |        | —                                  |       | 1,963,570                   |       | 19,103                            |        | (9,423           | )          | 1,973,250        |       |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |        | —                                  |       | 1,746,291                   |       | 20,675                            |        | (9,898           | )          | 1,757,068        |       |
| Materials, labor, and other operating expenses from  related parties                 |       | —                                                      |        | —                                  |       | 29,915                      |       | —                            |        | —           |       | 29,915           |       |
| Depreciation and amortization                                                        |       | —                                                      |        | 317                                     |       | 38,696                      |       | 1,861                             |        | —           |       | 40,874           |       |
| Selling and distribution expenses                                                    |       | —                                                      |        | —                                  |       | 189,229                     |       | 1,202                             |        | —           |       | 190,431          |       |
| General and administrative expenses                                             |       | 1                                                           |        | 4,890                                   |       | 22,035                      |       | —                            |        | 475              |       | 27,401           |       |
| General and administrative expenses from  related party                         |       | —                                                      |        | 10,169                                  |       | —                      |       | —                            |        | —           |       | 10,169           |       |
| Other (income) expense, net                                                          |       | —                                                      |        | (1,232                                  | )          | 2,421                       |       | (347                              | )           | —           |       | 842              |       |
|                                                                                 |       | 1                                                           |        | 14,144                                  |       | 2,028,587                   |       | 23,391                            |        | (9,423           | )          | 2,056,700        |       |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Loss from operations**                                                             |       | (1                                                          | )           | (14,144                                 | )          | (65,017                     | )          | (4,288                            | )           | —           |       | (83,450          | )          |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Equity in net income of Boise Inc.                                              |       | 79,729                                                      |        | —                                  |       | —                      |       | —                            |        | —           |       | 79,729           |       |
| Gain on sale of shares of Boise Inc.                                            |       | 42,752                                                      |        | —                                  |       | —                      |       | —                            |        | —           |       | 42,752           |       |
| Impairment of investment in Boise Inc.                                          |       | (43,039                                                     | )           | —                                  |       | —                      |       | —                            |        | —           |       | (43,039          | )          |
| Foreign exchange gain                                                                |       | —                                                      |        | 611                                     |       | 212                         |       | 202                               |        | —           |       | 1,025            |       |
| Change in fair value of contingent value rights                                      |       | —                                                      |        | 194                                     |       | —                      |       | —                            |        | —           |       | 194              |       |
| Gain on repurchase of long-term debt                                                 |       | —                                                      |        | 6,026                                   |       | —                      |       | —                            |        | —           |       | 6,026            |       |
| Interest expense                                                                     |       | —                                                      |        | (22,520                                 | )          | —                      |       | —                            |        | —           |       | (22,520          | )          |
| Interest income                                                                      |       | —                                                      |        | 560                                     |       | 326                         |       | —                            |        | —           |       | 886              |       |
|                                                                                 |       | 79,442                                                      |        | (15,129                                 | )          | 538                         |       | 202                               |        | —           |       | 65,053           |       |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 79,441                                                      |        | (29,273                                 | )          | (64,479                     | )          | (4,086                            | )           | —           |       | (18,397          | )          |
| Income tax provision                                                                 |       | —                                                      |        | (580                                    | )          | (59                         | )          | (21                               | )           | —           |       | (660             | )          |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before equity in net  income (loss) of affiliates**                  |       | 79,441                                                      |        | (29,853                                 | )          | (64,538                     | )          | (4,107                            | )           | —           |       | (19,057          | )          |
|                                                                                 |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (98,498                                                     | )           | (68,645                                 | )          | —                      |       | —                            |        | 167,143          |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **(19,057** | **)**                                   | **$**      | **(98,498**                 | **)**      | **$**                             | **(64,538** | **)**            | **$**      | **(4,107**       | **)**      | **$** | **167,143** | ** ** | **$** | **(19,057** | **)** |

 

87

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingStatements of Income (Loss)**

**F****or the Year Ended December 31,2008**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **   | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|--------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** **   |
| **Sales**                                                                            |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                           | —       |                              | $          | —                      |       | $                                 | 2,816,082  |             | $          | 15,201           |       | $ | — |   | $ | 2,831,283 |   |
| Intercompany                                                                         |       | —                                                      |         | —                            |       | 2                           |       | 22,547                            |       | (22,549          | )          | —           |       |
| Related parties                                                                      |       | —                                                      |         | —                            |       | 146,215                     |       | —                            |       | —           |       | 146,215          |       |
|                                                                                 |       | —                                                      |         | —                            |       | 2,962,299                   |       | 37,748                            |       | (22,549          | )          | 2,977,498        |       |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |         | 1,124                             |       | 2,596,500                   |       | 40,112                            |       | (17,623          | )          | 2,620,113        |       |
| Materials, labor, and other operating expenses from  related parties                 |       | —                                                      |         | —                            |       | 70,026                      |       | —                            |       | —           |       | 70,026           |       |
| Depreciation and amortization                                                        |       | —                                                      |         | 435                               |       | 33,492                      |       | 2,331                             |       | —           |       | 36,258           |       |
| Selling and distribution expenses                                                    |       | —                                                      |         | —                            |       | 228,975                     |       | 2,570                             |       | —           |       | 231,545          |       |
| General and administrative expenses                                             |       | 1                                                           |         | 8,642                             |       | 32,602                      |       | 237                               |       | (4,926           | )          | 36,556           |       |
| General and administrative expenses from  related party                         |       | —                                                      |         | 8,143                             |       | —                      |       | —                            |       | —           |       | 8,143            |       |
| Gain on sale of Paper and Packaging &  Newsprint assets                     |       | —                                                      |         | (2,915                            | )          | —                      |       | —                            |       | —           |       | (2,915           | )          |
| Other (income) expense, net                                                          |       | 8,357                                                       |         | 410                               |       | 1,839                       |       | 28                                |       | —           |       | 10,634           |       |
|                                                                                 |       | 8,358                                                       |         | 15,839                            |       | 2,963,434                   |       | 45,278                            |       | (22,549          | )          | 3,010,360        |       |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| **Loss from operations**                                                             |       | (8,358                                                      | )            | (15,839                           | )          | (1,135                      | )          | (7,530                            | )          | —           |       | (32,862          | )          |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| Equity in net loss of Boise Inc.                                                |       | (11,328                                                     | )            | —                            |       | —                      |       | —                            |       | —           |       | (11,328          | )          |
| Impairment of investment in Boise Inc.                                          |       | (208,074                                                    | )            | —                            |       | —                      |       | —                            |       | —           |       | (208,074         | )          |
| Foreign exchange gain (loss)                                                         |       | —                                                      |         | (1,645                            | )          | (345                        | )          | 159                               |       | —           |       | (1,831           | )          |
| Change in fair value of contingent value rights                                      |       | —                                                      |         | (507                              | )          | —                      |       | —                            |       | —           |       | (507             | )          |
| Change in fair value of interest rate swaps                                          |       | —                                                      |         | (6,284                            | )          | —                      |       | —                            |       | —           |       | (6,284           | )          |
| Interest expense                                                                     |       | —                                                      |         | (33,460                           | )          | (8                          | )          | (845                              | )          | —           |       | (34,313          | )          |
| Interest expense—intercompany                                                   |       | —                                                      |         | (158                              | )          | (1                          | )          | (1,435                            | )          | 1,594            |       | —           |       |
| Interest income                                                                      |       | 2,760                                                       |         | 4,621                             |       | 296                         |       | 14                                |       | —           |       | 7,691            |       |
| Interest income—intercompany                                                    |       | —                                                      |         | 68                                |       | 1,526                       |       | —                            |       | (1,594           | )          | —           |       |
|                                                                                 |       | (216,642                                                    | )            | (37,365                           | )          | 1,468                       |       | (2,107                            | )          | —           |       | (254,646         | )          |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | (225,000                                                    | )            | (53,204                           | )          | 333                         |       | (9,637                            | )          | —           |       | (287,508         | )          |
| Income tax provision                                                                 |       | —                                                      |         | (363                              | )          | (107                        | )          | —                            |       | —           |       | (470             | )          |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in net  income (loss) of affiliates**                  |       | (225,000                                                    | )            | (53,567                           | )          | 226                         |       | (9,637                            | )          | —           |       | (287,978         | )          |
|                                                                                 |       |                                                        |         |                              |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (62,978                                                     | )            | (9,411                            | )          | —                      |       | —                            |       | 72,389           |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **(287,978** | **)**                             | **$**      | **(62,978**                 | **)**      | **$**                             | **226**    | ** **       | **$**      | **(9,637**       | **)**      | **$** | **72,389** | ** ** | **$** | **(287,978** | **)** |

 

88

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingStatements of Income (Loss)**

**F****or the Year Ended December 31,2007**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** **  |
| **Sales**                                                                            |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                                |       | $                                                           | —      |                              | $          | —                      |       | $                                 | 4,768,083   |             | $          | 29,712           |       | $ | — |   | $ | 4,797,795 |   |
| Intercompany                                                                         |       | —                                                      |        | 3,607                             |       | 5                           |       | 92,411                            |        | (96,023          | )          | —           |       |
| Related parties                                                                      |       | —                                                      |        | —                            |       | 615,661                     |       | —                            |        | —           |       | 615,661          |       |
|                                                                                 |       | —                                                      |        | 3,607                             |       | 5,383,749                   |       | 122,123                           |        | (96,023          | )          | 5,413,456        |       |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |        | 1,704                             |       | 4,680,178                   |       | 81,270                            |        | (57,827          | )          | 4,705,325        |       |
| Depreciation, amortization, and depletion                                            |       | —                                                      |        | 3,098                             |       | 116,628                     |       | 4,183                             |        | —           |       | 123,909          |       |
| Selling and distribution expenses                                                    |       | —                                                      |        | —                            |       | 282,901                     |       | 2,732                             |        | —           |       | 285,633          |       |
| General and administrative expenses                                             |       | —                                                      |        | 30,147                            |       | 89,412                      |       | 2,699                             |        | (38,196          | )          | 84,062           |       |
| Other (income) expense, net                                                          |       | —                                                      |        | (3,053                            | )          | (5,396                      | )          | 2,756                             |        | —           |       | (5,693           | )          |
|                                                                                 |       | —                                                      |        | 31,896                            |       | 5,163,723                   |       | 93,640                            |        | (96,023          | )          | 5,193,236        |       |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) from operations**                                                    |       | —                                                      |        | (28,289                           | )          | 220,026                     |       | 28,483                            |        | —           |       | 220,220          |       |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Foreign exchange gain                                                                |       | —                                                      |        | 1,675                             |       | 1,591                       |       | 1,185                             |        | —           |       | 4,451            |       |
| Change in fair value of interest rate swaps                                          |       | —                                                      |        | 3,733                             |       | —                      |       | —                            |        | —           |       | 3,733            |       |
| Interest expense                                                                     |       | —                                                      |        | (89,132                           | )          | —                      |       | (7,670                            | )           | —           |       | (96,802          | )          |
| Interest expense—intercompany                                                   |       | —                                                      |        | (686                              | )          | —                      |       | (20,541                           | )           | 21,227           |       | —           |       |
| Interest income                                                                      |       | —                                                      |        | 3,882                             |       | 162                         |       | 39                                |        | —           |       | 4,083            |       |
| Interest income—intercompany                                                    |       | —                                                      |        | 97                                |       | 21,130                      |       | —                            |        | (21,227          | )          | —           |       |
|                                                                                 |       | —                                                      |        | (80,431                           | )          | 22,883                      |       | (26,987                           | )           | —           |       | (84,535          | )          |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | —                                                      |        | (108,720                          | )          | 242,909                     |       | 1,496                             |        | —           |       | 135,685          |       |
| Income tax provision                                                                 |       | —                                                      |        | (5,786                            | )          | (2,202                      | )          | —                            |        | —           |       | (7,988           | )          |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before equity in net  income (loss) of affiliates**                  |       | —                                                      |        | (114,506                          | )          | 240,707                     |       | 1,496                             |        | —           |       | 127,697          |       |
|                                                                                 |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | 127,697                                                     |        | 242,203                           |       | —                      |       | —                            |        | (369,900         | )          | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **127,697** | ** **                        | **$**      | **127,697**                 | ** ** | **$**                             | **240,707** | ** **       | **$**      | **1,496**        | ** ** | **$** | **(369,900** | **)** | **$** | **127,697** | ** ** |

 

89

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingBalance Sheets at December 31, 2009**

 
| ** **                                       | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,  L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                       | ** ** | **(thousands)**                                 | ** **  |
| **ASSETS**                                       | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                             |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                      |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| Cash and cash equivalents                        |       | $                                               | —      |                        | $          | 286,999                     |       | $                                             | 19          |             | $          | 83               |       | $ | — |   | $ | 287,101 |   |
| Receivables                                      |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| Trade, less allowances                           |       | —                                          |        | —                      |       | 94,422                      |       | 976                                           |        | —           |       | 95,398           |       |
| Intercompany                                     |       | —                                          |        | —                      |       | 56                          |       | —                                        |        | (56              | )          | —           |       |
| Related parties                                  |       | —                                          |        | 23                          |       | 2,581                       |       | —                                        |        | —           |       | 2,604            |       |
| Other                                            |       | —                                          |        | 61                          |       | 3,038                       |       | 396                                           |        | —           |       | 3,495            |       |
| Inventories                                      |       | —                                          |        | —                      |       | 228,286                     |       | 4,488                                         |        | —           |       | 232,774          |       |
| Prepaid expenses and other                       |       | —                                          |        | 704                         |       | 1,094                       |       | 72                                            |        | —           |       | 1,870            |       |
|                                             |       | —                                          |        | 287,787                     |       | 329,496                     |       | 6,015                                         |        | (56              | )          | 623,242          |       |
|                                             |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| **Property**                                     |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| Property and equipment, net                      |       | —                                          |        | 2,405                       |       | 255,604                     |       | 12,220                                        |        | —           |       | 270,229          |       |
| Fiber farms and deposits                         |       | —                                          |        | —                      |       | 9,264                       |       | —                                        |        | —           |       | 9,264            |       |
|                                             |       | —                                          |        | 2,405                       |       | 264,868                     |       | 12,220                                        |        | —           |       | 279,493          |       |
| ** **                                       |       |                                            |        |                        |       |                        |       |                                          |        |             |       |             |       |
| **Investment in equity affiliate  (Boise Inc.)** |       | 62,967                                          |        | —                      |       | —                      |       | —                                        |        | —           |       | 62,967           |       |
| **Deferred financing costs**                     |       | —                                          |        | 5,734                       |       | —                      |       | —                                        |        | —           |       | 5,734            |       |
| **Goodwill**                                     |       | —                                          |        | —                      |       | 12,170                      |       | —                                        |        | —           |       | 12,170           |       |
| **Intangible assets, net**                       |       | —                                          |        | —                      |       | 8,919                       |       | —                                        |        | —           |       | 8,919            |       |
| **Other assets**                                 |       | —                                          |        | 19                          |       | 8,340                       |       | —                                        |        | —           |       | 8,359            |       |
| **Investments in affiliates**                    |       | 367,252                                         |        | 521,889                     |       | —                      |       | —                                        |        | (889,141         | )          | —           |       |
| **Total assets**                                 | ** ** | **$**                                           | **430,219** | ** **                  | **$**      | **817,834**                 | ** ** | **$**                                         | **623,793** | ** **       | **$**      | **18,235**       | ** ** | **$** | **(889,197** | **)** | **$** | **1,000,884** | ** ** |

 

90

----

Table of Contents

** **

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingBalance Sheets at December 31, 2009 (continued)**

** **
| ** **                                     | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                     | ** ** | **(thousands)**                                 | ** **  |
| **LIABILITIES AND CAPITAL**                    | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                           |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                    |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Accounts payable                               |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade                                          |       | $                                               | —      |                              | $          | 7,422                       |       | $                                             | 81,308      |             | $          | 523              |       | $ | — |   | $ | 89,253 |   |
| Related parties                                |       | —                                          |        | 2,019                             |       | 430                         |       | —                                        |        | —           |       | 2,449            |       |
| Intercompany                                   |       | —                                          |        | —                            |       | —                      |       | 56                                            |        | (56              | )          | —           |       |
| Accrued liabilities                            |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Compensation and benefits                      |       | —                                          |        | 8,941                             |       | 18,766                      |       | 180                                           |        | —           |       | 27,887           |       |
| Interest payable                               |       | —                                          |        | 3,644                             |       | —                      |       | —                                        |        | —           |       | 3,644            |       |
| Other                                          |       | —                                          |        | 1,443                             |       | 14,614                      |       | 638                                           |        | —           |       | 16,695           |       |
|                                           |       | —                                          |        | 23,469                            |       | 115,118                     |       | 1,397                                         |        | (56              | )          | 139,928          |       |
|                                           |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Debt**                                       |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Long-term debt                                 |       | —                                          |        | 303,146                           |       | —                      |       | —                                        |        | —           |       | 303,146          |       |
|                                           |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Other**                                      |       |                                            |        |                              |       |                        |       |                                          |        |             | ** ** | ** **       | ** ** |
| Compensation and benefits                      |       | —                                          |        | 113,290                           |       | —                      |       | —                                        |        | —           |       | 113,290          |       |
| Other long-term liabilities                    |       | —                                          |        | 10,677                            |       | 3,624                       |       | —                                        |        | —           |       | 14,301           |       |
|                                           |       | —                                          |        | 123,967                           |       | 3,624                       |       | —                                        |        | —           |       | 127,591          |       |
|                                           |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Redeemable equity units**                    |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Series B equity  units                    |       | 2,765                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 2,765            |       |
| Series C equity  units                    |       | 5,202                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 5,202            |       |
| Redeemable equity units                        |       | —                                          |        | 7,967                             |       | —                      |       | —                                        |        | (7,967           | )          | —           |       |
|                                           |       | 7,967                                           |        | 7,967                             |       | —                      |       | —                                        |        | (7,967           | )          | 7,967            |       |
|                                           |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Commitments and****contingent  liabilities** | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                     | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                    | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A equity units                     |       | 88,908                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | 88,908           |       |
| Series B equity units                     |       | 333,344                                         |        | —                            |       | —                      |       | —                                        |        | —           |       | 333,344          |       |
| Series C equity units                     |       | —                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | —           |       |
| Subsidiary equity                              |       | —                                          |        | 359,285                           |       | 505,051                     |       | 16,838                                        |        | (881,174         | )          | —           |       |
| **Total capital**                              |       | 422,252                                         |        | 359,285                           |       | 505,051                     |       | 16,838                                        |        | (881,174         | )          | 422,252          |       |
| **Total liabilities and capital**              | ** ** | **$**                                           | **430,219** | ** **                        | **$**      | **817,834**                 | ** ** | **$**                                         | **623,793** | ** **       | **$**      | **18,235**       | ** ** | **$** | **(889,197** | **)** | **$** | **1,000,884** | ** ** |

 

91

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingBalance Sheets at December 31, 2008**

** **
| ** **                                       | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                       | ** ** | **(thousands)**                                 | ** **  |
| **ASSETS**                                       | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                      |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Cash and cash equivalents                        |       | $                                               | 1           |                              | $          | 275,726                     |       | $                                             | 20          |             | $          | 56               |       | $ | — |   | $ | 275,803 |   |
| Receivables                                      |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade, less allowances                           |       | —                                          |        | —                            |       | 78,211                      |       | 182                                           |        | —           |       | 78,393           |       |
| Intercompany                                     |       | —                                          |        | —                            |       | 56                          |       | 34                                            |        | (90              | )          | —           |       |
| Related parties                                  |       | —                                          |        | 126                               |       | 2,986                       |       | —                                        |        | —           |       | 3,112            |       |
| Other                                            |       | —                                          |        | 1,269                             |       | 4,324                       |       | 314                                           |        | —           |       | 5,907            |       |
| Inventories                                      |       | —                                          |        | —                            |       | 272,992                     |       | 6,031                                         |        | —           |       | 279,023          |       |
| Prepaid expenses and other                       |       | —                                          |        | (295                              | )          | 1,558                       |       | 33                                            |        | —           |       | 1,296            |       |
|                                             |       | 1                                               |        | 276,826                           |       | 360,147                     |       | 6,650                                         |        | (90              | )          | 643,534          |       |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Property**                                     |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Property and equipment, net                      |       | —                                          |        | 3,204                             |       | 275,499                     |       | 13,296                                        |        | —           |       | 291,999          |       |
| Fiber farms and deposits                         |       | —                                          |        | —                            |       | 8,632                       |       | —                                        |        | —           |       | 8,632            |       |
|                                             |       | —                                          |        | 3,204                             |       | 284,131                     |       | 13,296                                        |        | —           |       | 300,631          |       |
| ** **                                       |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Investment in equity affiliate  (Boise Inc.)** |       | 20,985                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | 20,985           |       |
| **Deferred financing costs**                     |       | —                                          |        | 7,862                             |       | —                      |       | —                                        |        | —           |       | 7,862            |       |
| **Goodwill**                                     |       | —                                          |        | —                            |       | 12,170                      |       | —                                        |        | —           |       | 12,170           |       |
| **Intangible assets, net**                       |       | —                                          |        | —                            |       | 9,248                       |       | —                                        |        | —           |       | 9,248            |       |
| **Other assets**                                 |       | —                                          |        | 105                               |       | 5,904                       |       | —                                        |        | —           |       | 6,009            |       |
| **Investments in affiliates**                    |       | 335,329                                         |        | 918,259                           |       | —                      |       | —                                        |        | (1,253,588       | )          | —           |       |
| **Total assets**                                 | ** ** | **$**                                           | **356,315** | ** **                        | **$**      | **1,206,256**               | ** ** | **$**                                         | **671,600** | ** **       | **$**      | **19,946**       | ** ** | **$** | **(1,253,678** | **)** | **$** | **1,000,439** | ** ** |

 

92

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and Subsidiaries**

**ConsolidatingBalance Sheets at December 31, 2008 (continued)**

** **
| ** **                                       | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                       | ** ** | **(thousands)**                                 | ** **  |
| **LIABILITIES AND CAPITAL**                      | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                      |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Accounts payable                                 |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade                                            |       | $                                               | —      |                              | $          | 6,928                       |       | $                                             | 62,345      |             | $          | 205              |       | $ | — |   | $ | 69,478 |   |
| Related parties                                  |       | —                                          |        | 1,427                             |       | 768                         |       | —                                        |        | —           |       | 2,195            |       |
| Intercompany                                     |       | —                                          |        | —                            |       | 34                          |       | 56                                            |        | (90              | )          | —           |       |
| Accrued liabilities                              |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Compensation and benefits                        |       | —                                          |        | 14,396                            |       | 23,660                      |       | 172                                           |        | —           |       | 38,228           |       |
| Interest payable                                 |       | —                                          |        | 3,930                             |       | —                      |       | —                                        |        | —           |       | 3,930            |       |
| Other                                            |       | —                                          |        | 13,736                            |       | 16,455                      |       | 702                                           |        | —           |       | 30,893           |       |
|                                             |       | —                                          |        | 40,417                            |       | 103,262                     |       | 1,135                                         |        | (90              | )          | 144,724          |       |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Debt**                                         |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Long-term debt                                   |       | —                                          |        | 315,000                           |       | —                      |       | —                                        |        | —           |       | 315,000          |       |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Other**                                        |       |                                            |        |                              |       |                        |       |                                          |        |             | ** ** | ** **       | ** ** |
| Compensation and benefits                        |       | —                                          |        | 172,275                           |       | —                      |       | —                                        |        | —           |       | 172,275          |       |
| Other long-term liabilities                      |       | —                                          |        | 8,214                             |       | 3,911                       |       | —                                        |        | —           |       | 12,125           |       |
|                                             |       | —                                          |        | 180,489                           |       | 3,911                       |       | —                                        |        | —           |       | 184,400          |       |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Redeemable equity units**                      |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Series B equity  units                      |       | 2,920                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 2,920            |       |
| Series C equity  units                      |       | 3,037                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 3,037            |       |
| Redeemable equity units                          |       | —                                          |        | 5,957                             |       | —                      |       | —                                        |        | (5,957           | )          | —           |       |
|                                             |       | 5,957                                           |        | 5,957                             |       | —                      |       | —                                        |        | (5,957           | )          | 5,957            |       |
|                                             |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Commitments and contingent  liabilities** | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                       | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                      | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A equity units                       |       | 81,967                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | 81,967           |       |
| Series B equity units                       |       | 268,391                                         |        | —                            |       | —                      |       | —                                        |        | —           |       | 268,391          |       |
| Series C equity units                       |       | —                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | —           |       |
| Subsidiary equity                                |       | —                                          |        | 664,393                           |       | 564,427                     |       | 18,811                                        |        | (1,247,631       | )          | —           |       |
| **Total capital**                                |       | 350,358                                         |        | 664,393                           |       | 564,427                     |       | 18,811                                        |        | (1,247,631       | )          | 350,358          |       |
| **Total liabilities and capital**                | ** ** | **$**                                           | **356,315** | ** **                        | **$**      | **1,206,256**               | ** ** | **$**                                         | **671,600** | ** **       | **$**      | **19,946**       | ** ** | **$** | **(1,253,678** | **)** | **$** | **1,000,439** | ** ** |

 

93

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Year Ended December 31, 2009**

** **
| ** **                                                                   | ** ** | **Boise********Cascade********Holdings,********L.L.C.********(Parent)** | ** ** | **Boise********Cascade,********L.L.C.** | ** ** | **Guarantor********Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                   | ** ** | **(thousands)**                                                         | ** ** |
| **Cash provided by (used  for) operations**                             |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Net income (loss)                                                            |       | $                                                                       | (19,057    | )                                       | $          | (98,498                           | )          | $                                             | (64,538    | )                | $          | (4,107           | )          | $ | 167,143 |   | $ | (19,057 | ) |
| Items in net income (loss) not using (providing)  cash                       |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Equity in net income of Boise Inc.                                           |       | (79,729                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (79,729          | )          |
| Gain on sale of shares of Boise Inc.                                    |       | (42,752                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (42,752          | )          |
| Impairment of investment in Boise Inc.                                  |       | 43,039                                                                  |       | —                                  |       | —                            |       | —                                        |       | —           |       | 43,039           |       |
| Equity in net (income) loss of affiliates                                    |       | 98,498                                                                  |       | 68,645                                  |       | —                            |       | —                                        |       | (167,143         | )          | —           |       |
| Depreciation and amortization of deferred financing  costs and other         |       | —                                                                  |       | 3,122                                   |       | 38,696                            |       | 1,861                                         |       | —           |       | 43,679           |       |
| Deferred income taxes                                                        |       | —                                                                  |       | —                                  |       | —                            |       | (4                                            | )          | —           |       | (4               | )          |
| Pension expense                                                              |       | —                                                                  |       | 12,315                                  |       | —                            |       | —                                        |       | —           |       | 12,315           |       |
| Change in fair value of contingent rights                                    |       | —                                                                  |       | (194                                    | )          | —                            |       | —                                        |       | —           |       | (194             | )          |
| Management equity units expense                                         |       | —                                                                  |       | 2,736                                   |       | —                            |       | —                                        |       | —           |       | 2,736            |       |
| Gain on repurchase of long-term debt                                         |       | —                                                                  |       | (6,026                                  | )          | —                            |       | —                                        |       | —           |       | (6,026           | )          |
| (Gain) loss on sale of assets, net                                           |       | —                                                                  |       | 548                                     |       | (394                              | )          | 4                                             |       | —           |       | 158              |       |
| Facility closure and curtailment costs                                       |       | —                                                                  |       | —                                  |       | 1,968                             |       | —                                        |       | —           |       | 1,968            |       |
| Other                                                                        |       | —                                                                  |       | (588                                    | )          | (410                              | )          | (202                                          | )          | —           |       | (1,200           | )          |
| Decrease (increase) in working capital, netof acquisitions and  dispositions |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Receivables                                                                  |       | —                                                                  |       | 715                                     |       | (17,122                           | )          | (843                                          | )          | —           |       | (17,250          | )          |
| Inventories                                                                  |       | —                                                                  |       | —                                  |       | 45,543                            |       | 1,543                                         |       | —           |       | 47,086           |       |
| Prepaid expenses and other                                                   |       | —                                                                  |       | (1,001                                  | )          | 465                               |       | (33                                           | )          | —           |       | (569             | )          |
| Accounts payable and accrued liabilities                                |       | —                                                                  |       | (2,087                                  | )          | 13,265                            |       | 263                                           |       | —           |       | 11,441           |       |
| Pension contributions                                                        |       | —                                                                  |       | (28,385                                 | )          | —                            |       | —                                        |       | —           |       | (28,385          | )          |
| Current and deferred income taxes                                            |       | —                                                                  |       | (11                                     | )          | 210                               |       | (1                                            | )          | —           |       | 198              |       |
| Other                                                                        |       | —                                                                  |       | (139                                    | )          | (2,539                            | )          | —                                        |       | —           |       | (2,678           | )          |
| Cash provided by (used for) operations                                       |       | (1                                                                      | )          | (48,848                                 | )          | 15,144                            |       | (1,519                                        | )          | —           |       | (35,224          | )          |
| **Cash provided by (used  for) investment**                             |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Proceeds from sale of assets, net                                            |       | —                                                                  |       | —                                  |       | 467                               |       | —                                        |       | —           |       | 467              |       |
| Proceeds from sale of shares of Boise Inc.                                   |       | 83,172                                                                  |       | —                                  |       | —                            |       | —                                        |       | —           |       | 83,172           |       |
| Expenditures for property and equipment                                 |       | —                                                                  |       | (6                                      | )          | (15,993                           | )          | (807                                          | )          | —           |       | (16,806          | )          |
| Acquisition of businesses and facilities                                     |       | —                                                                  |       | —                                  |       | (4,598                            | )          | —                                        |       | —           |       | (4,598           | )          |
| Other                                                                        |       | —                                                                  |       | 601                                     |       | (183                              | )          | 219                                           |       | —           |       | 637              |       |
| Cash provided by (used for) investment                                  |       | 83,172                                                                  |       | 595                                     |       | (20,307                           | )          | (588                                          | )          | —           |       | 62,872           |       |
| **Cash provided by (used for)  financing**                                   | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                        | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of long-term debt                                                  |       | —                                                                  |       | 60,000                                  |       | —                            |       | —                                        |       | —           |       | 60,000           |       |
| Payments of long-term debt                                                   |       | —                                                                  |       | (65,627                                 | )          | —                            |       | —                                        |       | —           |       | (65,627          | )          |
| Tax distributions to members                                                 |       | (10,705                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (10,705          | )          |
| Repurchase of management equity units                                        |       | (18                                                                     | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (18              | )          |
| Due to (from) affiliates                                                     |       | (72,449                                                                 | )          | 65,153                                  |       | 5,162                             |       | 2,134                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                                   |       | (83,172                                                                 | )          | 59,526                                  |       | 5,162                             |       | 2,134                                         |       | —           |       | (16,350          | )          |
| **Increase (decrease) in cash and  cash****equivalents**                     |       | (1                                                                      | )          | 11,273                                  |       | (1                                | )          | 27                                            |       | —           |       | 11,298           |       |
| **Balance at beginning of the period**                                       |       | 1                                                                       |       | 275,726                                 |       | 20                                |       | 56                                            |       | —           |       | 275,803          |       |
| **Balance at end of the period**                                             | ** ** | **$**                                                                   | **—** | ** **                              | **$**      | **286,999**                       | ** ** | **$**                                         | **19**     | ** **       | **$**      | **83**           | ** ** | **$** | **—** | ** ** | **$** | **287,101** | ** ** |

 

94

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Year Ended December 31, 2008**

** **
| ** **                                                                | ** ** | **Boise********Cascade********Holdings,********L.L.C.********(Parent)** | ** ** | **Boise********Cascade,********L.L.C.** | ** ** | **Guarantor********Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                | ** ** | **(thousands)**                                                         | ** ** |
| **Cash provided by (used for) operations**                                |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Net income (loss)                                                         |       | $                                                                       | (287,978   | )                                       | $          | (62,978                           | )          | $                                             | 226        |             | $          | (9,637           | )          | $ | 72,389 |   | $ | (287,978 | ) |
| Items in net income (loss) not using (providing)  cash                    |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Equity in net loss of Boise Inc.                                          |       | 11,328                                                                  |       | —                                  |       | —                            |       | —                                        |       | —           |       | 11,328           |       |
| Impairment of investment in Boise Inc.                               |       | 208,074                                                                 |       | —                                  |       | —                            |       | —                                        |       | —           |       | 208,074          |       |
| Equity in net loss of affiliates                                          |       | 62,978                                                                  |       | 9,411                                   |       | —                            |       | —                                        |       | (72,389          | )          | —           |       |
| Depreciation and amortization of deferred financing  costs and other      |       | —                                                                  |       | 1,946                                   |       | 33,492                            |       | 2,345                                         |       | —           |       | 37,783           |       |
| Related-party interest expense                                            |       | —                                                                  |       | 158                                     |       | 1                                 |       | 1,435                                         |       | (1,594           | )          | —           |       |
| Related-party interest income                                             |       | (2,760                                                                  | )          | (68                                     | )          | (1,526                            | )          | —                                        |       | 1,594            |       | (2,760           | )          |
| Deferred income taxes                                                     |       | —                                                                  |       | 42                                      |       | (184                              | )          | —                                        |       | —           |       | (142             | )          |
| Pension expense                                                           |       | —                                                                  |       | 17,063                                  |       | —                            |       | —                                        |       | —           |       | 17,063           |       |
| Change in fair value of contingent rights                                 |       | —                                                                  |       | 507                                     |       | —                            |       | —                                        |       | —           |       | 507              |       |
| Change in fair value of interest rate swaps                               |       | —                                                                  |       | 6,284                                   |       | —                            |       | —                                        |       | —           |       | 6,284            |       |
| Management equity units expense, net of  expense related to the Sale |       | —                                                                  |       | 1,542                                   |       | —                            |       | —                                        |       | —           |       | 1,542            |       |
| (Gain) loss on sale of assets, net                                        |       | —                                                                  |       | (2,915                                  | )          | (7,989                            | )          | 1                                             |       | —           |       | (10,903          | )          |
| Facility closure costs                                                    |       | —                                                                  |       | —                                  |       | 10,796                            |       | —                                        |       | —           |       | 10,796           |       |
| Loss on sale of note receivable from related party                        |       | 8,357                                                                   |       | —                                  |       | —                            |       | —                                        |       | —           |       | 8,357            |       |
| Other                                                                     |       | —                                                                  |       | 1,660                                   |       | 311                               |       | (159                                          | )          | —           |       | 1,812            |       |
| Decrease (increase) in working capital, netof dispositions                |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Receivables                                                               |       | —                                                                  |       | (11,721                                 | )          | (301,473                          | )          | 319,386                                       |       | 34               |       | 6,226            |       |
| Inventories                                                               |       | —                                                                  |       | 5,611                                   |       | 50,626                            |       | 6,757                                         |       | —           |       | 62,994           |       |
| Prepaid expenses and other                                                |       | —                                                                  |       | 3,375                                   |       | 1,495                             |       | 631                                           |       | —           |       | 5,501            |       |
| Accounts payable and accrued liabilities                             |       | —                                                                  |       | (16,351                                 | )          | (55,127                           | )          | (7,800                                        | )          | (34              | )          | (79,312          | )          |
| Pension contributions                                                     |       | —                                                                  |       | (20,417                                 | )          | —                            |       | —                                        |       | —           |       | (20,417          | )          |
| Current and deferred income taxes                                         |       | —                                                                  |       | (1,504                                  | )          | 291                               |       | (658                                          | )          | —           |       | (1,871           | )          |
| Other                                                                     |       | —                                                                  |       | 12,352                                  |       | (14,417                           | )          | 2,746                                         |       | —           |       | 681              |       |
| Cash provided by (used for) operations                                    |       | (1                                                                      | )          | (56,003                                 | )          | (283,478                          | )          | 315,047                                       |       | —           |       | (24,435          | )          |
|                                                                      |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **Cash provided by (used for) investment**                                |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Proceeds from sale of assets, net of cash  contributed                    |       | —                                                                  |       | 1,201,939                               |       | 23,505                            |       | 45,532                                        |       | —           |       | 1,270,976        |       |
| Proceeds from sale of note receivable from related  party, net            |       | 52,737                                                                  |       | —                                  |       | —                            |       | —                                        |       | —           |       | 52,737           |       |
| Expenditures for property and equipment                              |       | —                                                                  |       | (1,938                                  | )          | (46,796                           | )          | (3,133                                        | )          | —           |       | (51,867          | )          |
| Increase in restricted cash                                               |       | —                                                                  |       | (183,290                                | )          | —                            |       | —                                        |       | —           |       | (183,290         | )          |
| Decrease in restricted cash                                               |       | —                                                                  |       | 183,290                                 |       | —                            |       | —                                        |       | —           |       | 183,290          |       |
| Other                                                                     |       | —                                                                  |       | (968                                    | )          | 952                               |       | (386                                          | )          | —           |       | (402             | )          |
| Cash provided by (used for) investment                                    |       | 52,737                                                                  |       | 1,199,033                               |       | (22,339                           | )          | 42,013                                        |       | —           |       | 1,271,444        |       |
|                                                                      |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **Cash provided by (used for)  financing**                                | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                        | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of long-term debt                                               |       | —                                                                  |       | 115,000                                 |       | —                            |       | 125,000                                       |       | —           |       | 240,000          |       |
| Payments of long-term debt                                                |       | —                                                                  |       | (920,563                                | )          | —                            |       | (165,000                                      | )          | —           |       | (1,085,563       | )          |
| Short-term borrowings                                                     |       | —                                                                  |       | (10,500                                 | )          | —                            |       | —                                        |       | —           |       | (10,500          | )          |
| Tax distributions to members                                              |       | (128,058                                                                | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (128,058         | )          |
| Repurchase of management equity units                                     |       | (28,634                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (28,634          | )          |
| Cash paid for termination of interest  rate swaps                    |       | —                                                                  |       | (11,918                                 | )          | —                            |       | —                                        |       | —           |       | (11,918          | )          |
| Due to (from) affiliates                                                  |       | 103,956                                                                 |       | (91,755                                 | )          | 305,816                           |       | (318,017                                      | )          | —           |       | —           |       |
| Other                                                                     |       | —                                                                  |       | (4,156                                  | )          | —                            |       | —                                        |       | —           |       | (4,156           | )          |
| Cash provided by (used for) financing                                     |       | (52,736                                                                 | )          | (923,892                                | )          | 305,816                           |       | (358,017                                      | )          | —           |       | (1,028,829       | )          |
|                                                                      |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash****equivalents**                  |       | —                                                                  |       | 219,138                                 |       | (1                                | )          | (957                                          | )          | —           |       | 218,180          |       |
| **Balance at beginning of the period**                                    |       | 1                                                                       |       | 56,588                                  |       | 21                                |       | 1,013                                         |       | —           |       | 57,623           |       |
| **Balance at end of the period**                                          | ** ** | **$**                                                                   | **1**      | ** **                              | **$**      | **275,726**                       | ** ** | **$**                                         | **20**     | ** **       | **$**      | **56**           | ** ** | **$** | **—** | ** ** | **$** | **275,803** | ** ** |

 

95

----

Table of Contents

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Year Ended December 31, 2007**

 
| ** **                                                                      | ** ** | **Boise********Cascade********Holdings,********L.L.C.********(Parent)** | ** ** | **Boise********Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                      | ** ** | **(thousands)**                                                         | ** ** |
| **Cash provided by (used for) operations**                                      |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Net income (loss)                                                               |       | $                                                                       | 127,697    |                                    | $          | 127,697                     |       | $                                             | 240,707    |             | $          | 1,496            |       | $ | (369,900 | ) | $ | 127,697 |   |
| Items in net income (loss) not using (providing)  cash                          |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Equity in net income of affiliates                                              |       | (127,697                                                                | )          | (242,203                                | )          | —                      |       | —                                        |       | 369,900          |       | —           |       |
| Depreciation, depletion, and amortization ofdeferred financing costs  and other |       | —                                                                  |       | 8,305                                   |       | 116,628                     |       | 4,356                                         |       | —           |       | 129,289          |       |
| Related-party interest expense                                                  |       | —                                                                  |       | 686                                     |       | —                      |       | 20,541                                        |       | (21,227          | )          | —           |       |
| Related-party interest income                                                   |       | —                                                                  |       | (97                                     | )          | (21,130                     | )          | —                                        |       | 21,227           |       | —           |       |
| Deferred income taxes                                                           |       | —                                                                  |       | 3,954                                   |       | 241                         |       | —                                        |       | —           |       | 4,195            |       |
| Pension expense                                                                 |       | —                                                                  |       | 25,085                                  |       | —                      |       | —                                        |       | —           |       | 25,085           |       |
| Gain on changes in retiree healthcare programs                                  |       | —                                                                  |       | (4,367                                  | )          | —                      |       | —                                        |       | —           |       | (4,367           | )          |
| Change in fair value of interest rate swaps                                     |       | —                                                                  |       | (3,733                                  | )          | —                      |       | —                                        |       | —           |       | (3,733           | )          |
| Management equity units expense                                            |       | —                                                                  |       | 3,110                                   |       | —                      |       | —                                        |       | —           |       | 3,110            |       |
| Gain (loss) on sale of assets, net                                              |       | —                                                                  |       | 38                                      |       | (2,451                      | )          | 59                                            |       | —           |       | (2,354           | )          |
| Other                                                                           |       | —                                                                  |       | (1,209                                  | )          | (1,144                      | )          | (1,185                                        | )          | —           |       | (3,538           | )          |
| Decrease (increase) in working capital,net of dispositions                      |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Receivables                                                                     |       | —                                                                  |       | (7                                      | )          | (2,569                      | )          | 42,620                                        |       | (5,888           | )          | 34,156           |       |
| Inventories                                                                     |       | —                                                                  |       | (3                                      | )          | (28,427                     | )          | (967                                          | )          | —           |       | (29,397          | )          |
| Prepaid expenses and other                                                      |       | —                                                                  |       | (318                                    | )          | 1,073                       |       | (76                                           | )          | —           |       | 679              |       |
| Accounts payable and accrued liabilities                                   |       | —                                                                  |       | (5,871                                  | )          | (28,790                     | )          | (3,031                                        | )          | 5,888            |       | (31,804          | )          |
| Pension contributions                                                           |       | —                                                                  |       | (722                                    | )          | —                      |       | —                                        |       | —           |       | (722             | )          |
| Current and deferred income taxes                                               |       | —                                                                  |       | 1,033                                   |       | 367                         |       | (323                                          | )          | —           |       | 1,077            |       |
| Other                                                                           |       | —                                                                  |       | 1,732                                   |       | (1,008                      | )          | (6                                            | )          | —           |       | 718              |       |
| Cash provided by (used for) operations                                          |       | —                                                                  |       | (86,890                                 | )          | 273,497                     |       | 63,484                                        |       | —           |       | 250,091          |       |
| **Cash provided by (used for) investment**                                      |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Proceeds from sale of assets                                                    |       | —                                                                  |       | 11                                      |       | 27,786                      |       | —                                        |       | —           |       | 27,797           |       |
| Expenditures for property and equipment                                    |       | —                                                                  |       | (4,584                                  | )          | (178,965                    | )          | (4,423                                        | )          | —           |       | (187,972         | )          |
| Increase in restricted cash                                                     |       | —                                                                  |       | (200,000                                | )          | —                      |       | —                                        |       | —           |       | (200,000         | )          |
| Decrease in restricted cash                                                     |       | —                                                                  |       | 200,000                                 |       | —                      |       | —                                        |       | —           |       | 200,000          |       |
| Additional Consideration Agreement payment                                      |       | —                                                                  |       | —                                  |       | (32,542                     | )          | —                                        |       | —           |       | (32,542          | )          |
| Other                                                                           |       | —                                                                  |       | 1,576                                   |       | 3,652                       |       | 837                                           |       | —           |       | 6,065            |       |
| Cash provided by (used for) investment                                     |       | —                                                                  |       | (2,997                                  | )          | (180,069                    | )          | (3,586                                        | )          | —           |       | (186,652         | )          |
| **Cash provided by (used for)  financing**                                      | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of long-term debt                                                     |       | —                                                                  |       | 725,000                                 |       | —                      |       | 360,000                                       |       | —           |       | 1,085,000        |       |
| Payments of long-term debt                                                      |       | —                                                                  |       | (793,337                                | )          | —                      |       | (345,000                                      | )          | —           |       | (1,138,337       | )          |
| Short-term borrowings                                                           |       | —                                                                  |       | 7,300                                   |       | —                      |       | —                                        |       | —           |       | 7,300            |       |
| Tax distributions to members                                                    |       | (2,753                                                                  | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (2,753           | )          |
| Repurchase of management equity units                                           |       | (993                                                                    | )          | (993                                    | )          | —                      |       | —                                        |       | 993              |       | (993             | )          |
| Proceeds from changes to interest rate swaps                                    |       | —                                                                  |       | 2,848                                   |       | —                      |       | —                                        |       | —           |       | 2,848            |       |
| Due to (from) affiliates                                                        |       | 3,747                                                                   |       | 166,745                                 |       | (93,439                     | )          | (76,060                                       | )          | (993             | )          | —           |       |
| Other                                                                           |       | —                                                                  |       | (4,050                                  | )          | —                      |       | —                                        |       | —           |       | (4,050           | )          |
| Cash provided by (used for) financing                                           |       | 1                                                                       |       | 103,513                                 |       | (93,439                     | )          | (61,060                                       | )          | —           |       | (50,985          | )          |
| **Increase (decrease) in cash and  cash equivalents**                           |       | 1                                                                       |       | 13,626                                  |       | (11                         | )          | (1,162                                        | )          | —           |       | 12,454           |       |
| **Balance at beginning of the year**                                            |       | —                                                                  |       | 42,962                                  |       | 32                          |       | 2,175                                         |       | —           |       | 45,169           |       |
| **Balance at end of the year**                                                  | ** ** | **$**                                                                   | **1**      | ** **                              | **$**      | **56,588**                  | ** ** | **$**                                         | **21**     | ** **       | **$**      | **1,013**        | ** ** | **$** | **—** | ** ** | **$** | **57,623** | ** ** |

 

96

----

Table of Contents

 

**Report of Independent Registered Public AccountingFirm**

 

To theBoard of Directors of Boise Cascade Holdings, L.L.C.:

 

Wehave audited the accompanying consolidated balance sheets of Boise CascadeHoldings, L.L.C. and subsidiaries as of December 31, 2009 and 2008, andthe related consolidated statements of income (loss), capital, and cash flowsfor each of the years in the three-year period ended December 31, 2009*.* These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Boise Cascade Holdings, L.L.C. andsubsidiaries as of December 31, 2009 and 2008, and the results of theiroperations and their cash flows for each of the years in the three-year periodended December 31, 2009, in conformity with U.S. generally acceptedaccounting principles.

 

/s/ KPMG LLP

 

Boise,IdahoMarch 1, 2010

 

97

----

Table of Contents

 

***ITEM9.******                                                ******CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE***

 

None.

 

***ITEM9A(T).******                       ******CONTROLS AND PROCEDURES***

 

Attached as exhibits to this Form 10-K are certifications ofour chief executive officer and chief financial officer. Rule 13a-14 ofthe Securities Exchange Act of 1934, as amended, requires that we include thesecertifications with this report. This Controls and Procedures section includesinformation concerning the disclosure controls and procedures referred to inthe certifications. You should read this section in conjunction with thecertifications.

 

*Evaluationof Disclosure Controls and Procedures*

 

We maintain “disclosure controls and procedures,” as Rule 13a-15(e) underthe Securities Exchange Act of 1934, as amended, defines such term. We havedesigned these controls and procedures to reasonably assure that informationrequired to be disclosed in our reports filed under the Exchange Act, such asthis Form 10-K, is recorded, processed, summarized, and reported withinthe time periods specified in the Securities and Exchange Commission’s rules andforms. We have also designed our disclosure controls to provide reasonableassurance that such information is accumulated and communicated to our seniormanagement, including the chief executive officer (CEO) and chief financialofficer (CFO), as appropriate, to allow them to make timely decisions regardingour required disclosures.

 

We evaluate the effectiveness of our disclosure controls andprocedures on at least a quarterly basis. A number of key components in ourinternal control system assist us in these evaluations. Since the company’sinception, we have had a disclosure committee. The committee meets regularlyand includes input from our senior management, general counsel, internal auditstaff, and independent accountants. This committee is charged with consideringand evaluating the materiality of information and reviewing the company’sdisclosure obligations on a timely basis. Our internal audit department alsoevaluates components of our internal controls on an ongoing basis. To assist inits evaluations, the internal audit staff identifies, documents, and tests ourcontrols and procedures. Our intent is to maintain disclosure controls andprocedures as dynamic processes that change as our business and workingenvironments change.

 

In conjunction with the February 22, 2008, sale of our Paperand Packaging & Newsprint assets, we entered into an Outsourcing Services Agreement under which Boise Inc.provides a number of corporate staff services to us at cost. These servicesinclude information technology, accounting, and human resource services. Ourmanagement, with the participation of our CEO and CFO, has evaluated theeffectiveness of the design and operation of our disclosure controls andprocedures, including the effectiveness of the services provided to us underthe Outsourcing Services Agreement, as of the end of the year covered by this Form 10-K.Based on that evaluation, our CEO and CFO have concluded that, as of such date,our disclosure controls and procedures were effective in meeting the objectivesfor which they were designed and were operating at a reasonable assurancelevel.

 

*Limitationson the Effectiveness of Controls and Procedures*

 

In designing and evaluating our disclosure controls andprocedures, we recognized that disclosure controls and procedures, no matterhow well conceived and well operated, can provide only reasonable, notabsolute, assurance that the objectives of the disclosure controls andprocedures are met. Additionally, in designing disclosure controls andprocedures, our management necessarily was required to apply its judgment inevaluating the cost-benefit relationship of possible disclosure controls andprocedures. We have also designed our disclosure controls and procedures basedin part upon assumptions about the likelihood of future events, and there canbe no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions.

 

*Management’s Report on Internal Control OverFinancial Reporting*

 

The management of Boise Cascade Holdings, L.L.C.,(BC Holdings) is responsible for establishing and maintaining adequateinternal control over financial reporting as defined in Rules 13a-

 

98

----

Table of Contents

 

15(f) and 15d-15(f) under the SecuritiesExchange Act of 1934, as amended. Our internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in theUnited States of America. Internal control over financial reporting includesthose policies and procedures that:

 

·                  Pertain to the maintenance of records that inreasonable detail accurately and fairly reflect our transactions anddispositions of assets;

 

·                  Provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with accounting principles generally accepted in the United Statesof America;

 

·                  Provide reasonable assurance that our receipts andexpenditures are being made only in accordance with authorizations of ourmanagement and directors; and

 

·                  Provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of our assetsthat could have a material effect on the consolidated financial statements.

 

Internal control over financial reporting includes thecontrols themselves, monitoring and internal auditing practices, and actionstaken to correct deficiencies as identified. Because of its inherentlimitations, internal control over financial reporting, no matter how welldesigned, may not prevent or detect misstatements. Accordingly, even effectiveinternal control over financial reporting can provide only reasonable assurancewith respect to financial statement preparation. Also, the effectiveness ofinternal control over financial reporting was determined as of a specific date.Projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures maydeteriorate. As of December 31, 2009, management conducted an assessmentof the effectiveness of BC Holdings’ internal control over financial reporting,including the effectiveness of the services provided to us underthe Outsourcing Services Agreement with Boise Inc., based on criteria for effective internal control overfinancial reporting described in “Internal Control—Integrated Framework” issuedby the Committee of Sponsoring Organizations of the Treadway Commission.Management’s assessment included an evaluation of the design of internalcontrol over financial reporting and testing of the operational effectivenessof internal control over financial reporting. Management reviewed the resultsof its assessment with our CEO and CFO. Based on this assessment, our CEO andCFO concluded that, as of December 31, 2009, our internal control overfinancial reporting was effective.

 

This annual report does not include an attestationreport of the company’s registered public accounting firm regarding internalcontrol over financial reporting. Management’s report was not subject toattestation by the company’s registered public accounting firm pursuant totemporary rules of the Securities and Exchange Commission that permit thecompany to provide only management’s report in this annual report.

 

*Changes in Internal Control OverFinancial Reporting*

 

There have been no changes in our internal controlover financial reporting that occurred during our fourth quarter ended December 31,2009, that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

***ITEM 9B.             OTHERINFORMATION***

 

None.

 

99

----

Table of Contents

 

**PART III**

 

***ITEM 10.******                                         ******DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATEGOVERNANCE***

 

The following is a listof our directors and officers along with brief descriptions of their businesspositions and experience during the past five years and their educationalbackground. All officers listed are “executive officers” under Section 16of the Securities Exchange Act of 1934 except Messrs. Corrick and Stokes.

 
| **Name**                | ** ** | **Age** | ** ** | **Position**                                                            |
|-------------------------|------------|---------|------------|-------------------------------------------------------------------------|
|                    |       |    |       |                                                                    |
| Matthew R. Broad        |       | 50      |       | Nonexecutive Director                                                   |
| John W. Madigan         |       | 72      |       | Nonexecutive Director                                                   |
| Christopher J. McGowan  |       | 38      |       | Nonexecutive Director                                                   |
| Samuel M. Mencoff       |       | 53      |       | Nonexecutive Director                                                   |
| Matthew W. Norton       |       | 31      |       | Nonexecutive Director                                                   |
| Thomas S. Souleles      |       | 41      |       | Nonexecutive Director                                                   |
| Duane C. McDougall      |       | 58      |       | Nonexecutive Director  and Chairman of the Board                        |
| Thomas E. Carlile       |       | 58      |       | Chief Executive Officer  and Director                                   |
| Stanley R. Bell         |       | 63      |       | President, Building  Materials Distribution                             |
| Thomas A. Lovlien       |       | 54      |       | President, Wood  Products Manufacturing                                 |
| Wayne M. Rancourt       |       | 47      |       | Chief Financial  Officer, Senior Vice President and Treasurer           |
| David G. Gadda          |       | 62      |       | Vice President and  General Counsel                                     |
| Bernadette M. Madarieta |       | 34      |       | Vice President and  Controller                                          |
| John T. Sahlberg        |       | 56      |       | Vice President, Human  Resources & Communications              |
| Thomas K. Corrick       |       | 54      |       | Vice President,  Engineered Wood Products                               |
| Nick Stokes             |       | 52      |       | Vice President and  Operations Manager, Building Materials Distribution |

 

***MatthewR. Broad, Director***

 

Mr. Broad has servedas one of our directors since November 2006. Mr. Broad became theexecutive vice president and general counsel of OfficeMax Incorporated(formerly known as Boise Cascade Corporation) in 2004. OfficeMax providesoffice supplies and paper, print and document services, technology products andsolutions, and furniture to large, medium, and small businesses and consumers.From 1989 to 2004, Mr. Broad was associate general counsel of BoiseCascade Corporation and also served as corporate secretary of Boise CascadeOffice Products Corporation, a wholly owned subsidiary of Boise CascadeCorporation. Mr. Broad received a B.A. in business economics from theUniversity of California, Santa Barbara, and a J.D. from the University ofCalifornia, Hastings College of Law. Mr. Broad does not hold any publiccompany directorships. Mr. Broad serves on our board as a designee ofOfficeMax and, as such, provides our board of directors with insight into theperspective of a significant minority equity holder.

 

***JohnW. Madigan, Director***

 

Mr. Madigan hasserved as one of our directors since January 2005. Mr. Madigan servesas an advisor to Madison Dearborn Partners, LLC. In December 2003, Mr. Madiganretired from Tribune Company, where he had served as chairman and chiefexecutive officer since 1996. Tribune Company operates businesses in publishing,interactive media, and broadcasting. Mr. Madigan’s experience in directingthe operations of a major corporation provides our board of directors withperspective on operating issues. Mr. Madigan holds bachelor’s and master’sdegrees in business administration from the University of Michigan. Mr. Madiganis a member of the board of directors of Gilead Sciences, Inc. Mr. Madiganalso served on the board of directors of Morgan Stanley from 2000 to 2005.

 

***ChristopherJ. McGowan, Director***

 

Mr. McGowan hasserved as one of our directors since October 2004. Mr. McGowan hasbeen employed by our equity sponsor, Madison Dearborn Partners, LLC, since 1999and currently serves as a managing director concentrating on investments in thebasic industries sector. Prior to joining Madison Dearborn Partners, Mr. McGowanwas with AEA Investors, Inc., and Morgan Stanley & Co.Incorporated. Mr. McGowan received a B.A. from Columbia University and anM.B.A. from the Harvard Graduate

 

100

----

Table of Contents

 

School of BusinessAdministration. Mr. McGowan currently serves on the boards of directors ofForest Products Holdings, L.L.C., and Smurfit Kappa Group Ltd. (formerly knownas Jefferson Smurfit Group). Mr. McGowan provides strong finance skills toour board of directors. Mr. McGowan serves on our board as a designee ofour majority owner, Forest Products Holdings, L.L.C. (FPH).

 

***SamuelM. Mencoff, Director***

 

Mr. Mencoff hasserved as one of our directors since October 2004. Mr. Mencoff hasbeen employed by our equity sponsor, Madison Dearborn Partners, LLC, since 1992and currently serves as co-CEO. Prior to cofounding Madison Dearborn Partners, Mr. Mencoffwas with First Chicago Venture Capital for 11 years. Mr. Mencoff hasmore than 24 years of experience in private equity investing with a particularfocus on investments in the basic industries sector. Mr. Mencoff receivedan A.B. from Brown University and an M.B.A. from the Harvard Graduate School ofBusiness Administration. Mr. Mencoff is also a member of the boards ofdirectors of Forest Products Holdings, L.L.C., Packaging Corporation ofAmerica, and Smurfit Kappa Group, Ltd. (formerly known as Jefferson SmurfitGroup). Mr. Mencoff was a member of the board of directors of Great LakesDredge & Dock Corporation; he no longer serves on this board. As acofounder of our principal equity holder, Mr. Mencoff provides the boardof directors with insight into the requirements and objectives of our equityholder. Mr. Mencoff serves on our board as a designee of our majorityowner, FPH.

 

***MatthewW. Norton, Director***

 

Mr. Norton hasserved as one of our directors since December 2008. Mr. Norton hasbeen employed by our equity sponsor, Madison Dearborn Partners, LLC, since 2008and currently serves as a vice president. From August 2006 to May 2008,Mr. Norton attended The Wharton School of the University of Pennsylvania.From 2004 to August 2006, he was employed by Madison Dearborn Partners asan associate. From 2001 to 2004, he was employed by Merrill Lynch. Mr. Nortonreceived a B.S. and an M.B.A. from The Wharton School of the University ofPennsylvania. Mr. Norton was also a member of the board of directors of Boise Inc.until January 2010, and he is a current member of the board of directorsof Forest Products Holdings, L.L.C. Mr. Norton provides strong financeskills to our board of directors. Mr. Norton serves on our board as adesignee of our majority owner, FPH.

 

***ThomasS. Souleles, Director***

 

Mr. Souleles hasserved as one of our directors since October 2004. Mr. Souleles hasbeen employed by our equity sponsor, Madison Dearborn Partners, LLC, since 1995and currently serves as a managing director concentrating on investments in thebasic industries sector. Prior to joining Madison Dearborn Partners, Mr. Souleleswas with Wasserstein Perella & Co., Inc. Mr. Soulelesreceived an A.B. from Princeton University, a J.D. from Harvard Law School, andan M.B.A. from the Harvard Graduate School of Business Administration. Mr. Soulelesis also a member of the boards of directors of Boise Inc., Forest ProductsHoldings, L.L.C., Great Lakes Dredge & Dock Corporation, and TheChildren’s Memorial Medical Center and of the board of trustees of the NationalMultiple Sclerosis Society, Greater Illinois Chapter. Mr. Souleles was amember of the boards of directors of Magellan GP, LLC, Magellan MidstreamHoldings GP, LLC, Packaging Corporation of America, and US Power Generating Company;he no longer serves on these boards. Mr. Souleles provides strong financeskills to our board of directors. Mr. Souleles serves on our board as adesignee of our majority owner, FPH.

 

***DuaneC. McDougall, Chairman of the Board and Director***

 

Mr. McDougall hasserved as our board chairman since December 2008 and has been a directorof the company since 2005. Mr. McDougall also served as our chiefexecutive officer from December 2008 to August 2009. Prior to joiningBoise Cascade, Mr. McDougall was president and chief executive officer ofWillamette Industries, an international paper and forest products company,until its sale in 2002. During his 23-year career with Willamette, Mr. McDougallheld numerous operating and finance positions before becoming president andchief executive officer of Willamette. Mr. McDougall received a B.S. inaccounting from Oregon State University. Mr. McDougall is also a member ofthe boards of directors of Cascade Corporation, Forest Products Holdings,L.L.C., The Greenbrier Companies, West Coast Bancorp, and StanCorp FinancialGroup, Inc. Mr. McDougall was a member of the board of directors ofInFocus Corporation; he no longer serves on this board. Mr. McDougall’sexperience as the CEO of a major forest products company provides our board ofdirectors with valuable insight on operational and

 

101

----

Table of Contents

 

industry issues. Mr. McDougallserves on our board of directors pursuant to an agreement between FPH,OfficeMax, and us.

 

***ThomasE. Carlile, Chief Executive Officer and Director***

 

Mr. Carlile becameour chief executive officer and a director in August 2009. Mr. Carlilepreviously served as our executive vice president and chief financial officerfrom February 2008 to August 2009, following the divestiture of ourpaper and packaging businesses. From October 2004 to January 2008, heserved as senior vice president and chief financial officer following MadisonDearborn Partners’ acquisition of the forest products and paper assets fromOfficeMax. From 1994 to October 2004, Mr. Carlile served as vicepresident and controller of Boise Cascade Corporation. Mr. Carlilereceived a bachelor’s degree in accounting from Boise State University andcompleted the Stanford Executive Program. Mr. Carlile is a member of theboard of directors of Forest Products Holdings, L.L.C. Mr. Carlile’sposition as our chief executive officer allows him to advise the board of directorson management’s perspective over a full range of issues affecting the company.

 

***StanleyR. Bell, President, Building Materials Distribution***

 

Mr. Bell became ourpresident, Building Materials Distribution, in February 2008, followingthe divestiture of our paper and packaging businesses. From October 2004to January 2008, he served as senior vice president, Building MaterialsDistribution, following Madison Dearborn Partners’ acquisition of the forestproducts and paper assets from OfficeMax. From 2000 to October 2004, Mr. Bellserved as senior vice president and general manager, Boise Building SolutionsDistribution, of Boise Cascade Corporation. Mr. Bell received a B.A. ineconomics from the University of Utah and an M.B.A. from the University of Utah.In January 2010, Mr. Bell was elected to the board of directors ofBoise Inc.

 

***ThomasA. Lovlien, President, Wood Products Manufacturing***

 

Mr. Lovlien becameour president, Wood Products Manufacturing, in February 2008, followingthe divestiture of our paper and packaging businesses. From October 2004to January 2008, he served as senior vice president, Wood Products,following Madison Dearborn Partners’ acquisition of the forest products andpaper assets from OfficeMax. From 2000 to October 2004, Mr. Lovlienserved as vice president of operations, Boise Building Solutions Manufacturing,of Boise Cascade Corporation. Mr. Lovlien received a bachelor’s degree inaccounting and a master’s degree in wood technology from Oregon StateUniversity.

 

***WayneM. Rancourt, Chief Financial Officer, Senior Vice President and Treasurer***

 

Mr. Rancourt becameour chief financial officer and senior vice president in August 2009. Mr. Rancourtpreviously served as our vice president, treasurer, and investor relations fromFebruary 2008 to August 2009, following the divestiture of our paperand packaging businesses. From October 2004 to January 2008, heserved as vice president and treasurer. From June 2004 to October 2004,Mr. Rancourt was vice president and treasurer for Boise CascadeCorporation. From 2000 to June 2004, Mr. Rancourt was the director ofretirement funds and risk management for Boise Cascade Corporation. Mr. Rancourtreceived a B.S. degree in accounting from Central Washington University.

 

***DavidG. Gadda, Vice President and General Counsel***

 

Mr. Gadda became ourvice president, general counsel, and corporate secretary in February 2008,following the divestiture of our paper and packaging businesses. From December 2005to January 2008, Mr. Gadda served as our vice president, Legal. From October 2004to November 2005, Mr. Gadda served as associate general counsel inour legal department. From 1997 to October 2004, he served as associategeneral counsel of Boise Cascade Corporation. Mr. Gadda received a B.S. ineconomics from the University of Oregon and a J.D. from the University ofCalifornia, Berkeley School of Law, and completed the Stanford ExecutiveProgram. Mr. Gadda is a member of the California, Idaho, and Oregon barassociations.

 

***BernadetteM. Madarieta, Vice President and Controller***

 

Mrs. Madarietabecame our vice president and controller in February 2008, following thedivestiture of our paper and packaging businesses. From October 2004 to January 2008,Mrs. Madarieta

 

102

----

Table of Contents

 

served as director offinancial reporting. From 2002 to October 2004, Mrs. Madarieta servedas supervisor of external financial reporting for Boise Cascade Corporation.Prior to joining Boise Cascade Corporation, Mrs. Madarieta was anassurance and business advisory manager at KPMG and Arthur Andersen, where shewas responsible for planning and supervising audit engagements for corporationsand privately held companies. Mrs. Madarieta received a B.B.A. inaccounting from Boise State University and is a certified public accountant.

 

***JohnT. Sahlberg, Vice President, Human Resources & Communications***

 

Mr. Sahlbergbecame our vice president, human resources & communications, in February 2008,following the divestiture of our paper and packaging businesses. Prior to that,he served as director of human resources from February 2006 to February 2008.From January 2004 through January 2006, he was the director of laborrelations. Mr. Sahlberg received a bachelor’s degree in economics fromHarvard College and a J.D. from Georgetown University. He is a member of theIdaho bar association.

 

***ThomasK. Corrick, Vice President, Engineered Wood Products***

 

Mr. Corrick became thevice president of Engineered Wood Products in January 2005,following Madison Dearborn Partners’ acquisition of the forest products assetsfrom OfficeMax. From March 1999 to January 2005, he servedas the general manager of Engineered Wood Products. From 1992 to1999, Mr. Corrick was the financial manager for Wood Products. Mr. Corrickjoined Boise Cascade in 1980 and worked in a variety of positions in financeand planning prior to 1993. Mr. Corrick received both his bachelor’s andmaster’s degrees in business administration from Texas Christian University.

 

***NickStokes, Vice President and Operations Manager, Building Materials Distribution***

 

Mr. Stokes serves asour vice president of operations, Building Materials Distribution. He has heldthat position with us and our predecessor company since 2001. Mr. Stokesreceived a B.S. in management and a B.S. in marketing from the University ofUtah.

 

Messrs. Norton,McGowan, Mencoff, Souleles, and Madigan serve on our board of directors asdesignees of FPH pursuant to the Securityholders Agreement dated October 29,2004, as amended on November 10, 2006, among FPH, OfficeMax, and us (theSecurityholders Agreement). Mr. Broad serves on our board of directors asa designee of OfficeMax pursuant to the Securityholders Agreement. Mr. McDougallserves on our board of directors pursuant to the Securityholders Agreement andthe terms of his employment agreement (see “Agreements With, and PotentialPayments to, Named Executive Officers” under “Compensation Discussion andAnalysis” in “Item 11. Executive Compensation” of this Form 10-K fora description of Mr. McDougall’s employment agreement). We have furtherdescribed the Securityholders Agreement in “Item* *13*.* Certain Relationships and Related Transactions, and DirectorIndependence” of this Form 10-K. Mr. Carlile serves on our board ofdirectors as our chief executive officer pursuant to the terms of theSecurityholders Agreement. There are no other arrangements or understandingsbetween any member of the board of directors or executive officer and any otherperson pursuant to which that person was elected or appointed to his or herposition.

 

Each of our directorswill serve until such person’s successor is elected and qualified or until suchperson’s death, resignation, or removal. Our board of directors has the powerto appoint our officers. Each officer will hold office for the term determinedby the board of directors and until such person’s successor is chosen andqualified or until such person’s death, resignation, or removal.

 

There are no arrangementsor understandings between any of our executive officers and any other personpursuant to which he or she was selected to be an officer of the company (see “AgreementsWith, and Potential Payments to, Named Executive Officers” under “CompensationDiscussion and Analysis” in “Item 11. Executive Compensation” of this Form 10-Kfor a description of Mr. McDougall’s employment agreement).

 

There are no familyrelationships among any of our directors or executive officers.

 

103

----

Table of Contents

 

***Committeesof the Board of Directors***

 

Our board of directorscurrently has an audit committee and a compensation committee. The composition,duties, and responsibilities of these committees are set forth in writtencharters that our board has adopted for each committee.

 

*Audit Committee*

 

Our audit committeecurrently consists of Messrs. Souleles (chair), Madigan, McDougall,McGowan, Mencoff, and Norton. Mr. Souleles is an “audit committeefinancial expert,” as such term is defined in Item 407(d)(5) ofRegulation S-K.

 

The audit committee isresponsible for:

 

·                  Selecting the independent auditor;

 

·                  Approving the overall scope of the audit;

 

·                  Discussing the annual audited financialstatements and quarterly financial statements, including matters required to bereviewed under applicable legal and regulatory requirements, with managementand the independent auditor;

 

·                  Discussing earnings press releases andother financial information provided to the public with management and theindependent auditor, as appropriate;

 

·                  Discussing with management and theindependent auditor, as appropriate, any audit problems or difficulties andmanagement’s response;

 

·                  Discussing the company’s risk assessmentand risk management policies;

 

·                  Reviewing the company’s financialreporting and accounting standards and principles, significant changes in suchstandards or principles, and the key accounting decisions affecting the company’sfinancial statements;

 

·                  Reviewing and approving the internalcorporate audit staff functions;

 

·                  Reviewing the company’s internal systemof audit, financial, and disclosure controls and the results of internalaudits;

 

·                  Annually reviewing the independentauditor’s written report describing the auditing firm’s internalquality-control procedures and any material issues raised by the auditing firm’sinternal quality-control review or peer reviews of the auditing firm;

 

·                  Reviewing and investigating matterspertaining to the integrity of management;

 

·                  Establishing procedures concerning thetreatment of complaints and concerns regarding accounting, internal accountingcontrols, or audit matters;

 

·                  Meeting separately with management, thecorporate audit staff, and the independent auditor;

 

·                  Handling such other matters that arespecifically delegated to the audit committee by the board of directors from timeto time; and

 

·                  Reporting regularly to the full board ofdirectors.

 

During 2009, our auditcommittee held four meetings.

 

During 2009, no officer or employee served as amember of the audit committee. Mr. McDougall’s membership in the auditcommittee terminated when he served as chief executive officer of the companyduring the time period of December 2008 to August 2009 and resumed inAugust 2009.

 

*Compensation Committee*

 

Our compensationcommittee currently consists of Messrs. Mencoff (chair), Souleles,Madigan, and McDougall. Messrs. Mencoff and Souleles have relationshipswith our equity sponsor, Madison Dearborn Partners, LLC (MDP). As such, Messrs. Mencoffand Souleles may be indirect beneficiaries of

 

104

----

Table of Contents

 

the relationship betweenMDP and us. For more information about these relationships, refer to*“*Item 13*.*CertainRelationships and Related Transactions, and Director Independence” of this Form 10-K.

 

The compensationcommittee is responsible for:

 

·                  Reviewing and approving corporate goalsand objectives relevant to the compensation of our chief executive officer andannually evaluating the chief executive officer’s performance in light of thesegoals;

 

·                  Reviewing and approving the compensationand incentive opportunities of our executive officers;

 

·                  Reviewing and approving employmentcontracts, severance arrangements, incentive arrangements, change-in-controlarrangements, and other similar arrangements between us and our executiveofficers;

 

·                  Receiving periodic reports on the company’scompensation programs as they affect all employees;

 

·                  Reviewing executive succession plans forbusiness and staff organizations; and

 

·                  Handling such other matters that arespecifically delegated to the compensation committee by the board of directorsfrom time to time.

 

During 2009, ourcompensation committee held three meetings.

 

*CompensationCommittee Interlocks and Insider Participation*

 

During2009, no officer or employee served as a member of the compensation committee. Mr. McDougall’smembership in the compensation committee terminated during the time he servedas chief executive officer of the company from December 2008 to August 2009and was reinstated upon his resignation from that position. Messrs. Mencoffand Souleles each served as initial officers of the company when it was formedin 2004. None of our executive officers serve as a member of the board ofdirectors or compensation committee of any entity that has one or moreexecutive officers serving on our board of directors or compensation committee,except that Mr. Carlile serves as a director of FPH.

 

Messrs. Mencoffand Souleles, both members of our compensation committee, have relationshipswith our equity sponsor, Madison Dearborn Partners, LLC (MDP). From time totime, we may pay fees to MDP for providing management, consulting, or otheradvisory services. As such, Messrs. Mencoff and Souleles may be indirectbeneficiaries of the relationship between MDP and us. For more informationabout these relationships, refer to “Item 13. Certain Relationships andRelated Transactions, and Director Independence” of this Form 10-K.

 

*Other Committees*

 

Our board of directorsmay establish other committees as it deems necessary or appropriate from timeto time.

 

***Codeof Ethics***

 

We have adopted a Code of Ethics that applies to allof our employees, including our chief executive officer, chief financialofficer, and principal accounting officer. Our Code of Ethics is available onour website at www.bc.com by clicking on *AboutBoise**Cascade* and then *Code ofEthics*. If we amend or grant a waiver of one or more of theprovisions of our Code of Ethics, we intend to disclose such amendments orwaivers by posting the required information on our website at the aboveaddress.

 

105

----

Table of Contents

 

***ITEM11.******                                         ******EXECUTIVE COMPENSATION***

 

***Compensation Discussion and Analysis***

 

***NamedExecutive Officers***

 

Our Named ExecutiveOfficers for 2009******and the positions they heldwith the company as of December 31, 2009 are:

 

Duane C.McDougall—Chairman of the Board of Directors

Thomas E. Carlile—ChiefExecutive Officer

Stanley R.Bell—President, Building Materials Distribution

Thomas A.Lovlien—President, Wood Products Manufacturing

Wayne M. Rancourt—SeniorVice President, Chief Financial Officer and Treasurer

David G. Gadda—VicePresident and General Counsel

 

***Summaryof Key Events and Drivers***

 

Compensation decisionsaffecting salaried employees, including our executive officers, were driven byextreme adverse market conditions affecting the company and the buildingmaterials industry, specific tax law changes, and personnel changes. Thefollowing major changes were made in the compensation structure affecting ourexecutive officers, all of which are discussed in more detail in the balance ofthis “Item 11. Executive Compensation.”

 

1.  Due to adverse economic conditions early in2009, the company adopted a salary freeze affecting all salaried employees,including executive officers, which remains in effect. Exceptions were verylimited and generally were made only to recognize significant changes inresponsibilities for individuals receiving promotions.

 

2.  The company also elected early in the year tofreeze benefits under our salaried defined benefit pension plan, effective December 31,2009, and to suspend the company match under our salaried 401(k) savingsplan, effective April 1, 2009 (exclusive of that portion of the matchaccruing only to salaried employees not participating in our defined benefitpension plan, which continued through December 31, 2009). These decisionswere driven by the impact of volatility in securities markets on pension planfunding levels and resulting cash contribution requirements and by the extremeadverse conditions in our product markets. The compensation committee andmanagement concluded that the company should not continue to bear the financialrisks arising from the volatility of the funding requirements for its definedbenefit pension plans, nor should it bear the cost of continuing to provide acompany match under the 401(k) plan during the continuation of currentadverse conditions.

 

3.  In August 2009, Mr. McDougallresigned his position as the company’s chief executive officer while retaininghis position as chairman of our board of directors. In response, our chieffinancial officer, Tom Carlile, was promoted to chief executive officer. WayneRancourt, our vice president and treasurer, was promoted to senior vicepresident, chief financial officer, and treasurer. These changes inresponsibilities resulted in changes in base salary, target short-termincentive compensation, and other benefits described below for the affectedofficers.

 

4.  In August 2009, the compensationcommittee authorized, and the company entered into, retention agreements withour two division presidents, Thomas A. Lovlien and Stanley R. Bell. Theseagreements provide for cash payments to Mr. Lovlien and Mr. Bell ifthey remain employed with the company through target dates specified in eachindividual’s agreement.

 

5.  In October 2009, the compensationcommittee adopted a new long-term incentive compensation plan for approximately72 of the company’s senior managers, including its Named Executive Officers.Award Notices made under that plan were approved by the compensation committeein February 2010.

 

106

----

Table of Contents

 

6.  In late 2008, Congress enacted a new sectionof the Internal Revenue Code (Section 457A) that subjected approximately50 of our managers, including all of our Named Executive Officers, to tax onamounts earned by them in 2009 and later years under certain of ournonqualified deferred compensation and nonqualified defined benefit pensionplans, even though such earnings would not be paid until retirement or later.Late in 2009, the compensation committee adopted amendments to the affectedplans to address the issue. The amendments resulted in distributions to theaffected employees in December 2009 of the amounts deferred or earned bythem under the affected plans during 2009 that would have been taxable undersection 457A. Section 457A may significantly impair our ability to providelong-term compensation arrangements to our executives that will be competitiveand comparable to those provided by other employers who are not affected by Section 457A.

 

***ExecutiveCompensation Program Objectives***

 

Our compensation committee’s overall compensationobjective with respect to our executive officers is to provide a compensationpackage that will:

 

·                  Align compensation with the company’sperformance on both a short-term and long-term basis;

 

·                  Link each executive officer’scompensation to his or her performance and the areas for which he or she isresponsible;

 

·                  Attract, motivate, reward, and retain thebroad-based management talent critical to achieving the company’s businessgoals;

 

·                  Align the interests of our executiveofficers with those of our principal equity owners through their ownership ofthe company’s management equity units; and

 

·                  Recognize limitations on the company’sability to pay arising from the extreme adverse conditions in its principalproduct markets and in financial markets in which the company invests funds setaside to pay pension benefits.

 

***Whatthe Compensation Program Is Designed to Reward***

 

The compensation programas a whole is designed to provide a base level of compensation that willattract and retain the broad-based management talent the compensation committeebelieves is essential to achieving the company’s strategic objectives and toreward, with additional short-term and long-term compensation, performance byits executive officers that maintains and creates value for our equityinvestors. Although we anticipate executive compensation and benefits may bealtered to reflect the company’s business strategies and future regulatorychanges, we anticipate that the overall objectives of our compensation andbenefits will remain substantially the same over time.

 

***Use of Market Data to DetermineAmount and Allocation of Compensation***

 

The compensation committee believes thatan important criterion for the determination of the aggregate value of thecompany’s compensation program and the allocation of such value among thevarious elements of its compensation plans is market data on the amounts,allocations, and structures utilized by similarly situated companies forpositions of comparable responsibility.

 

Management and the compensation committeeutilize compensation and benefits surveys to ascertain market levels ofaggregate compensation and the allocation of that compensation among specificcompensation elements for its executive officers. Aggregate compensation andeach of the major elements (base salary, annual variable incentivecompensation, and long-term incentive compensation) for the company’s executiveofficers are targeted at the 50th percentile of the surveyed companies.However, the specific aggregate compensation (and the allocation thereof amongthe elements of such total compensation) paid to any of our executive officersmay be below or above such target levels, depending on subjective judgmentsmade by the compensation committee based on factors such as the specificofficer’s tenure with the company and in his or her position, responsibilitiesthat vary from the benchmark position, and historical performance in the job.

 

107

----

Table of Contents

 

Due to the salary freezedisclosed above, the compensation committee did not engage in a comprehensivereview of executive officer compensation during 2009. For the analysis of 2008 compensation levels andelements, which largely remained in place during 2009 due to the salary freeze,the compensation committee relied upon data from surveys produced by HewittAssociates and the Forest Products Industry Compensation Association (FPICA).

 

·                  The Hewitt Associates survey provides data on a general industry peer groupof approximately 350 manufacturing and services companies, excluding utilitiesand financial companies. Hewitt’s TCM (Total Compensation Measurement) is aconsistent and proprietary methodology for valuing “total” compensation. TCMcaptures, among other things, base salary, short-term cash incentives (actualand targets), and long-term incentives. There is a wide range of consistentbenchmark positions in TCM that cover a broad spectrum of organizationalfunctions. Access to TCM data is available exclusively through participation,and TCM adheres to strict data privacy regulations. No individual companyinformation is reported on an identifiable basis. Hewitt applied a regression analysisbased on sales scope to the TCM survey data. This provided us with compensationinformation for our benchmarked jobs, including our Named Executive Officers.

 

·                  The FPICA survey provides proprietary results gathered from papermanufacturing and wood products companies belonging to the Forest ProductsIndustry Compensation Association. This survey is published annually, is onlyavailable to FPICA members, and comprises approximately 50 to60 companies. Forty-five of these companies report into the Corporate Section ofthe survey, which was also used for our compensation analysis. Of these, notall 45 companies report on every position. The FPICA survey providesinformation on base salaries, short-term cash incentives (actual and targets),and annual total cash compensation that was paid by the surveyed companies forbenchmarked positions, of which there is a wide range that covers a broadspectrum of organizational functions. No individual company information isreported on an identifiable basis. A regression analysis was also applied tothe FPICA survey data.

 

Management usedthis information to:

 

·                  Provide a market-based foundation for executive compensation decisions;

 

·                  Assist in structuring the company’s compensation programs;

 

·                  Benchmark the officer compensation recommendations that management providedto the compensation committee; and

 

·                  Support its 2008 compensation recommendations to the compensationcommittee.

 

Promotional increases provided to Mr. Carlileand Mr. Rancourt in August 2009 were arrived at by the compensationcommittee on the basis of an adjustment of the compensation levels accordedtheir predecessors to recognize reduced levels of experience in the job anddifferences in the jobs’ responsibilities from those of the predecessors.

 

In connection with the committee’sevaluation of management’s proposed new long-term incentive plan, the committeeretained the services of Fredric W. Cook & Co., Inc. (FWC), acompensation consultant. FWC prepared a comprehensive analysis of the company’scompensation packages for its Named Executive Officers (except Mr. Rancourt,who was not then a Named Executive Officer) and compared the specific elementsof such compensation and the aggregate value with a group of peer companiesselected by the consultant. The committee used the results of this study toguide it in adoption of the long-term incentive plan and in the determinationof the terms of the Award Notices to the Named Executive Officers approved in February 2010under the long-term incentive plan.

 

***ExecutiveCompensation Program Elements***

 

The five elements of thecompany’s executive compensation program are:

 

·                  Base salary;

 

·                  Annual variable incentive compensation(Incentive and Performance Plan);

 

·                  Ad hoc bonus awards;

 

108

----

 

Table of Contents

 

·                  Long-term incentive compensation(Management Equity Plan and, for 2010 and beyond, the 2010 Cash Long-TermIncentive Plan; and

 

·                  Other compensation and benefit plans.

 

***BaseSalary***

 

The company provides abase salary to executive officers to attract and retain talented andexperienced individuals to provide management and leadership services to thecompany.

 

The committee reviewsbase salaries for executive officers annually and at the time of promotions orother changes in responsibilities. Almost all salaried positions, includingeach executive officer position, have an established salary guideline. Themidpoint of each salary guideline approximates the median salary, adjusted forcompany size (in sales) of equivalent positions at our surveyed companies.While the salary target range for our executive officers is the midpoint of thesalary guideline, an individual’s salary may fall above or below the midpointbased on a subjective evaluation of factors such as the individual’s level ofresponsibility, performance, and years of experience. As noted above, due toextreme adverse conditions in the company’s product markets, the compensationcommittee and management imposed a freeze on all salaried compensation levelsfor 2009. As a result, the compensation committee’s customary annual review ofofficer salaries did not occur.

 

Prior to his resignationin August 2009, the company paid its then-chairman and chief executiveofficer, Duane McDougall, pursuant to an Employment Agreement dated November 20,2008, amended in February 2009. The agreement was amended further in August 2009in connection with Mr. McDougall’s resignation from the position of chiefexecutive officer. For a description of the material terms of Mr. McDougall’sEmployment Agreement, see “Agreements With, and Potential Payments to, NamedExecutive Officers” in this Compensation Discussion and Analysis.

 

None of our NamedExecutive Officers, other than Mr. McDougall, is a party to an employmentcontract with the company. Our Named Executive Officers’ salaries and otherterms of compensation are determined from time to time by the compensationcommittee in accordance with the policies, objectives and procedures describedabove. With the exception of Mr. Carlile and Mr. Rancourt, whoreceived promotional increases, and Mr. McDougall, whose salary wassignificantly reduced because of his resignation from the chief executiveofficer position, the 2008 salaries of the Named Executive Officers remained ineffect throughout 2009. Those salaries were determined in 2008 by thecompensation committee in accordance with the procedures and utilizing themarket data described above. No comprehensive review of new market data wasutilized in arriving at the promotional increases granted to Mr. Carlileand Mr. Rancourt. The committee arrived at the base salaries granted Mr. Carlileand Mr. Rancourt on the basis of a comparative analysis of the basesalaries accorded their predecessors, along with their relative levels ofexperience, compared with that of their predecessors. The committee alsoconsidered, with respect to Mr. Rancourt, the more limited scope of hisresponsibilities, compared with those of his predecessor.

 

***AnnualVariable Incentive Compensation (Incentive and Performance Plan)***

 

The annual Incentive and Performance Plan isdesigned to recognize and reward the contributions that executive officers andother participating employees have made to the company’s annual performance.The plan does this by linking a portion of the annual cash compensation of eachexecutive officer and other participating employees to performance measuresthat are expected to positively affect the company’s annual financialperformance. We offer this plan to encourage and reward conduct that will leadto better performance of our businesses as measured by the criteria used fordetermining Award amounts. Each participating employee’s participation in theplan, along with the criteria for calculation of the payout to such employee,is established annually by action of our Compensation Committee andcommunicated to the participants in an Annual Incentive Award Notification(Award Notice). After the end of each year, a determination of the amountpayable under the plan on account of the year is made by the CompensationCommittee and the resulting payments (Awards) are made to the planparticipants.

 

*2009 Variable Incentive Compensation*

 

For 2009, each of ourNamed Executive Officers participated in our annual Incentive and PerformancePlan. The plan provided for Awards to be calculated as a percentage of basesalary, based

 

109

----

Table of Contents

 

on the extent to whichthe financial goals and performance objectives were met during the year, and onthe exercise of the compensation committee’s discretion. The 2009 annualincentive Award targets for our Named Executive Officers were as follows:

 
| **Officer**        | ** ** | **Target as a Percentage of Base Salary**                                                                                   |
|--------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|
| ** **         | ** ** | ** **                                                                                                                  |
| Duane C. McDougall |       | 100% of base salary  prorated through August 15, 2009                                                                  |
|               |       |                                                                                                                        |
| Thomas E. Carlile  |       | 65% of base salary for  the portion of 2009 ending August 15, 2009, and 100% of base salary for  the remainder of 2009 |
|               |       |                                                                                                                        |
| Thomas A. Lovlien  |       | 55%                                                                                                                         |
|               |       |                                                                                                                        |
| Stanley R. Bell    |       | 55%                                                                                                                         |
|               |       |                                                                                                                        |
| Wayne M. Rancourt  |       | 45% of base salary for  the portion of 2009 ending August 15, 2009, and 55% of base salary for  the remainder of 2009  |
|               |       |                                                                                                                        |
| David G. Gadda     |       | 45%                                                                                                                         |

 

The actual Awards may beless than or greater than the target incentive amounts. The actual Awardsdepended on the achievement of predetermined financial goals and performanceobjectives and the exercise of the compensation committee’s discretion. Thedollar amount of the threshold, target, and maximum Award payable to each ofour Named Executive Officers is set out in the table found under “Grants ofPlan-Based Awards.”

 

The annual financialgoals required for each of our Named Executive Officers under our 2009Incentive and Performance Plan were as follows:

 
| ** **          | ** ** | ** **                         | ** ** | **Requirement For** | ** **     | **Requirement**         | ** ** | **Requirement**      | ** ** |
|---------------------|------------|------------------------------------|------------|--------------------------|----------------|-------------------------|------------|----------------------|------------|
| ** **          | ** ** | **Financial**                      | ** ** | **Threshold**            | ** **     | **For**                 | ** ** | **For Maximum** | ** ** |
| **Officer**         | ** ** | **Criteria**                       | ** ** | **Payment**              | ** **     | **Target Payment** | ** ** | **Payment**          | ** ** |
|                |       |                               |       |                     |           |                    |       |                 |       |
| Duane  C. McDougall |       | 100% Corporate EBITDA              |       | $                        | (31.0) million |                    | $          | 4.0 million          |       | $ | 59.0 million |   |
|                |       |                               |       |                     |           |                    |       |                 |       |
| Thomas  E. Carlile  |       | 100% Corporate EBITDA              |       | (31.0) million           |           | 4.0 million             |       | 59.0 million         |       |
|                |       |                               |       |                     |           |                    |       |                 |       |
| Stanley  R. Bell    |       | 25% Corporate EBITDA               |       | (31.0) million           |           | 4.0 million             |       | 59.0 million         |       |
|                |       | 37.5%  BMD Division EBITDA         |       | —                   |           | 15.0 million            |       | 45.0 million         |       |
|                |       | 37.5%  BMD Division PRONWC         |       | 0                        | %              | 6.0                     | %          | 20.0                 | %          |
|                |       |                               |       |                     |           |                    |       |                 |       |
| Thomas  A. Lovlien  |       | 25% Corporate EBITDA               |       | (31.0) million           |           | 4.0 million             |       | 59.0 million         |       |
|                |       | 75%  Wood Products Division EBITDA |       | (15.0) million           |           | 5.0 million             |       | 30.0 million         |       |
|                |       |                               |       |                     |           |                    |       |                 |       |
| Wayne  M. Rancourt  |       | 100% Corporate EBITDA              |       | (31.0) million           |           | 4.0 million             |       | 59.0 million         |       |
|                |       |                               |       |                     |           |                    |       |                 |       |
| David  G. Gadda     |       | 100% Corporate EBITDA              |       | (31.0) million           |           | 4.0 million             |       | 59.0 million         |       |
|                     |            |                                    |            |                          |                |                         |            |                      |            |  |  |  |

 

EBITDA means, earningsbefore interest, taxes, depreciation, amortization, and depletion at thecorporate or division level as indicated in the table above and adjusted ineach case for special items. PRONWC means pretax return on net working capitaladjusted for special items. The compensation committee believes that EBITDAadjusted for special items represents a financial measure that closely approximatesthe value delivered by management to the company’s equity owners and is a keymeasure of performance frequently used by the company’s debt holders. Thecompensation committee included PRONWC as a portion of Mr. Bell’sperformance criteria because it reflects his division’s control of its workingcapital, which is a critical financial measure in the distribution business.

 

Stanley R. Bell was theonly Named Executive Officer who earned an Award under the Award formulas ofour 2009 Incentive and Performance Plan and no other Awards were made under theplan by the compensation committee through its exercise of its reserveddiscretion.

 

110

----

Table of Contents

 

At its meeting in February 2010,our compensation committee confirmed the payment to one of our Named ExecutiveOfficers, Mr. Bell, of an Award under the plan that was calculated inaccordance with the plan’s metrics. No other Named Executive Officers receivedpayments under the 2009 plan.

 

*2010 Variable Incentive Compensation*

 

At the compensation committee’s meeting in February 2010,the committee approved the details of the company’s 2010 Incentive andPerformance Plan. No changes were made to the plan document or the methods forcalculating the financial criteria to be used in determining each NamedExecutive Officer’s Award under the plan. Financial criteria and targetcompensation for the Named Executive Officers were established as follows:

 
| **Officer**        | ** ** | **Financial********Criteria**      | ** ** | **Target as a  Percentage of Base  Salary** |
|--------------------|------------|------------------------------------|------------|---------------------------------------------|
|               |       |                               |       |                                        |
| Thomas  E. Carlile |       | 100%  Corporate EBITDA             |       | 100%  of base salary                        |
|               |       |                               |       |                                        |
| Stanley  R. Bell   |       | 25%  Corporate EBITDA              |       | 55%  of base salary                         |
|               |       | 37.5%  BMD Division EBITDA         |       |                                        |
|               |       | 37.5%  BMD Division PRONWC         |       |                                        |
|               |       |                               |       |                                        |
| Thomas  A. Lovlien |       | 25%  Corporate EBITDA              |       | 55%  of base salary                         |
|               |       | 75%  Wood Products Division EBITDA |       |                                        |
|               |       |                               |       |                                        |
| Wayne  M. Rancourt |       | 100%  Corporate EBITDA             |       | 55%  of base salary                         |
|               |       |                               |       |                                        |
| David  G. Gadda    |       | 100%  Corporate EBITDA             |       | 45%  of base salary                         |

 

As in past years, thecommittee reserved broad discretion to adjust the formula payout of the annualincentive plan based on its perception of the performance of the companyrelevant to market conditions prevailing during the plan period, along withother factors it deems relevant, including the company’s performance comparedto competitors and its ability to bear the cost of the payout.

 

***2009Bonus Payments***

 

From time to time, thecompany may elect to grant an ad hoc**bonus to oneor more of the executive officers or other employees to recognize and rewardexemplary performance providing value to the company that is not recognized bythe structure of the company’s short-term incentive compensation plan. Thesebonus payments are not governed by any formal plan, and no executive officerhas any contractual entitlement or expectation of any such payment. The amountand timing of the grant of any such bonus to Named Executive Officers aredetermined by the compensation committee at its sole discretion. No ad hoc**bonuses were paid to any of our named Executive Officers ascompensation for 2009.

 

***Long-TermIncentive Compensation (******Management EquityPlan and 2010 Cash Long-Term Incentive Plan)***

 

We have two long-termincentive plans in place that affect the compensation of our executiveofficers:  The Management Equity Plan andthe 2010 Cash Long-Term Incentive Plan. We offer these plans to ensure along-term alignment of the interests of senior management with those of ourequity investors and to provide an ongoing retention incentive to theparticipating executive officers and employees.

 

*Management Equity Plan*

 

Our principal equityowner is a private equity fund managed by Madison Dearborn Partners, LLC (MDP).MDP believes that the senior management of its portfolio companies should holda personally significant interest in the equity of the portfolio company andmaintain that ownership throughout the period of MDP’s ownership of theportfolio company. The purpose of this requirement is to maintain a close alignmentbetween the interests of MDP, as the principal equity owner of the portfoliocompany, and the interests of the company’s senior management. The terms ofthese arrangements are structured

 

111

----

Table of Contents

 

uniquely to fit theconditions of each portfolio company, but the overriding philosophy is toencourage investment by key managers in the enterprise so their interests arealigned with those of MDP.

 

MDP implemented itsmanagement investment philosophy in our case through the creation of ourManagement Equity Plan. The compensation committee believes the Management Equity Plan alignsthe interests of the Named Executive Officers and other management investors(the Management Investors) with those of the company’s equity investors. Underthe terms of the Management Equity Plan, each executive officer has made apersonally significant investment in the company or holds through his or her Series Cequity units a personally significant equity interest in the company. Withlimited exceptions described below, he or she may be required to maintain thatinvestment or interest for the same term as MDP maintains its investment in thecompany.

 

Shortly after thecompletion of our acquisition of the forest products and paper assets ofOfficeMax (the Forest Products Acquisition), our parent company, ForestProducts Holdings, L.L.C. (FPH) offered an opportunity to purchase its Series Bequity units to each of 171 of the Management Investors. The Series Bequity units were priced at $1.00 per unit, which was the same price paid byMDP for its investment in FPH made to fund the acquisition. If a ManagementInvestor elected to purchase Series B equity units (which all of ourexecutive officers and substantially all of the other offerees elected to do),he or she was also awarded a grant of the FPH Series C equity units. The Series Bequity units are the voting common equity units of FPH. The Series Cequity units are nonvoting equity units of FPH, which share in the appreciationin the value of FPH only after the holders of the Series B equity unitshave recovered a specified participation threshold. The participation thresholdfor Series C units issued in 2004 was $1.00 per outstanding Series Bunit.

 

In 2006, an additionalaward of Series C equity units was made to a limited group of individuals,including one of our current Named Executive Officers and two of ourindependent directors. These Series C units had a participation thresholdof $2.00 per outstanding Series B unit.

 

In 2009, a grant of Series Cequity units was made to Mr. McDougall, with a participation threshold of$1.30 per unit. No purchase of Series B equity units was made by Mr. McDougall.The initial 2009 grant of Series C units to Mr. McDougall was8,972,980 units. Upon Mr. McDougall’s resignation in August 2009,2,900,854 of these units were forfeited.

 

As a result of employmentterminations due principally to business unit divestitures and retirements, ourSeries B and Series C management equity units are now held by 59 ofour key managers. The FPH Series B and Series C equity unitscurrently held by our Named Executive Officers are disclosed in “Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters” of this Form 10-K.

 

The 2004, 2006, and 2009purchases and awards (and the subsequent ownership of the FPH Series B andSeries C equity units so purchased or awarded) are governed by a series ofManagement Equity Agreements between FPH, MDP, and each of the ManagementInvestors, which collectively constitute our Management Equity Plan.

 

The Management Equity Plan contains many of thefeatures typical to an investor rights agreement for a closely held company.The material terms of the Management Equity Plan are:

 

1.               The Management Investor is not permitted to sell or otherwise transferhis or her equity units governed by the agreement except in connection withestate planning activities (in which case, the equity units remain subject tothe plan) and in connection with implementation of the liquidity featuresdescribed below.

 

2.               The Management Investor is required to sell his or her units inconnection with a sale of FPH approved by MDP and may require that MDP cause apurchaser of all or any portion of the FPH equity units held by MDP to includein its purchase of MDP’s equity units the equity units of each of theManagement Investors (or the applicable proportion thereof in the case of apurchase of less than all of the FPH equity units) at the same price and on thesame terms as are provided to MDP (with due allowance for the relevantparticipation threshold applicable to Series C equity units).

 

112

----

Table of Contents

 

3.               FPH may, but is not required to, purchase from the Management Investorhis or her equity units upon termination of the Management Investor’s employmentwith the company (or service on the board of directors) at a formula priceintended to approximate the fair market value of the equity units beingrepurchased (with due allowance for the relevant participation thresholdapplicable to Series C equity units). Unvested Series C units areforfeited upon termination of employment. The company’s current policy is thatit does not repurchase the units of a Management Investor who leaves thecompany except where such repurchase is required of it by the terms of thePlan. A Management Investor may require the company to exercise its option torepurchase his or her equity units upon termination of employment with thecompany (or service on its board of directors) only if such termination arisesfrom either (i) the death or permanent disability of the ManagementInvestor or (ii) the sale of a division of the company.

 

4.               Series B units vested over a five-year period,which ended on December 31, 2009.

 

At December 31,2009, 64.0% of the outstanding 2004 and 2006 Series C units held by activeEmployee Investors were vested. The remainder of such 2004 and 2006 Series Cunits will vest on December 31, 2010, provided that 51.5% of suchremainder is subject to a performance vesting requirement, which will bedetermined at such date. The performance formula compares a hypothetical (oractual) rate of return obtained by an initial investor in the Series Bunits against a target rate of return as of December 31, 2010. If thevesting calculation is made in connection with a liquidity event for the Series Bunits, actual returns will be used in the calculation. Otherwise, the Series Bunits will be valued for purposes of the calculation at their fair marketvalue.

 

The 2009 Series Cunits remaining outstanding after Mr. McDougall’s resignation are subjectto a two-year vesting schedule, which ends on December 1, 2010. Atyear-end 2009, 54.11% of such remaining units were vested.

 

Accelerated vesting (inwhole or in part) of any class or series of management equity units is providedfor in the event of a sale of the company, an initial public offering,termination of a Management Investor’s employment due to sale of a division ofthe company, and upon death or disability of a Management Investor.

 

In contrast to manypublic company equity compensation plans, vesting does not, under our plan,necessarily create a liquidity opportunity for the Management Investor. Itsonly effect is on the valuation formulas that may be used when and if aliquidity event occurs.

 

*2010 Long-Term Incentive CashPlan*

 

In October 2009, ourcompensation committee adopted our 2010 Cash Long-Term Incentive Plan (theLTIP). The terms of the LTIP contemplate the annual grant to participants bythe company of an opportunity to earn a cash Award conditioned upon achievementof financial goals to be specified in each such opportunity. The plan providesthat the identity of participants and the terms under which each year’s awardare to be calculated and paid shall be set by the compensation committee andcommunicated to participants in a Long-Term Incentive Award Notification (AwardNotice) with the resulting payments (the Award) to be calculated by thecompensation committee once the company’s performance against the relevantfinancial criteria is determined.

 

In February 2010,the compensation committee approved Award Notices under the LTIP for a group ofthe company’s senior managers, including each of its Named Executive Officers.The Award Notices enable each such officer the opportunity to earn a cash Awarddetermined on the basis of a target percentage of the officer’s base salary (asspecified in the Award Notice) and the company’s 2010 achievement againstcorporate EBITDA goals set forth in the Award Notice. Awards for each officerrange from a threshold of 50% of the target award through a maximum of 200% oftarget, depending on corporate EBITDA achieved for 2010. Although the amount ofthe cash Award will be determined on the basis of the company’s 2010 financialperformance, the resulting Award will be paid in three equal installments,which will be payable no later than March 15, 2011, 2012, and 2013. Toearn each installment of the award, a participant must remain an employee ofthe company through December 31 of the year preceding the due date of thepayment (subject to the retirement provisions of the plan).

 

113

----

Table of Contents

 

The target Awards for2010, expressed as a percentage of base salary, for each of our Named ExecutiveOfficers, are disclosed in the table below:

 
| **Officer**        | ** ** | **Target Award as a  Percentage of Base Salary** | ** ** |
|--------------------|------------|--------------------------------------------------|------------|
|               |       |                                             |       |
| Thomas  E. Carlile |       | 100                                              | %          |
| Thomas  A. Lovlien |       | 50                                               | %          |
| Stanley  R. Bell   |       | 50                                               | %          |
| Wayne  R. Rancourt |       | 50                                               | %          |
| David  G. Gadda    |       | 40                                               | %          |

 

In considering the LTIPand the 2010 Award Notices, the compensation committee recognized thatmanagement’s ownership of Series B and Series C units under theManagement Equity Plan will continue to provide an incentive that aligns management’sinterests with those of the company’s equity owners. However, it alsorecognized that with the expiration of the vesting provisions of thatstructure, an additional long-term incentive component was required to maintaincompetitive compensation levels, provide a retention incentive, and provideadequate alignment of management’s and equity holders’ interests. In connectionwith its consideration of the LTIP and the 2010 Award Notices, the compensationcommittee was advised by a compensation consultant retained by it, Fredric W. Cook & Co., Inc. (FWC). For adescription of the FWC analysis and its use by the compensation committee, see “Useof Market Data to Determine Amount and Allocation of Compensation” in thisCompensation Discussion and Analysis.

 

***OtherCompensation and Benefit Plans***

 

The company’s executive officers receive additionalcompensation in the form of payments, allocations, or accruals under variousother compensation and benefit plans. These plans and benefits, which aredescribed below, are provided to ensure that we are providing an aggregatecompensation and benefits package competitive in the marketplace, therebyensuring that we can attract and retain the management talent needed to achievethe company’s strategic objectives.

 

*Defined Benefit Pension Benefits*

 

We maintain a definedbenefit pension plan, referred to as the Salaried Pension Plan, as well assupplemental pension plans for certain salaried employees, including five ofthe Named Executive Officers:  Messrs. Carlile,Bell, Lovlien, Rancourt, and Gadda. The Salaried Pension Plan is available only toemployees who were employed by OfficeMax before November 2003.Accordingly, Mr. McDougall was not eligible to participate in the company’spension plans.

 

Our Salaried Pension Plan entitles each vestedemployee to receive a pension benefit at normal retirement age equal to 1.25%of the average of the highest five consecutive years of compensation out of thelast ten years of employment through December 31, 2009, multiplied by theparticipant’s years of service through December 31, 2003, plus 1% of theaverage of such benchmark compensation level multiplied by the participant’syears of service from December 31, 2003, through December 31, 2009.Under the Salaried Pension Plan, “compensation” is defined as the employee’staxable base salary plus any taxable amounts earned under our annual variableincentive compensation programs. Benefits are computed on a straight-line annuitybasis and are not offset by Social Security or other retirement-type benefits.An employee is 100% vested in his or her pension benefit after five years ofunbroken service.

 

Ifan employee is entitled to a greater benefit under the Salaried Pension Planformula than the Internal Revenue Code allows for tax-qualified plans, or ifincome is not taxed (and therefore not counted for purposes of benefit amountcalculation under the qualified defined benefit plan) due to deferral under thecompany’s deferred compensation plan, the excess benefits will be paid from thecompany’s general assets under our unfunded nonqualified Supplemental PensionPlan (SUPP).

 

Under our unfunded nonqualified Supplemental EarlyRetirement Plan (SERP), an officer is eligible for benefits under the plan ifhe or she:  (i) was an officer ofOfficeMax immediately prior to Madison Dearborn Partners’ acquisition of the forestproducts and paper assets from OfficeMax (the Forest Products Acquisition); (ii) is55 years old or older (or 58 years old or older for officers electedon or after June 1, 2004, and before October 29, 2004); (iii) hasten or more years of service; (iv) has served as

 

114

----

Table of Contents

 

an officer for at least five full years; and (v) retiresbefore the age of 62. Eligible officers retiring prior to age 62 receive anearly retirement benefit from the SERP which, in combination with their benefitunder the Salaried Pension Plan and the SUPP, equals the benefit calculatedunder the Salaried Pension Plan and the SUPP, without reduction due to theofficer’s early retirement. Benefits payable under the SERP are offset in partby benefits payable under a similar plan maintained by OfficeMax. Mr. Carlileis currently eligible for early retirement under the SERP. Mr. Lovlien andMr. Rancourt will become eligible for benefits under the SERP when theyreach age 55 and 58, respectively. Mr. Bell’s age permits him to retirewith unreduced benefits under our qualified salaried pension plan and the SUPP,and accordingly, he does not participate in the SERP. Mr. Gadda does notparticipate in the SERP because he was not an officer of OfficeMax immediatelyprior to MDP’s acquisition of the company.

 

Two events noted above in “Summary of Key Eventsand Driver*s*” of this CompensationDiscussion and Analysis had a significant impact on the company’s definedbenefit pension plans for its executive officers. First, the compensationcommittee made a decision to freeze the company’s salaried pension planseffective December 31, 2009. The mechanics of the freeze are included inthe description of the qualified defined benefit pension plan provided above.Since the benefit formulas in the SUPP and SERP track the qualified plan formulas,the benefit freeze also affected those plans. As with the qualified plan, thefreeze did not impact the calculation of benefits under the SUPP and SERP in2009 but will do so going forward.

 

The second major event occurring during 2009relative to the company’s defined benefit pension plan was the determinationthat its nonqualified defined benefit pension plans (the SUPP and the SERP)were impacted by the company’s status as a disqualified entity under InternalRevenue Code Section 457A. At the compensation committee’s October 2009meeting, management advised the committee that, after extensive review, it haddetermined the company was a disqualified entity under Section 457A. As aresult, increases in the value to participants in the SUPP and the SERPoccurring during 2009 would be taxable to the participants, even though nodistribution would be made to such individuals during 2009. In response, thecommittee voted to modify the SUPP and SERP to provide that a distributionwould be made to participants prior to year-end 2009 of the amount made taxableto each participant by Section 457A. Such distributions will be offsetagainst benefits payable to participants upon their retirement. These amountswere distributed in December 2009.

 

*401(k) Plan*

 

The company maintains a 401(k) definedcontribution savings plan for all of its U.S. salaried employees, including itsNamed Executive Officers. Under the plan, eligible employees electing toparticipate may contribute up to 25% of their pretax income, subject to IRS rules limitingan individual’s total contributions and the application of IRS tests designedto ensure that the plan does not discriminate in favor of highly compensatedemployees.

 

Prior to April 1, 2009, the company provided amatching contribution for eligible participants of $0.70 for each employeedollar contributed up to 6% of the employee’s eligible compensation. Due toextreme adverse conditions in the company’s product markets, the companysuspended this matching contribution effective April 1, 2009.

 

For eligible employees not participating in ourdefined benefit pension plan (i.e., those hired on or after November 1,2003, including Mr. McDougall), the company provided an additionaldiscretionary match. The amount of this discretionary match is announced eachyear and may vary from year to year. The discretionary match for 2009 underthis program was $0.30 on each $1.00 contributed up to the first 6% of eligiblecompensation. The company has announced that this match will not be continuedin 2010.

 

The company and the compensation committee recognizedthat the decision to eliminate the company’s matching contributions may impairthe company’s ability to attract and retain talented employees but believedthat the action was necessary on at least a temporary basis to respond toextreme adverse conditions in the company’s product markets. In response tothis concern, the company has recently announced a redesign of the companycontribution provisions to the salaried 401(k) plan. Under the redesign,the company will provide a contribution to each salaried employee’s 401(k) accountfor each pay period in an amount equal to 4% of the employee’s eligible wages(base salary and short-term incentive compensation) for such period. Inaddition, in years in which the company’s EBITDA exceeds specified targets, itwill contribute an additional amount to each employee’s 401(k) account,which will range from zero to 4% of the employee’s eligible wages, depending onthe affected employee’s

 

115

----

Table of Contents

 

number of service years. All of our Named ExecutiveOfficers will participate in the redesigned plan. However, the company hasadvised all salaried employees that it will not implement the new plan untilthe company, in its discretion, has determined that there is strong evidence ofa sustained economic recovery in its product markets. The company has advisedall salaried employees that the revised 401(k) company contribution describedabove became effective March 1, 2010.

 

*Nonqualified Deferred Compensation*

 

OurDeferred Compensation Plan is an unfunded nonqualified defined contributionplan. Under the plan, participating employees may irrevocably elect each yearto defer receipt of a portion of their base salary and incentive compensation.A participant’s account is credited with imputed interest at a rate equal to130% of Moody’s Composite Average of Yields on Corporate Bonds. In addition,participants may elect to receive their company-matching contribution in ourDeferred Compensation Plan in lieu of any matching contribution in our 401(k) savingsplan. Participants may receive payment of their deferred compensation planbalance in a lump sum or in monthly installments over a specified period ofyears following the termination of their employment with the company.

 

During 2009, management determined that itsDeferred Compensation Plan was impacted by the company’s status as a disqualifiedentity under Internal Revenue Code Section 457A. At the compensationcommittee’s October 2009 meeting, management advised the committee thatamounts deferred during 2009, company contributions to the plan made in lieu ofcontributions to the 401(k) plan, and interest earned on those amountsduring the year would be taxable to the participants, even though nodistribution would be made to such individuals during 2009. As a result, thecommittee voted to modify the Deferred Compensation Plan to provide that adistribution to participants would be made prior to year-end 2009 of the amountmade taxable to each participant by Section 457A. Such distribution willbe offset against benefits payable under the plan to participants upon theirretirement. These amounts were distributed in December 2009. For so longas the company remains a disqualified entity under Section 457A, nofurther compensation deferrals will be made under the plan.

 

*Agreements With, and Potential Payments to, NamedExecutive Officers*

 

The following summaries provide a description of theformalized agreements we have entered into with our Named Executive Officerscovering the terms of their employment and/or potential severance benefits.

 

*Duane C. McDougall*

 

The company, acting through its principal subsidiary,Boise Cascade, L.L.C., entered into an Employment Agreement with Mr. McDougallon November 20, 2008, pursuant to which he served as our chairman andchief executive officer. Mr. McDougall’s Employment Agreement was amendedin February 2009 and further amended upon his resignation from theposition of chief executive officer in August 2009. Pursuant to the termsof the agreement, as amended (the Agreement), Mr. McDougall received anannual base salary of $808,250 per year until his resignation date of August 16,2009. In addition to base salary, Mr. McDougall’s contract established histarget for the annual Short-Term Incentive Award under our annual Incentive andPerformance Plan at 100% of his base salary. The Second Amendment to EmploymentAgreement reduced Mr. McDougall’s base salary to $180,000 per year(effective as of August 16, 2009), prorated his participation in thecompany’s 2009 short-term incentive plan as of August 16, 2009, andprovided that he would not participate further in any of the company’sincentive compensation plans. The amendment also provides that the Agreementmay be terminated by either party on 30 days’ notice.

 

Prior to Mr. McDougall’s resignation, we providedhim, at our cost, the use of a furnished condominium in Boise, Idaho, andreimbursed his travel costs from his home to his place of work in Boise, Idaho.To the extent these benefits result in any increase in Mr. McDougall’s nettaxable income, we have agreed to pay him a gross-up payment to cover anyadditional tax liability for which he may be responsible.

 

In addition, at the time of commencement of hisemployment, Mr. McDougall entered into a Management Equity Agreement withour parent company, FPH, and our principal equity investor, Madison DearbornPartners, LLC. The terms of the agreement are substantially the same as, andconsistent with, the other Management Equity Agreements described in “Long-TermIncentive

 

116

----

Table of Contents

 

Compensation (Management Equity Plan and 2010 CashLong-Term Incentive Plan)”**of thisCompensation Discussion and Analysis*.*On February 20,2009, Mr. McDougall was awarded 8,972,980 Series C equity unitsissued by our parent company, Forest Products Holdings, L.L.C. Theagreement governing this grant of units was modified concurrently with his August 2009resignation to confirm that 2,900,854 of such units were forfeited and that, ofthe 6,072,126 Series C units remaining, 3,171,272 were vested and2,900,854 remain subject to time vesting under the vesting schedule ending December 1,2010, provided for in the original agreement. The agreement also confirmed thatit had no effect on the vesting of the 400,000 Series C units awarded himunder a separate Directors Equity Agreement entered into in 2006.

 

*Severance Agreements with Messrs. Carlile,Bell, Lovlien, Rancourt, and Gadda*

 

The company is a party to severance agreements witheach of its executive officers entered into in February 2008, including Messrs. Bell,Carlile, Lovlien, Rancourt, and Gadda. The severance agreements are effectivefor three years, provided that on the second anniversary and each anniversarythereafter, the term of each severance agreement is automatically extended foran additional year unless the company gives 60 days’ prior notice statingotherwise. Notice was not given prior to the second anniversary date in February 2010.Accordingly, the term of such agreements has now been extended to February 22,2012.

 

The severance agreements provide that in the event ofa “qualifying termination” (meaning any termination with the exception of (i) atermination by the company for cause or disability, (ii) a termination bythe employee other than for good reason, or (iii) termination as a resultof the employee’s death), an employee will be entitled to receive (a) hisor her full base salary through the date of termination, a short-term incentiveplan payment for the year of termination based on the plan’s actual payout forthe year and prorated to reflect the portion of the year expired, and all othercompensation to which he or she is then entitled; (b) a lump-sum severancepayment equal to one or two times the sum of such employee’s annual base salaryplus target annual incentive bonus for the year in which the terminationoccurs; and (c) a lump-sum amount equal to the value of such employee’sunused and accrued time off, less any advanced time off. Additionally, theseverance agreements provide, in the event of a qualifying termination, forfull maintenance of healthcare and insurance benefits for a period of12 or 18 months following the termination date (subject to payment ofrequired contributions), payment of the premium under the company’sSupplemental Life Plan for 12 or 24 months following the terminationdate and, if applicable, receipt of the monthly benefit that such employeewould have been entitled to receive under the SERP. The higher levels ofseverance benefits are reserved for those Named Executive Officers at the levelof senior vice president and higher (Messrs. Carlile, Lovlien, Bell, andRancourt).

 

The severance agreements provide that in the event ofa termination that is not a qualifying termination, such employee will beentitled to receive his or her full base salary through the date oftermination, plus all other compensation to which he is then entitled. In theevent of a failure to perform duties as a result of incapacity due to physicalor mental illness or injury, such employee will be entitled to continue toreceive his full base salary until such time as his employment is terminateddue to disability. No severance payments or continuation of healthcare benefitsbeyond the date of termination are provided for under such circumstances.

 

In consideration of the severance payments asdescribed above, each severance agreement contains, with respect to eachemployee party thereto, confidentiality and nonsolicitation provisions, as wellas a provision for general release of all claims against the company and itsaffiliates, as a condition to payment of benefits under the severanceagreement.

 

*Retention Agreements with Messrs. Lovlien andBell*

 

In October 2009, the company entered intoRetention Award Agreements with Messrs. Bell and Lovlien. Each of theseagreements provides that the officer may, by maintaining his employment withthe company through a specified vesting date, earn a cash award equal to hisbase salary at the time of vesting of the award. The vesting date specified inthe agreements is October 31, 2011, for Mr. Bell and December 31,2012, for Mr. Lovlien. Each agreement provides that if the individual’semployment terminates prior to the vesting date due to death or permanentdisability, a prorated award will vest on and be payable within 90 days aftersuch termination, and that if employment is terminated due to a sale of thecompany or of the division which such officer heads, or for reasons other thana disciplinary

 

117

----

Table of Contents

 

reason, the full amount of the award will vest uponsuch termination and be payable within 90 days thereafter.

 

*Salaried Employee Life Insurance Plan andSupplemental Life Plan*

 

The company maintains twoplans under which company-paid life insurance is made available to itsofficers. Under its Salaried Employee Life Insurance Plan, the companyprovides, at its expense during each salaried employee’s period of employment,life insurance in an amount equal to the employee’s base salary. All of ournamed executive officers, except Messrs. Carlile, Bell, and Lovlien,participate in this plan.

 

Messrs. Carlile,Bell, and Lovlien participate in our officers’ Supplemental Life Plan, underwhich a company-paid life insurance benefit during employment is provided in anamount equal to two times the officer’s base salary. The plan also provides apostretirement benefit for such officers equal to one times their final basesalary.

 

Amounts paid by the company for the coverage providedto each of our Named Executive Officers is reported in the column titled**“All Other Compensation”**in the**“Summary Compensation Table” below.

 

***Compensation Committee Report***

 

Ourcompensation committee has reviewed and discussed with our management theCompensation Discussion and Analysis set forth above. Based on the review anddiscussion, our compensation committee has recommended to the board ofdirectors that the Compensation Discussion and Analysis be included in this Form 10-Kfor the year ended December 31, 2009.

 

Bythe compensation committee:

 

SamuelM. Mencoff, Chair

 

JohnW. Madigan

 

ThomasS. Souleles

 

DuaneC. McDougall

 

118

----

Table of Contents

 

***Summary Compensation Table***

 

The followingtable presents compensation information for Messrs. McDougall, Carlile,Lovlien, Bell, Rancourt and Gadda for 2009, 2008, and 2007 to the extent eachof them served as one of our Named Executive Officers during each of suchyears:

** **
| **Name and  Principal Position**                           | ** ** | **Year**   | ** ** | **Salary  ($)(1)** | ** ** | **Bonus  ($)(2)** | ** ** | **Stock  Awards  ($)(3)** | ** ** | **Non-Equity  Incentive  Plan  Compensation  ($)(4)** | ** ** | **Change  in********Pension********Value and********Nonqualified********Deferred********Compensation********Earnings********($)(5)** | ** ** | **All  Other  Compensation  ($)(6)** | ** ** | **Total  ($)** |   |
|------------------------------------------------------------|------------|------------|------------|--------------------|------------|-------------------|------------|---------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|----------------|--------|
| ** **                                                 | ** ** | ** ** | ** ** | ** **         | ** ** | ** **        | ** ** | ** **                | ** ** | ** **                                            |       |                                                                                                                                 |       |                                 |       |           |   |
| **Duane C. McDougall**                                     |       | 2009       |       | $                  | 572,656    |              | $          | —                    |       | $                                                     | 3,023,894  |                                                                                                                                 | $          | —                               |       | $              | 842    |   | $ | 66,044 |   | $ | 3,663,436 |   |
| Chairman of the Board  and Chief Executive Officer         |       | 2008       |       | 66,667             |       | —            |       | —                    |       |  28,000                                          |       |  —                                                                                                                         |       |  86                             |       | 94,753         |   |
|                                                       |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
| **Thomas E. Carlile**                                      |       | 2009       |       | 550,000       |       | —            |       |  —              |       | —                                                |       | 210,543                                                                                                                         |       | 28,901                               |       | 789,444   |   |
| Chief Executive Officer                                    |       | 2008       |       | 460,000            |       | 50,000            |       | —                    |       |  125,580                                         |       | 524,386                                                                                                                              |       |  43,354                         |       | 1,203,320      |   |
| ** **                                                 |       | 2007       |       | 451,250            |       |  —      |       |  —              |       |  277,891                                         |       | 412,353                                                                                                                              |       |  41,659                         |       | 1,183,153      |   |
|                                                       |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
| **Stanley R. Bell**                                        |       | 2009       |       | 420,000            |       | —            |       | —                    |       | 163,505                                               |       | 136,941                                                                                                                              |       | 45,041                               |       | 765,487        |   |
| President, Building                                        |       | 2008       |       |  414,333      |       |  —      |       |  —              |       |  160,000                                         |       |  732,242                                                                                                                        |       | 46,126                               |       | 1,352,701      |   |
| Materials Distribution                                     |       | 2007       |       | 377,500            |       | 46,000            |       |  —              |       |  154,000                                         |       | 372,061                                                                                                                              |       | 45,142                               |       | 994,703        |   |
|                                                       |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
| **Thomas A. Lovlien**                                      |       | 2009       |       | 420,000            |       | —            |       | —                    |       | —                                                |       | 239,331                                                                                                                              |       | 28,847                               |       | 688,178        |   |
| President, Wood  Products                                  |       | 2008       |       |  414,333      |       |  97,020      |       |  —              |       |  —                                          |       |  421,618                                                                                                                        |       |  43,542                         |       |  976,513  |   |
| Manufacturing                                              |       | 2007       |       |  372,500      |       |  6,096       |       |  —              |       |  193,904                                         |       |  238,793                                                                                                                        |       |  38,416                         |       |  849,709  |   |
|                                                       |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
| **Wayne M. Rancourt**                                      |       | 2009       |       | 303,125            |       | —            |       | —                    |       | —                                                |       | 136,135                                                                                                                              |       | 8,415                                |       | 447,675        |   |
| Sr. Vice President,  Chief Financial Officer and Treasurer |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
|                                                       |       |       |       |               |       |              |       |                      |       |                                                  |       |                                                                                                                                 |       |                                 |       |           |   |
| **David G. Gadda**                                         |       | 2009       |       | 300,000            |       | —            |       | —                    |       | —                                                |       | 183,026                                                                                                                              |       | 9,973                                |       | 492,999        |   |
| Vice President and  General Counsel                        |       | 2008       |       |  292,917      |       |  30,000      |       |  —              |       |  56,700                                          |       |  182,745                                                                                                                        |       |  18,278                         |       |  580,640  |   |
|                                                            |            |            |            |                    |            |                   |            |                           |            |                                                       |            |                                                                                                                                      |            |                                      |            |                |        |  |  |  |  |  |  |  |

** **

----

(1)                                  Includes amountsdeferred under our savings plan and Deferred Compensation Plan, includingcompany matching payments. See “401(k) Plan” and “Nonqualified DeferredCompensation” under “Other Compensation and Benefit Plans” in “CompensationDiscussion and Analysis”**for adescription of these plans. The following amounts initially deferred under theDeferred Compensation Plan during 2009 were distributed to the officer makingthe deferral during December 2009, pursuant to an amendment to theDeferred Compensation Plan required to avoid taxation of undistributed amountsunder Section 457A of the Internal Revenue Code.

 
| **Name**            | ** ** | **Amount  Deferred and Refunded** | ** ** |
|---------------------|------------|-----------------------------------|------------|
| ** **          | ** ** | ** **                        | ** ** |
| Duane  C. McDougall |       | $                                 | 34,359     |   |
|                |       |                              |       |
| Thomas  E. Carlile  |       | 43,535                            |       |
|                |       |                              |       |
| Stanley  R. Bell    |       | 58,000                            |       |
|                |       |                              |       |
| Thomas  A. Lovlien  |       | 51,702                            |       |
|                |       |                              |       |
| Wayne  M. Rancourt  |       | 23,706                            |       |
|                |       |                              |       |
| David G. Gadda      |       | 38,670                            |       |
|                     |            |                                   |            |  |

 

Theforegoing amounts are included in the distributions from the DeferredCompensation Plan reported in the table contained in “Nonqualified DeferredCompensation*.*”

 

(2)                                  Includes amountsdeferred under our savings plan and Deferred Compensation Plan. See “401(k) Plan”and “Nonqualified Deferred Compensation” under “Other Compensation and BenefitPlans” in “Compensation Discussion and Analysis” for a description of theseplans.  

 

119

----

Tableof Contents

 

(3)                                  The amountsreported for Mr. McDougall reflect the aggregate grant-date fair value forthe 2009 Series C units awarded him in February 2009, computed in accordancewith Financial Accounting Standards Board Accounting Standards Codification(FASB ASC) Topic 718, *Compensation — StockCompensation,*determined in accordance with the assumptions made insuch valuation as described in Note 13, Long-Term Incentive CompensationPlans, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K. The valuereported is based on the full number of Series C equity units awarded to Mr. McDougalland does not reflect the forfeiture of 2,900,854 units upon his resignationfrom the position of chief executive officer in August 2009.**

 

(4)                                  Representspayments of Awards under our annual variable Incentive and Performance Plan.The specific financial goals and performance objectives at corporate andbusiness unit levels of the Performance Plan are described under “AnnualVariable Incentive Compensation (Incentive and Performance Plan)” in“Compensation Discussion and Analysis.”**Includesamounts deferred under our savings plan and Deferred Compensation Plan. See“401(k) Plan” and “Nonqualified Deferred Compensation” under “OtherCompensation and Benefit Plans” in “Compensation Discussion and Analysis” for adescription of these plans.

 

(5)                                  Amounts disclosed in this column includethe following:

 
| **Name**            | ** ** | **Year** | ** ** | **Change in  Pension Value(a)** | ** ** | **Nonqualified Deferred  Compensation  Earnings(b)** | ** ** |
|---------------------|------------|----------|------------|---------------------------------|------------|------------------------------------------------------|------------|
|                |       |     |       |                            |       |                                                 |       |
| Duane  C. McDougall |       | 2009     |       | $                               | —     |                                                 | $          | 842 |   |
|                |       | 2008     |       | —                          |       | —                                               |       |
|                |       |     |       |                            |       |                                                 |       |
| Thomas  E. Carlile  |       | 2009     |       | 199,065                         |       | 11,478                                               |       |
|                |       | 2008     |       | 516,417                         |       | 7,969                                                |       |
|                |       | 2007     |       | 407,581                         |       | 4,772                                                |       |
|                |       |     |       |                            |       |                                                 |       |
| Stanley  R. Bell    |       | 2009     |       | 112,841                         |       | 24,101                                               |       |
|                |       | 2008     |       | 714,300                         |       | 17,942                                               |       |
|                |       | 2007     |       | 360,458                         |       | 11,603                                               |       |
|                |       |     |       |                            |       |                                                 |       |
| Thomas  A. Lovlien  |       | 2009     |       | 226,186                         |       | 13,145                                               |       |
|                |       | 2008     |       | 412,475                         |       | 9,143                                                |       |
|                |       | 2007     |       | 233,258                         |       | 5,535                                                |       |
|                |       |     |       |                            |       |                                                 |       |
| Wayne  M. Rancourt  |       | 2009     |       | 129,962                         |       | 6,173                                                |       |
|                |       |     |       |                            |       |                                                 |       |
| David  G. Gadda     |       | 2009     |       | 173,541                         |       | 9,485                                                |       |
|                |       | 2008     |       | 176,210                         |       | 6,535                                                |       |
|                     |            |          |            |                                 |            |                                                      |            |  |  |

 

----

(a)                            Mr. McDougallwas not eligible to participate in the company’s pension plans. The amountsreported for Messrs. Carlile, Bell, Lovlien, Rancourt, and Gadda reflectthe actuarial increase in the present value of their benefits under all pensionplans established by the company using interest rate and mortality rateassumptions consistent with those used in the company’s financial statements,including amounts which were distributed to such officers pursuant toamendments made to the SUPP and the SERP, which provided for distribution in December 2009of amounts earned by participants in the SUPP and the SERP during 2009 to theextent such amounts were taxable pursuant to Section 457A. The amountsdistributed are reported in the table found in “Pension Benefits.”

 

(b)                           The amountsreported for Messrs. McDougall, Carlile, Bell, Lovlien, Rancourt, andGadda reflect the above-market portion of the interest earned on deferredcompensation during the years in which they were Named Executive Officers. Aportion of such above-market interest was distributed to such officers pursuantto amendments made to the Deferred Compensation Plan, which provided fordistribution in December 2009 of amounts earned by participants in theplan during 2009 to the extent such amounts were taxable pursuant to Section 457A:

 

120

----

Table of Contents

 
| **Name**            | ** ** | **Above-Market  Earnings  Refunded** | ** ** |
|---------------------|------------|--------------------------------------|------------|
|                | ** ** | ** **                           | ** ** |
| Duane  C. McDougall | ** ** | $                                    | 842        | ** ** |
|                |       |                                 |       |
| Thomas  E. Carlile  |       | 1,028                                |       |
|                |       |                                 |       |
| Stanley  R. Bell    |       | 1,327                                |       |
|                |       |                                 |       |
| Thomas  A. Lovlien  |       | 1,076                                |       |
|                |       |                                 |       |
| Wayne  M. Rancourt  |       | 572                                  |       |
|                |       |                                 |       |
| David  G. Gadda     |       | 838                                  |       |
|                     |            |                                      |            |  |

 

Theforegoing amounts are included in the distributions from the DeferredCompensation Plan reported in the table contained in “Nonqualified DeferredCompensation*.*”

 

(6)                                  Amountsdisclosed in this column include the following:

 
| **Name**           | ** ** | **Year** | ** ** | **Company-  Matching  Contributions********to Savings********and Deferred********Compensation********Plans(a)** | ** ** | **Company-Paid********Portion of********Executive********Officer********Life Insurance(b)** | ** ** | **Reportable Perquisites(c)** | ** ** | **Tax  Reimbursements  and Gross-ups** | ** ** |
|--------------------|------------|----------|------------|-----------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-------------------------------|------------|----------------------------------------|------------|
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| Duane C. McDougall |       | 2009     |       | $                                                                                                               | 18,794     |                                                                                        | $          | 1,619                         |       | $                                      | 30,175     |   | $ | 15,456 |   |
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| Thomas E. Carlile  |       | 2009     |       | 12,204                                                                                                          |       | 15,234                                                                                      |       | —                        |       | 1,463                                  |       |
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| Stanley R. Bell    |       | 2009     |       | 11,130                                                                                                          |       | 33,111                                                                                      |       | —                        |       | 800                                    |       |
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| Thomas A. Lovlien  |       | 2009     |       | 8,485                                                                                                           |       | 18,997                                                                                      |       | —                        |       | 1,365                                  |       |
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| Wayne M. Rancourt  |       | 2009     |       | 6,750                                                                                                           |       | 1,140                                                                                       |       | —                        |       | 525                                    |       |
|               |       |     |       |                                                                                                            |       |                                                                                        |       |                          |       |                                   |       |
| David G. Gadda     |       | 2009     |       | 6,791                                                                                                           |       | 2,364                                                                                       |       | —                        |       | 818                                    |       |
|                    |            |          |            |                                                                                                                 |            |                                                                                             |            |                               |            |                                        |            |  |  |  |  |

 

----

(a)                                  See “401(k) Plan”and “Nonqualified Deferred Compensation” under “Other Compensation and BenefitPlans” in “Compensation Discussion and Analysis” for a description of theseplans. All of the company contributions to our deferred compensation plansreported in this column were distributed during December 2009, pursuant toan amendment to the Deferred Compensation Plan required to avoid taxation ofundistributed amounts under Section 457A of the Internal Revenue Code.Such distributions are included in the distributions from the DeferredCompensation Plan reported in the table contained in “Nonqualified DeferredCompensation*.*”

 

(b)                                 See “Salaried Employee LifeInsurance Plan and Supplemental Life Plan” under “Other Compensation andBenefit Plans” in “Compensation Discussion and Analysis” for a description of the company-paid lifeinsurance plans under which these costs were incurred.

 

(c)                                  The company’scost for various perquisites provided to our Named Executive Officers otherthan Mr. McDougall are not reflected because they were in each case lessthan $10,000. Mr. McDougall’s perquisites and the company’s expenditureson them consisted of (i) tax planning and return preparation services; (ii) familyand personal travel; and (iii) Boise, Idaho housing.

 

121

----

Table of Contents

 

***Grants of Plan-Based Awards***

 

***EquityAwards***

 

The only Named ExecutiveOfficer who received a grant of equity interests during 2009 was Duane C.McDougall. The reportable information concerning Mr. McDougall’s award wasas follows:

 

**2009 Equity Awards**

 
| **Name**           | ** ** | **Grant Date**    | ** ** | **All Other Stock Awards:********Number of Shares of Stock********or Units********(# Series C Equity units)(1)** | ** ** | **Grant-Date Fair Value********of Stock and Option Awards ($)(2)** | ** ** |
|--------------------|------------|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
|               |       |                   |       |                                                                                                                  |       |                                                               |       |
| Duane C. McDougall |       | February 20, 2009 |       | 8,972,980                                                                                                             |       | $                                                                  | 3,023,894  |   |
|                    |            |                        |            |                                                                                                                       |            |                                                                    |            |  |

 

----

(1)                                  The equity unitsreported were issued by our parent company, Forest Products Holdings, L.L.C.(FPH), pursuant to a Management Equity Agreement between FPH and Mr. McDougalldated November 20, 2008. See “Management Equity Plan” under “Long-TermIncentive Compensation (Management Equity Plan and 2010 Cash Long-Term IncentivePlan)” in “Compensation Discussion and Analysis” for a description of the 2009 Series Cunits. The number of units held by Mr. McDougall was reduced to 6,072,126units by the forfeiture that occurred upon Mr. McDougall’s resignationfrom the position of chief executive officer in August 2009.

 

(2)                                  The grant-datefair value for the award of Series C equity units granted to Mr. McDougallin 2009 covers the full amount of units issued to him in February 2009,valued in accordance with FASB ASC Topic 718, using the assumptions utilized bythe company for its financial statements. See Note 13, Long-Term IncentiveCompensation Plans, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K.

 

***Non-EquityAwards***

 

The following tablereflects the potential threshold, target, and maximum incentive Awards for theNamed Executive Officers possible for 2009 under our Annual Variable Incentiveand Performance Plan. For further information on the terms of these incentiveawards, refer to “Annual Variable Incentive Compensation (Incentive andPerformance Plan)” in “Compensation Discussion and Analysis.” The NamedExecutive Officers’ actual incentive Awards earned in 2009 are shown in the “Non-equityIncentive Plan Compensation” column of the “Summary Compensation Table.” AllAwards earned under this plan were paid in February of 2010.

 

**Estimated Future Payouts Under**

**Non-Equity Incentive Plan Awards**

 
| **Name**              | ** ** | **Grant Date** | ** ** | **Threshold** | ** ** | **Target** | ** ** | **Maximum** | ** ** |
|-----------------------|------------|----------------|------------|---------------|------------|------------|------------|-------------|------------|
|                  |       |           |       |          |       |       |       |        |       |
| Duane C. McDougall(1) |       | 8/11/09        |       | $             | 0          |       | $          | 500,000     |       | $ | 1,125,000 |   |
|                  |       |           |       |          |       |       |       |        |       |
| Thomas E. Carlile     |       | 8/11/09        |       | 0             |       | 550,550    |       | 1,238,738   |       |
|                  |       |           |       |          |       |       |       |        |       |
| Stanley R. Bell       |       | 8/11/09        |       | 0             |       | 231,000    |       | 519,750     |       |
|                  |       |           |       |          |       |       |       |        |       |
| Thomas A. Lovlien     |       | 8/11/09        |       | 0             |       | 231,000    |       | 519,750     |       |
|                  |       |           |       |          |       |       |       |        |       |
| Wayne M. Rancourt     |       | 8/11/09        |       | 0             |       | 171,150    |       | 385,088     |       |
|                  |       |           |       |          |       |       |       |        |       |
| David G. Gadda        |       | 8/11/09        |       | 0             |       | 135,000    |       | 303,750     |       |
|                       |            |                |            |               |            |            |            |             |            |  |  |  |

 

----

(1)        Mr. McDougall’spayment formula was prorated to reflect 7.5 months of participation during2009.

 

122

----

Table of Contents

 

***Outstanding Equity Awards atFiscal Year-End***

 

The following table reflects the number of the NamedExecutive Officers’ 2004 Series C equity units, 2006 Series C equityunits, and 2009 Series C equity units that had not vested as of December 31,2009:

** **
| ** **          | ** ** | **Stock  Awards**                                                        | ** ** |
|---------------------|------------|--------------------------------------------------------------------------|------------|
| **Name**            | ** ** | **Number  of Shares or Units of  Stock That Have Not Vested********(#)** | ** ** | **Value  of Shares or Units of  Stock That Have Not Vested********($)(1)** | ** ** |
|                |       |                                                                     |       |   |   |
| Duane  C. McDougall |       | 3,045,048                                                                |       | $ | 841,248 |   |
| Thomas  E. Carlile  |       | 863,700                                                                  |       | 509,583 |   |
| Stanley  R. Bell    |       | 691,035                                                                  |       | 407,711 |   |
| Thomas  A. Lovlien  |       | 306,764                                                                  |       | 180,991 |   |
| Wayne  M. Rancourt  |       | 121,476                                                                  |       | 71,671 |   |
| David  G. Gadda     |       | 219,881                                                                  |       | 44,655 |   |
|                     |            |                                                                          |            |  |  |  |

 

----

(1)                                  Because theseunits are not publicly traded, there was no ascertainable market value for theunits. Accordingly, the values reflect the amount which would have been payableunder the terms of the Management Equity Plan if the Named Executive Officer’semployment were terminated as of December 31, 2009, other than for causeand the company elected to exercise its repurchase option under the plan.

 

For a discussion of the rules of the plangoverning vesting of the equity units described above, see “Long-Term IncentiveCompensation (Management Equity Plan and 2010 Cash Long-Term Incentive Plan)”in “Compensation Discussion and Analysis.”

 

***Option Exercises and Stock Vested***

 

The following table reflectsthe number of the Named Executive Officers’ 2004 Series C equity units and2006 Series C equity units that vested during 2009:

** **
| ** **          | ** ** | **Stock  Awards**                                           | ** ** |
|---------------------|------------|-------------------------------------------------------------|------------|
| **Name**            | ** ** | **Number  of Shares Acquired********on Vesting********(#)** | ** ** | **Value  Realized********on Vesting********($)(1)** | ** ** |
|                |       |                                                        |       |   |   |
| Duane  C. McDougall |       | 3,241,261                                                   |       | $ | 919,669 |   |
| Thomas  E. Carlile  |       | 419,243                                                     |       | 247,353 |   |
| Stanley  R. Bell    |       | 335,428                                                     |       | 197,902 |   |
| Thomas  A. Lovlien  |       | 148,905                                                     |       | 87,854 |   |
| Wayne  M. Rancourt  |       | 58,969                                                      |       | 34,792 |   |
| David  G. Gadda     |       | 106,733                                                     |       | 21,679 |   |
|                     |            |                                                             |            |  |  |  |

 

----

(1)                                  Because theseunits are not publicly traded, there was no ascertainable market value for theunits on the vesting date. Accordingly, the values reflect amounts which wouldhave been payable under the terms of the Management Equity Plan if the NamedExecutive Officer’s employment were terminated other than for cause and thecompany elected to exercise its repurchase option under the plan. None of theseamounts were in fact realized.

 

For a discussion of the rules of the plangoverning vesting of the equity units described above, see “Long-Term IncentiveCompensation (Management Equity Plan and 2010 Cash Long-Term Incentive Plan)” in“Compensation Discussion and Analysis.”

 

123

----

Table of Contents

 

***Pension Benefits***

 

The following table reflects the present value ofaccumulated benefits payable to Messrs. Carlile, Bell, Lovlien, Rancourt,and Gadda, including the number of years of service credited to each of them,and amounts actually distributed to them during 2009 under the Salaried PensionPlan, the SUPP, and the SERP. Mr. McDougall was not eligible toparticipate in the company’s pension plans. Mr. Bell did not participatein the SERP because he has exceeded the maximum age under which benefits arepayable under that plan. Mr. Gadda does not participate in the SERPbecause he was not an officer of OfficeMax prior to the Forest ProductsAcquisition.

 
| **Name**            | ** ** | **Plan  Name**        | ** ** | **Number  of  Years  Credited  Service********(#)(1)** | ** ** | **Present  Value  of  Accumulated  Benefit********($)(2)** | ** ** | **Payments  During Last  Fiscal Year********($)(3)** | ** ** |
|---------------------|------------|-----------------------|------------|--------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------|------------|
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| Duane  C. McDougall |       | Salaried Pension Plan |       | —                                                 |       | $                                                          | —     |                                                 | $          | — |   |
|                |       | SUPP                  |       | —                                                 |       | —                                                     |       | —                                               |       |
|                |       | SERP                  |       | —                                                 |       | —                                                     |       | —                                               |       |
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| Thomas  E. Carlile  |       | Salaried Pension Plan |       | 37                                                     |       | 1,103,196                                                  |       | —                                               |       |
|                |       | SUPP                  |       | 37                                                     |       | 1,061,670                                                  |       | 17,214                                               |       |
|                |       | SERP                  |       | 37                                                     |       | 728,137                                                    |       | —                                               |       |
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| Stanley  R. Bell    |       | Salaried Pension Plan |       | 39                                                     |       | 1,789,804                                                  |       | —                                               |       |
|                |       | SUPP                  |       | 39                                                     |       | 1,379,703                                                  |       | 48,581                                               |       |
|                |       | SERP                  |       | 39                                                     |       | —                                                     |       | —                                               |       |
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| Thomas  A. Lovlien  |       | Salaried Pension Plan |       | 31                                                     |       | 568,522                                                    |       | —                                               |       |
|                |       | SUPP                  |       | 31                                                     |       | 527,905                                                    |       | 23,612                                               |       |
|                |       | SERP                  |       | 31                                                     |       | 693,793                                                    |       | —                                               |       |
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| Wayne  M. Rancourt  |       | Salaried Pension Plan |       | 25                                                     |       | 263,226                                                    |       | —                                               |       |
|                |       | SUPP                  |       | 25                                                     |       | 104,231                                                    |       | 24,320                                               |       |
|                |       | SERP                  |       | 25                                                     |       | 192,522                                                    |       | —                                               |       |
|                |       |                  |       |                                                   |       |                                                       |       |                                                 |       |
| David  G. Gadda     |       | Salaried Pension Plan |       | 34                                                     |       | 621,583                                                    |       | —                                               |       |
|                |       | SUPP                  |       | 34                                                     |       | 459,823                                                    |       | 38,439                                               |       |
|                |       | SERP                  |       | 34                                                     |       | —                                                     |       | —                                               |       |
|                     |            |                       |            |                                                        |            |                                                            |            |                                                      |            |  |  |

 

----

(1)                                  Number of yearscredited service for Messrs. Carlile, Bell, Lovlien, Rancourt, and Gaddainclude amounts attributable to employment with OfficeMax prior to the ForestProducts Acquisition.

 

(2)                                  These valueswere calculated on the same basis and using the same assumptions used in thecompany’s financial statements except that the assumed retirement age for Messrs. Carlile,Lovlien, and Rancourt were the later of their current age or the earliest ageat which they could qualify for retirement under the SERP. See Note 12,Retirement and Benefit Plans, of the Notes to consolidated Financial Statementsin “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.Mr. Gadda’s accumulated benefit under the Salaried Pension Plan and theSUPP is net of an offset equal to his accumulated benefit through November of1994 when he resigned from the predecessor company, OfficeMax, to join aCanadian affiliate which assumed his pension obligations accrued through suchdate. When Mr. Gadda rejoined OfficeMax in 1997, his service prior to November 1994was credited subject to the offset.

 

(3)                                  Distributions toMessrs Carlile, Lovlien, Bell, Rancourt, and Gadda during 2009 were madepursuant to an amendment to the company’s SUPP and its SERP, under whichamounts earned pursuant to such plans during 2009 would have been subject totax under Section 457A of the Internal Revenue Code. Distributions weremade in December 2009.  

 

For more information concerning our pension plans, see“Defined Benefit Pension Benefits” under “Other Compensation and Benefit Plans”in “Compensation Discussion and Analysis*.”*

 

124

----

Table of Contents

 

***Nonqualified Deferred Compensation***

 

All of our Named Executive Officers participated inour Deferred Compensation Plan during 2009, and all such officers elected tohave matching contributions available under our 401(k) plan made to thedeferred compensation plan. The matching contribution for each Named ExecutiveOfficer was equal to $0.70 on the dollar up to the first 6% of eligiblecompensation earned through April 1, 2009. In addition, Mr. McDougallreceived an additional matching contribution equal to $0.30 for each dollarcontributed up to the first 6% of his eligible compensation. This companycontribution was available to all salaried employees who, like Mr. McDougall,were not eligible for our defined benefit pension plan.

 
| **Name**            | ** ** | **Executive  Contributions  in Last FY********($)(1)** | ** ** | **Company  Contributions  in Last FY********($)(2)** | ** ** | **Aggregate  Earnings********in Last FY********($)(3)** | ** ** | **Aggregate    withdrawals/********Distributions********($)(4)** | ** ** | **Aggregate  Balance********at FYE********($)(5)** | ** ** |
|---------------------|------------|--------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------------------------|------------|----------------------------------------------------|------------|
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| Duane  C. McDougall |       | $                                                      | 34,359     |                                                 | $          | 18,794                                                  |       | $                                                                | 2,148      |                                               | $          | 55,302 |   | $ | 55,302 |   |
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| Thomas  E. Carlile  |       | 43,535                                                 |       | 12,204                                               |       | 27,465                                                  |       | 58,311                                                           |       | 386,139                                            |       |
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| Stanley  R. Bell    |       | 58,000                                                 |       | 11,130                                               |       | 57,574                                                  |       | 72,453                                                           |       | 786,892                                            |       |
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| Thomas  A. Lovlien  |       | 51,702                                                 |       | 8,485                                                |       | 31,471                                                  |       | 62,908                                                           |       | 441,524                                            |       |
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| Wayne  M. Rancourt  |       | 23,706                                                 |       | 6,750                                                |       | 14,776                                                  |       | 31,888                                                           |       | 208,616                                            |       |
|                |       |                                                   |       |                                                 |       |                                                    |       |                                                             |       |                                               |       |
| David  G. Gadda     |       | 38,670                                                 |       | 6,791                                                |       | 22,709                                                  |       | 47,571                                                           |       | 318,842                                            |       |
|                     |            |                                                        |            |                                                      |            |                                                         |            |                                                                  |            |                                                    |            |  |  |  |  |  |

 

----

(1)                                  These amounts are included, as applicable, inthe “2009 Salary” column, the “2009 Bonus” column, or the “2009 Non-EquityIncentive Plan Compensation” column of the “Summary Compensation Table.”

 

(2)                                  These amounts are included in the “2009 AllOther Compensation” column of the “Summary Compensation Table.”

 

(3)                                  The above-market portion of these amounts isincluded in the “2009 Change in Pension Value and Nonqualified DeferredCompensation Earnings” column of the “Summary Compensation Table*.*”

 

(4)                                  Amounts reportedin this column consisted of distributions made pursuant to an amendment to theDeferred Compensation Plan, under which distributions were made in December 2009of amounts earned due to 2009 service that were contributed to the plan byparticipants or the company, together with any interest earned on such amounts,to the extent such amounts were taxable under Section 457A.

 

(5)                                  Amounts reportedin this column, which are net of the distribution disclosed in the priorcolumn, are disclosed in the “Summary Compensation Table” of this Form 10-Kand in the “Summary Compensation Table” of prior years’ Form 10-Ks(depending on when such compensation was earned) or, in respect to earnings onsuch account not in excess of market rates, in this “Nonqualified DeferredCompensation” table and in “Nonqualified Deferred Compensation”**tables of prior years’ Form 10-Ks to the extent thatthe Named Executive Officer was a Named Executive Officer in the year in whichsuch compensation was earned.

 

For more information concerning our nonqualifieddeferred compensation plan, see “Nonqualified Deferred Compensation” under “OtherCompensation and Benefit Plans” in “Compensation Discussion and Analysis.”

 

***Agreements With, and Potential Payments to, Named Executive Officers onTermination of Employment***

 

The following tables reflect an estimate of thecompensation the company would have been required to pay in the event oftermination of these employees with the company due to:

 

·                  Voluntary termination with good reason;

 

·                  Involuntary termination without cause;

 

125

----

Table of Contents

 

·                  For cause termination or voluntary termination withoutgood reason;

 

·                  Death; or

 

·                  Disability

 

The amounts shown for Messrs. Carlile, Bell,Lovlien, Rancourt, and Gadda assume that such termination was effective as of December 31,2009. The actual amounts the company would have been required to pay on otherdates may only be determined at the time of separation from the company andwill accordingly vary from those disclosed here, which are based on ahypothetical December 31, 2009, termination. The amounts disclosed here donot include amounts earned by the executive officer through that time as basesalary, any bonuses approved by the committee prior to that date, and paymentsearned prior to that date as Awards earned during 2009 pursuant to our 2009Incentive and Performance Plan, nor do they include amounts payable pursuant tothe 401(k), deferred compensation, or pension plans. Such amounts are notincluded because neither their amount nor the timing of their payment isaffected by the fact or the nature of the termination of employment. Disclosureof amounts earned during 2009 as base salary, bonuses, and Awards under the2009 Incentive and Performance Plan may be found in the “Summary CompensationTable.” Pension benefits and deferred compensation arrangements are describedunder the headings “Pension Benefits*”* and “NonqualifiedDeferred Compensation,” respectively.

 

The amounts reported for Mr. McDougall reflectamounts actually paid to him as a result of his August 2009 resignation ofhis position as chief executive officer.

 

The availability of severance payments and continuedhealthcare and insurance benefits beyond termination of employment iscontractually conditioned for each of our Named Executive Officers on theirprovision to the company of a release of claims arising from their employmentand the termination thereof and their performance of contractualconfidentiality, nonsolicitation, and nondisparagement obligations contained intheir employment or severance agreements with the company as well as payment ofapplicable contributions for healthcare and insurance benefits. The paymentsdescribed in the tables and textual materials that follow are provided for,with respect to Mr. McDougall, by his Employment Agreement; with respectto Messrs. Lovlien and Bell, by the terms of their Severance Agreementsand their Retention Award Agreements with the company; with respect to Messrs. Carlile,Rancourt, and Gadda, by their Severance Agreements with the company; and forall such Named Executive Officers, by the terms of the Management Equity Plan.For a description of these contractual arrangements, see “Long-Term IncentiveCompensation (Management Equity Plan and 2010 Cash Long-Term Incentive Plan)”and “Agreements With, and Potential Payments to, Named Executive Officers” in “CompensationDiscussion and Analysis.”

 

126

----

Table of Contents

 

**Duane C. McDougall**

 

Mr. McDougall’sresignation from his position as chief executive officer was a voluntarytermination without good reason, as defined in his Employment Agreement. Underthe terms of his Employment Agreement, Mr. McDougall received noadditional compensation beyond payment of base salary earned through theeffective date of his termination. He also receives ongoing compensation forserving as the chairman of our board of directors. For 2009, such ongoingcompensation is included in the compensation reported in the “SummaryCompensation Table.”

 

127

----

Table of Contents

 

**Thomas E. Carlile**

 
| **Benefit**                                                                 | ** ** | **Voluntary  Termination  With Good  Reason** | ** **    | **Involuntary********Termination********Without********Cause** | ** ** | **For  Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Death** | ** ** | **Disability** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------------------------|---------------|----------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-----------|------------|----------------|------------|
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Base  salary  (2 x base salary of $700,000)                                 |       | $                                             | 1,400,000     |                                                           | $          | 1,400,000                                                                      |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Incentive  and Performance Plan  (2 x target 100% Award)                    |       | 1,400,000                                     |          | 1,400,000                                                      |       | —                                                                         |       | —    |       | —         |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)                  |       | 30,468                                        |          | 30,468                                                         |       | —                                                                         |       | —    |       | —         |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  — healthcare, disability, and accident (for 18 months) |       | 11,113                                        |          | 11,113                                                         |       | —                                                                         |       | —    |       | —         |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Financial  counseling  (for 18 months)                                 |       | 7,500                                         |          | 7,500                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Unused  paid time off   (80 hours)                                     |       | 26,923                                        |          | 26,923                                                         |       | 26,923                                                                         |       | 26,923    |       | 26,923         |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Repurchase  of management equity units                                      |       | —                                        |          | —                                                         |       | —                                                                         |       | 1,846,842 |       | 1,846,842      |       |
|                                                                        |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| **TOTAL**                                                                   | ** ** | **$**                                         | **2,876,004** | ** **                                                     | **$**      | **2,876,004**                                                                  | ** ** | **$**     | **26,923** | ** **     | **$**      | **1,873,765** | ** ** | **$** | **1,873,765** | ** ** |

 

128

----

Table of Contents

 

**Stanley R. Bell**

 
| **Benefit**                                                            | ** ** | **Voluntary  Termination  With Good  Reason** | ** **    | **Involuntary********Termination********Without********Cause** | ** ** | **For  Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Death** | ** ** | **Disability** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------------------------|---------------|----------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-----------|------------|----------------|------------|
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Base  salary(2 x base salary of $420,000)                              |       | $                                             | 840,000       |                                                           | $          | 840,000                                                                        |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Incentive  and Performance Plan  (2 x target 55% Award)                |       | 462,000                                       |          | 462,000                                                        |       | —                                                                         |       | —    |       | —         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Retention  Agreement Payment  (1 x base salary of $420,000)            |       | —                                        |          | 420,000                                                        |       | —                                                                         |       | 71,822    |       | 71,822         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)             |       | 66,221                                        |          | 66,221                                                         |       | —                                                                         |       | —    |       | —         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  — healthcare, disability, and accident (for 18 months) |       | 11,113                                        |          | 11,113                                                         |       | —                                                                         |       | —    |       | —         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Financial  counseling  (for 18 months)                            |       | 7,500                                         |          | 7,500                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Unused  paid time off   (168 hours)                               |       | 33,923                                        |          | 33,923                                                         |       | 33,923                                                                         |       | 33,923    |       | 33,923         |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Repurchase  of managementequity units                                  |       | —                                        |          | —                                                         |       | —                                                                         |       | 1,526,659 |       | 1,526,659      |       |
|                                                                   |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| **TOTAL**                                                              | ** ** | **$**                                         | **1,420,757** | ** **                                                     | **$**      | **1,840,757**                                                                  | ** ** | **$**     | **33,923** | ** **     | **$**      | **1,632,404** | ** ** | **$** | **1,632,404** | ** ** |

 

129

----

Table of Contents

 

**Thomas A. Lovlien**

 
| **Benefit**                                                                | ** ** | **Voluntary  Termination  With Good  Reason** | ** **    | **Involuntary********Termination********Without********Cause** | ** ** | **For  Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Death** | ** ** | **Disability** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------|---------------|----------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-----------|------------|----------------|------------|
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Base  salary  (2 x base salary of $420,000)                                |       | $                                             | 840,000       |                                                           | $          | 840,000                                                                        |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Incentive  and Performance Plan  (2 x target 55% Award)                    |       | 462,000                                       |          | 462,000                                                        |       | —                                                                         |       | —    |       | —         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Retention  Agreement Payment  (1 x base salary of $420,000)                |       | —                                        |          | 420,000                                                        |       | —                                                                         |       | 46,969    |       | 46,969         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)                 |       | 37,994                                        |          | 37,994                                                         |       | —                                                                         |       | —    |       | —         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  — healthcare, disability,and accident (for 18 months) |       | 9,943                                         |          | 9,943                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Financial  counseling  (for 18 months)                                |       | 7,500                                         |          | 7,500                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Unused  paid time off  (328 hours)                                    |       | 66,231                                        |          | 66,231                                                         |       | 66,231                                                                         |       | 66,231    |       | 66,231         |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| Repurchase  of managementequity units                                      |       | —                                        |          | —                                                         |       | —                                                                         |       | 736,214   |       | 736,214        |       |
|                                                                       |       |                                          |          |                                                           |       |                                                                           |       |      |       |           |       |
| **TOTAL**                                                                  | ** ** | **$**                                         | **1,423,668** | ** **                                                     | **$**      | **1,843,668**                                                                  | ** ** | **$**     | **66,231** | ** **     | **$**      | **849,414** | ** ** | **$** | **849,414** | ** ** |

 

130

----

Table of Contents

 

**Wayne M. Rancourt**

 
| **Benefit**                                               | ** ** | **Voluntary  Termination  With Good  Reason** | ** **    | **Involuntary  Termination  Without********Cause** | ** ** | **For  Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Death** | ** ** | **Disability** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------|---------------|----------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-----------|------------|----------------|------------|
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Base  salary  (2 x base salary of $350,000)               |       | $                                             | 700,000       |                                               | $          | 700,000                                                                        |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Incentive  and Performance Plan  (2 x target 55% Award)   |       | 385,000                                       |          | 385,000                                            |       | —                                                                         |       | —    |       | —         |       |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Insurance  — life and AD&D  (for 18 months) |       | 16,801                                        |          | 16,801                                             |       | —                                                                         |       | —    |       | —         |       |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Financial  counseling  (for 18 months)               |       | 7,500                                         |          | 7,500                                              |       | —                                                                         |       | —    |       | —         |       |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Unused  paid time off  (196 hours)                   |       | 32,981                                        |          | 32,981                                             |       | 32,981                                                                         |       | 32,981    |       | 32,981         |       |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| Repurchase  of management equity units                    |       | —                                        |          | —                                             |       | —                                                                         |       | 292,852   |       | 292,852        |       |
|                                                      |       |                                          |          |                                               |       |                                                                           |       |      |       |           |       |
| **TOTAL**                                                 | ** ** | **$**                                         | **1,142,282** | ** **                                         | **$**      | **1,142,282**                                                                  | ** ** | **$**     | **32,981** | ** **     | **$**      | **325,833** | ** ** | **$** | **325,833** | ** ** |

 

131

----

Table of Contents

 

**David G. Gadda**

 
| **Benefit**                                                           | ** ** | **Voluntary  Termination  With Good  Reason** | ** **  | **Involuntary********Termination********Without********Cause** | ** ** | **For  Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Death** | ** ** | **Disability** | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------------------------------|-------------|----------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-----------|------------|----------------|------------|
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Base  salary  (1 x base salary of $300,000)                           |       | $                                             | 300,000     |                                                           | $          | 300,000                                                                        |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Incentive  and Performance Plan  (1 x target 45% Award)               |       | 135,000                                       |        | 135,000                                                        |       | —                                                                         |       | —    |       | —         |       |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Insurance  — healthcare, disability,and accident (for 12 months) |       | 9,617                                         |        | 9,617                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Financial  counseling  (for 12 months)                           |       | 5,000                                         |        | 5,000                                                          |       | —                                                                         |       | —    |       | —         |       |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Unused  paid time off  (60 hours)                                |       | 8,654                                         |        | 8,654                                                          |       | 8,654                                                                          |       | 8,654     |       | 8,654          |       |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| Repurchase  of managementequity units                                 |       | —                                        |        | —                                                         |       | —                                                                         |       | 202,767   |       | 202,767        |       |
|                                                                  |       |                                          |        |                                                           |       |                                                                           |       |      |       |           |       |
| **TOTAL**                                                             | ** ** | **$**                                         | **458,271** | ** **                                                     | **$**      | **458,271**                                                                    | ** ** | **$**     | **8,654**  | ** **     | **$**      | **211,421** | ** ** | **$** | **211,421** | ** ** |

 

132

----

Table of Contents

 

***Compensationof Directors***

 

Thecompany has, since shortly after its inception, included one or more directorson its board who are not employees of the company; its major investor, MadisonDearborn Partners, LLC; or its significant minority investor, OfficeMaxIncorporated, in an effort to ensure that the deliberations of its boardreflect a broader range of perspective and experience than are available solelyfrom the chief executive officer of the company and OfficeMax and MDPemployees. The compensation levels are believed by the compensation committeeto be comparable to those paid by other companies of similar size forindependent directors. The compensation earned during 2009 by Mr. Madiganis set forth in the following table:

 
| **Name**        | ** ** | **Fees Earned  or Paid in  Cash** | ** ** | **Stock Awards** | ** ** | **Change in  Pension Value  and  Nonqualified  Deferred  Compensation  Earnings(1)** | ** ** | **All Other  Compensation** | ** ** | **Total** | ** ** |
|-----------------|------------|-----------------------------------|------------|------------------|------------|--------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------|------------|
|            |       |                              |       |             |       |                                                                                 |       |                        |       |      |       |
| John W. Madigan |       | $                                 | 71,000     |             | $          | —                                                                               |       | $                           | 8,154      |      | $          | — |   | $ | 79,154 |   |
|                 |            |                                   |            |                  |            |                                                                                      |            |                             |            |           |            |  |  |  |  |  |

 

----

(1)           We do not provide our directors with pensionbenefits. The amount reported in this column reflects the above-market portionof the interest Mr. Madigan earned during 2009 under our DirectorsDeferred Compensation Plan.

 

***Directors Deferred CompensationPlan***

 

We maintain anonqualified Directors Deferred Compensation Plan, which allows each directorwho receives compensation for board service to defer all or a portion of suchcompensation in a calendar year. Amounts deferred are credited with imputedinterest at a rate equal to 130% of Moody’s Composite Average of Yields onCorporate Bonds. Participants may receive payment in cash in a lump sum or inannual installments following their service on the board. No directordeferred any of their 2009 fees under this plan. Mr. Madigan has deferreda portion of his fees in prior years.

 

***ITEM 12.******             ******SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS***

 

The following table sets forth information as of February 28,2010, regarding the beneficial ownership of our equity units held by:

 

·      Each person that is a beneficial owner of more than 5%of each series of our equity units;

 

·      Each of our Named Executive Officers;

 

·      Each of our directors; and

 

·      All executive officers and directors as a group.

 

Beneficial ownership of the equity units listed in thetable for Madison Dearborn Partners and members of our management representssuch person’s proportional interest in our total outstanding equity units ofthe series shown. Except as noted in the preceding sentence, beneficialownership of the equity units listed in the table has been determined inaccordance with the applicable rules and regulations promulgated under theExchange Act and generally includes voting or investment power over securities.Except in cases where community property laws apply or as indicated in thefootnotes to the table, we believe that each equity holder identified in thetable possesses sole voting and investment power over all equity units shown asbeneficially owned by such equity holder. Percentage of beneficial ownership isbased on our total equity units outstanding of each series as follows:

 

·      Series B equity units — 535,323,527

 

·      2004 Series C equity units — 20,422,372

 

133

----

Tableof Contents

 

·      2006 Series C equity units — 1,727,869

 

·      2009 Series C equity units — 6,072,126

 

Unless indicated otherwise in the footnotes, theaddress of each individual listed in the table is c/o Boise Cascade Holdings,L.L.C., 1111 West Jefferson Street, Suite 300, Boise, Idaho 83702-5389.

 

None of the equity units listed in the table arepledged as security pursuant to any pledge arrangement or agreement.Additionally, there are no arrangements with respect to the equity units, theoperation of which may result in a change in control of the company.

 
| ** **                                                              | ** ** | **Series B  Equity Units** | ** ** | **2004  Series C  Equity Units** | ** ** | **2006  Series C  Equity Units** | ** ** | **2009  Series C  Equity Units** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| **Name of Beneficial Owner**                                            | ** ** | **Number**                      | ** ** | **Percent  of Total**                 | ** ** | **Number**                            | ** ** | **Percent  of Total**                 | ** ** | **Number** | ** ** | **Percent  of Total** | ** ** | **Number** | ** ** | **Percent  of Total** | ** ** |
| ** **                                                              |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| **Principal  Equity Holders:**                                          |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Forest Products  Holdings, L.L.C.(1)                                    |       | 426,323,527                     |       | 79.6                                  | %          | 20,422,372                            |       | 100                                   | %          | 1,727,869 |   | 100 | % | 6,072,126 |   | 100 | % |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Madison Dearborn  Partners(1)                                           |       | 419,556,601                     |       | 78.4                                  |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| OfficeMax  Incorporated(2)                                              |       | 109,000,000                     |       | 20.4                                  |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| **Named  Executive Officers****and Directors:**                         |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Duane C.  McDougall                                                     |       | —                          |       | —                                |       | —                                |       | —                                |       | 400,000 |   | 23.2 |   | 6,072,126 |   | 100 |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Thomas E.  Carlile(5)                                                   |       | 437,379                         |       | *                                     |       | 2,396,000                             |       | 11.7                                  |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Stanley R.  Bell(5)                                                     |       | 380,777                         |       | *                                     |       | 1,917,000                             |       | 9.4                                   |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Thomas A.  Lovlien(5)                                                   |       | 205,825                         |       | *                                     |       | 851,000                               |       | 4.2                                   |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Wayne M.  Rancourt(5)                                                   |       | 82,330                          |       | *                                     |       | 337,000                               |       | 1.7                                   |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| David G. Gadda(5)                                                       |       | 64,063                          |       | *                                     |       | 209,980                               |       | 1.0                                   |       | 400,000 |   | 23.2 |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Matthew R.  Broad(2)                                                    |       | —                          |       | —                                |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| John W.  Madigan(4)                                                     |       | 1,000,000                       |       | *                                     |       | —                                |       | —                                |       | 400,000 |   | 23.2 |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Christopher J.  McGowan(3)                                              |       | —                          |       | —                                |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Samuel M.  Mencoff(6)                                                   |       | 419,556,601                     |       | 78.4                                  |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Matthew W.  Norton(3)                                                   |       | —                          |       | —                                |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| Thomas S.  Souleles(3)                                                  |       | —                          |       | —                                |       | —                                |       | —                                |       | — |   | — |   | — |   | — |   |
|                                                                    |       |                            |       |                                  |       |                                  |       |                                  |       |   |   |   |   |   |   |   |   |
| **All  Executive Officers and****Directors as a Group****(14 Persons)** |       | 421,817,024                     |       | 78.8                                  |       | 5,942,620                             |       | 29.1                                  |       | 1,200,000 |   | 69.5 |   | 6,072,126 |   | 100 |   |

 

----

***** Less than 1%.

 

(1)           Forest ProductsHoldings, L.L.C. (FPH) is controlled by Madison Dearborn Capital Partners IV,L.P. (MDCP IV). Madison Dearborn Partners IV, L.P. (MDP IV) is the generalpartner of MDCP IV. John A. Canning, Jr., Paul J. Finnegan, andSamuel M. Mencoff are the sole members of a limited partner committee ofMDP IV (which is the general partner of MDCP IV) that has the power, acting bymajority vote, to vote or dispose of the shares held by MDCP IV. The addressfor each of MDCP IV and MDP IV are c/o Madison Dearborn Partners, LLC,70 W. Madison Street, Suite 4600, Chicago, Illinois 60602. Thecurrent board of directors of FPH comprises Messrs. McDougall, McGowan,Mencoff, Norton, and Souleles. The address for FPH is c/o Boise CascadeHoldings, L.L.C., 1111 West Jefferson Street, Suite 300, P.O. Box 50,Boise, Idaho 83728. 

 

(2)           The address forOfficeMax Incorporated and Mr. Broad is 263 Shuman Boulevard, Naperville,Illinois 60563.

 

(3)           Messrs. Souleles,McGowan, and Norton are employed by Madison Dearborn Partners, LLC (MDP), andeach has a pecuniary interest in the units held by FPH. Messrs. Souleles,McGowan, and Norton expressly disclaim beneficial ownership except to theextent of their pecuniary interest therein. The address of Messrs. Souleles,McGowan, and Norton is c/o Madison Dearborn Partners, LLC, Three First NationalPlaza, Suite 4600, 70 West Madison Street, Chicago, Illinois 60602.

 

134

----

Table of Contents

 

(4)           Mr. Madiganis an investor in FPH, and the Series B equity units listed in the tablerepresent Mr. Madigan’s proportionate ownership interest in the units heldby FPH. Mr. Madigan does not exercise voting or investment power over anyof the units held by FPH. Mr. Madigan’s address is 205 North MichiganAvenue, Suite 4300, Chicago, Illinois 60601-5927.

 

(5)           Messrs. Carlile,Bell, Lovlien, Rancourt, and Gadda are investors in FPH pursuant to the termsof our Management Plan, and the equity units listed in the table represent suchindividuals’ proportionate interest of the equity units of Boise CascadeHoldings, L.L.C., of like series and issue year held by FPH. Such individualsdo not exercise voting power over any of our equity units held by FPH. Theaddress for such individuals is c/o Boise Cascade Holdings, L.L.C., 1111 WestJefferson Street, Suite 300, P.O. Box 50, Boise, Idaho 83728.

 

(6)           Mr. Mencoffis a co-CEO of MDP. As a member of the limited partner committee of MDP IV, Mr. Mencoffmay be deemed to share beneficial ownership of the units owned by FPH. Mr. Mencoffexpressly disclaims beneficial ownership of the units owned by FPH except tothe extent of his pecuniary interest therein. The address of Mr. Mencoffis c/o Madison Dearborn Partners, LLC, Three First National Plaza, Suite 4600,70 West Madison Street, Chicago, Illinois 60602.

*** ***

***ITEM13.******             ******CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE***

 

***OurPolicies***

 

We have establishedprocedures for the review of transactions and relationships between us, ourdirectors, our executive officers, and other affiliates. Our board of directorshas charged the audit committee with the responsibility of reviewing andinvestigating any conflicts of interest involving management and our board ofdirectors. Further, the audit committee reviews and investigates adherence toour Code of Ethics, which requires that our employees, officers, and agents befree from actual or apparent conflicts of interest with the company. The codealso prohibits employees, officers, and agents from competing with the company,using their positions for personal gain, or appropriating businessopportunities presented to the company.

 

# ***OfficeMaxand the Forest Products Acquisition***

# * *

In 2004, our parent company, Forest Products Holdings(FPH), acquired the forest products and paper assets of OfficeMax (the ForestProducts Acquisition). A portion of the consideration paid to OfficeMax was 109million shares of our Series B equity units, which represented at December 31,2009, 20.4% of our voting equity securities, with the remainder held by FPH. Inconnection with the Forest Products Acquisition, FPH and/or its subsidiaries(including us) entered into a number of agreements, including an Asset PurchaseAgreement, a Securityholders Agreement, and a Registration Rights Agreementwith OfficeMax and/or its subsidiaries.

 

*Asset Purchase Agreement*

 

Under the Asset Purchase Agreement, OfficeMaxindemnifies us for specified pre-Forest Products Acquisition liabilities,including environmental, asbestos, tax, benefits, and other legacy liabilities.

 

*Securityholders Agreement*

 

The Securityholders Agreement describes the rights and obligations of theparties regarding OfficeMax’s ownership of our equity units. TheSecurityholders Agreement:

 

·      Provides OfficeMax the right to appoint one director to our board ofdirectors;

 

·      Imposes conditions on the ability of OfficeMax to transfer our equityunits, including a requirement that it obtain consent of Forest ProductsHoldings L.L.C., which may be withheld in its reasonable discretion;

 

·      Provides OfficeMax with a right to participate in any sale made by FPH tothird parties of our equity units held by it (tag-along rights);

 

·      Obligates OfficeMax to consent to and participate inany sale of all or substantially all of our assets or equity approved by ourBoard of Directors (drag-along obligations);

 

135

----

Table of Contents

 

·      Provides OfficeMax with preemptive rights proportionalto its holdings of our equity units with respect to any issue of additionalequity units we may make;

 

·      Limits our ability to make distributions with respectto our Series B common equity units without consent by OfficeMax so longas it continues to hold our Series A equity units; and

 

·      Provides OfficeMax the right to require us torepurchase its holdings of our Series A equity units with the proceeds ofany public offering of our equity securities prior to the distribution of anyportion of such proceeds to the holders of our Series B equity units.

 

Subject to the provisions of the immediately preceding bullet point, theSecurityholders Agreement will terminate in a liquidation or dissolution of thecompany, in an initial public offering, or in a sale of all or substantiallyall of the company’s stock or assets.

 

*RegistrationRights Agreement*

 

Under the Registration Rights Agreement:

 

·      FPH has the right to demand that we effect anunlimited number of registrations of its equity interests, whether pursuant toa long-form registration statement or a short-form registration, and pay allexpenses, other than underwriting discounts and commissions, related to suchregistrations;

 

·      OfficeMax has the right to demand that we effect (a) sevenregistrations of its equity interests on a long-form registration statement andpay all expenses, other than underwriting discounts and commissions, related toany two of such registrations (with OfficeMax paying all expenses relating tothe other five such registrations) and (b) an unlimited number ofregistrations of its equity interests on a short-form registration statementand pay all expenses, other than underwriting discounts and commissions,related to such registrations; and

 

·      FPH and OfficeMax have the right to participate inregistrations of our equity interests effected by us, whether suchregistrations relate to an offering by us or by our equity holders;

 

*Additional Transactions*

 

During 2009, we purchased $0.4 million of officesupplies from OfficeMax.

 

***Other***

 

For a description ofother relationships the company has with its directors and executive officers,refer to “Item 10*.*Directors,Executive Officers, and Corporate Governance*”* and “Item 11*.*Executive Compensation” of this Form 10-K.

 

***ITEM14.******             ******PRINCIPAL ACCOUNTING FEES AND SERVICES***

 

KPMGLLP (KPMG) provides our audit committee with an engagement letter outlining thescope of proposed audit services for the year. The audit committee reviews theengagement letter and, if agreed to by the committee members, accepts it.

 

In addition to its auditservices for the annual financial statements, KPMG provides the company withother audit-related services (such as technical accounting research andconsultation). Management submits to the audit committee a list of proposedaudit-related and other nonaudit services and associated fees that itrecommends be provided by KPMG for the fiscal year. Management and KPMG eachconfirm to the committee that all the services on the list are permissibleunder applicable legal requirements. The committee reviews the proposedservices and fees and, if agreed to by committee members, approves thoseservices and associated fees. KPMG periodically informs the audit committee ofthe services it provides pursuant to this approval process.

 

136

----

Tableof Contents

 

KPMG must ensure that theaudit committee has preapproved all audit and nonaudit services. Our vicepresident and controller is responsible for tracking KPMG’s audit fees againstthe budget for such services and reports at least annually to the auditcommittee.

 

The company has neverused KPMG for any of the following nonaudit services:

 

·      Bookkeeping or other services related toour accounting records or financial statements;

 

·      Financial information systems design andimplementation;

 

·      Appraisal or valuation services, fairnessopinions, or contribution-in-kind reports;

 

·      Actuarial services;

 

·      Internal audit outsourcing services;

 

·      Management functions or human resources;

 

·      Broker or dealer, investment advisor, orinvestment banking services; or

 

·      Legal services and expert servicesunrelated to the audit.

 

Based on this review, thecommittee believes that KPMG’s provision of nonaudit services is compatiblewith maintaining its independence.

 

Thefollowing table sets forth the various fees for services provided by KPMG. Theaudit committee preapproved all of these services.

 

##### ***Fees Paid to the Independent Accountant***

 
| ** **              | ** ** | **Amounts** | ** ** |
|-------------------------|------------|-------------|------------|
| **Description**         | ** ** | **2009**    | ** ** | **2008** | ** ** |
|                    |       |        |       |   |   |
| Audit fees (a)          |       | $           | 1,004,000  |   | $ | 955,000 |   |
| Audit-related  fees (b) |       | —      |       | 750 |   |
| Tax fees (c)            |       | —      |       | — |   |
| All other fees  (d)     |       | —      |       | — |   |
|                         |            |             |            |  |  |  |  |

 

----

(a)           Professional audit services include KPMG’s audit ofthe company’s annual consolidated financial statements for 2009 and 2008; itsreview of the consolidated financial statements included in the company’s Forms10-Q; its audit of the company’s subsidiary annual consolidated financialstatements; assistance with registration statements, comfort letters, consents,and other services pertaining to Securities and Exchange Commission matters;and consultation on accounting standards.

 

(b)           Audit-related fees include attestation and otherservices traditionally performed by the registrant’s independent accountants.

 

(c)           None.

 

(d)           None.

 

137

----

Table of Contents

 

**PART IV**

 

***ITEM 15.******             ******EXHIBITS AND FINANCIAL STATEMENT SCHEDULES***

 

(a)           Thefollowing documents are filed as a part of this Form 10-K:

 

(1)           ConsolidatedFinancial Statements

 

TheConsolidated Financial Statements, the Notes to Consolidated FinancialStatements, and the Report of Independent Registered Public Accounting Firm forBoise Cascade Holdings, L.L.C., are presented in “Item 8. FinancialStatements and Supplementary Data” of this Form 10-K.

 

·              ConsolidatedBalance Sheets as of December 31, 2009 and 2008.

 

·              ConsolidatedStatements of Income (Loss) for the years ended December 31, 2009, 2008,and 2007. 

 

·              ConsolidatedStatements of Cash Flows for the years ended December 31, 2009, 2008, and2007. 

 

·              ConsolidatedStatements of Capital for the years ended December 31, 2009, 2008, and2007.

 

·              Notesto Consolidated Financial Statements.

 

·              Reportof Independent Registered Public Accounting Firm.

 

(2)           FinancialStatement Schedules

 

Allfinancial statement schedules have been omitted because they are inapplicable,not required, or shown in the consolidated financial statements and notes in“Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

 

(3)           Exhibits

 

Alist of the exhibits required to be filed as part of this report is set forthin the Index to Exhibits and is incorporated by reference.

 

(b)           SeeIndex to Exhibits. 

 

138

----

Tableof Contents

 

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.

 
|   | Boise Cascade Holdings,  L.L.C. |
|--------|---------------------------------|
|   |                            |
|   | By                              | /s/ Thomas E. Carlile |
|   |                            |   |
|   |                            | Thomas E. Carlile |
|   |                            | Chief Executive Officer |

 

Dated:  March 1,2010

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below on March 1,2010, by the following persons on behalf of the registrant and in thecapacities indicated.

 

| **Signature** | ** **                        | **Capacity** |
|---------------|-----------------------------------|--------------|
|          |                              |         |
| **(i)**       | **Principal Executive Officer:**  |         |   |
|          |                              |         |   |
|          | /s/ Thomas E. Carlile             |         | Chief Executive Officer |
|          |                              |         |   |
|          | Thomas E. Carlile                 |         |   |
|          |                              |         |   |
| **(ii)**      | **Principal Financial Officer:**  |         |   |
|          |                              |         |   |
|          | /s/ Wayne M. Rancourt             |         | Sr. Vice President,  Chief Financial Officer and Treasurer |
|          |                              |         |   |
|          | Wayne M. Rancourt                 |         |   |
|          |                              |         |   |
| **(iii)**     | **Principal Accounting Officer:** |         |   |
|          |                              |         |   |
|          | /s/ Bernadette M.  Madarieta      |         | Vice President and  Controller |
|          |                              |         |   |
|          | Bernadette M. Madarieta           |         |   |
|          |                              |         |   |
| **(iv)**      | **Directors:**                    |         |   |
|          |                              |         |   |
|          | /s/ Duane C. McDougall            |         | /s/ Christopher J. McGowan |
|          |                              |         |   |
|          | Duane C. McDougall,  Chairman     |         | Christopher J. McGowan |
|          |                              |         |   |
|          | /s/ Matthew R. Broad              |         | /s/ Matthew W. Norton |
|          |                              |         |   |
|          | Matthew R. Broad                  |         | Matthew W. Norton |
|          |                              |         |   |
|          | /s/ Thomas E. Carlile             |         | /s/ Thomas S. Souleles |
|          |                              |         |   |
|          | Thomas E. Carlile                 |         | Thomas S. Souleles |
|          |                              |         |   |
|          | /s/ John W. Madigan               |         |   |
|          |                              |         |   |
|          | John W. Madigan                   |         |   |
|          |                              |         |   |
|          | /s/ Samuel M. Mencoff             |         |   |
|          |                              |         |   |
|          | Samuel M. Mencoff                 |         |   |
|          |                              |         |   |

 

139

----

Table of Contents

 

**BOISECASCADE HOLDINGS, L.L.C.**

 

**INDEX TO EXHIBITS**

 

Filed or FurnishedWith This Form 10-K for the Year Ended December 31, 2009:

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 2.1                 |       | Asset Purchase  Agreement dated July 26, 2004, between Boise Cascade Corporation (now  OfficeMax Incorporated), Boise Southern Company, Minidoka Paper Company,  Forest Products Holdings, L.L.C., and Boise Land & Timber Corp., as  amended by First Amendment to Asset Purchase Agreement dated October 23,  2004, and as further amended by Second Amendment to Asset Purchase Agreement dated  October 28, 2004 |       | S-1  Amend. No. 3                  |       | 333-122770      |   | 2.1 |   | 5/2/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 2.2                 |       | Purchase and Sale  Agreement dated September 7, 2007, between Boise Cascade, L.L.C., Boise  Paper Holdings, L.L.C., Boise White Paper, L.L.C., Boise Packaging &  Newsprint, L.L.C., Boise Cascade Transportation Holdings Corp., Aldabra 2  Acquisition Corp., and Aldabra Sub LLC                                                                                                                                            |       | 8-K                                     |       | 333-122770      |   | 2.1 |   | 9/13/07 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 2.3                 |       | Amendment No. 1  (dated October 18, 2007) to Purchase and Sale Agreement dated  September 7, 2007, between Boise Cascade, L.L.C., Boise Paper Holdings,  L.L.C., Boise White Paper, L.L.C., Boise Packaging & Newsprint,  L.L.C., Boise Cascade Transportation Holdings Corp., Aldabra 2 Acquisition  Corp., and Aldabra Sub LLC                                                                                     |       | 8-K                                     |       | 333-122770      |   | 2.1 |   | 10/24/07 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 2.4                 |       | Amendment No. 2 to  Purchase and Sale Agreement, dated February 22, 2008, by and among Boise  Cascade, L.L.C., Boise Paper Holdings, L.L.C., Boise Packaging &  Newsprint, L.L.C., Boise White Paper, L.L.C., Boise Cascade Transportation  Holdings Corp., Aldabra 2 Acquisition Corp., and Aldabra Sub LLC                                                                                                              |       | 8-K                                     |       | 333-122770      |   | 10.5 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.1                 |       | Certificate of  Formation of Boise Cascade Holdings, L.L.C., dated December 20, 2005                                                                                                                                                                                                                                                                                                                                                    |       | 8-K                                     |       | 333-122770      |   | 3.1 |   | 12/27/05 |   |   |

 

140

----

Table of Contents

 
| ** **          | ** ** | ** **                                                                                                                                                                                                  | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.2                 |       | Second Amended and  Restated Operating Agreement of Boise Cascade Holdings, L.L.C., dated as of  November 10, 2006                                                                                     |       | 8-K                                     |       | 333-122770      |   | 3.1 |   | 11/16/06 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.3                 |       | Certificate of  Formation of Boise Cascade, L.L.C., dated July 26, 2004                                                                                                                                |       | S-4                                     |       | 333-125768      |   | 3.3 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.4                 |       | Operating Agreement of  Boise Cascade, L.L.C., effective September 20, 2004                                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.4 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.5                 |       | Certificate of  Incorporation of Boise Cascade Finance Corporation dated September 15, 2004                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.5 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.6                 |       | Bylaws of Boise Cascade Finance Corporation                                                                                                                                                                 |       | S-4                                     |       | 333-125768      |   | 3.6 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.7                 |       | Certificate of  Incorporation of Boise Land & Timber Corp. dated July 26, 2004                                                                                                                |       | S-4                                     |       | 333-125768      |   | 3.9 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.8                 |       | Bylaws of Boise  Land & Timber Corp.                                                                                                                                                               |       | S-4                                     |       | 333-125768      |   | 3.10 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.9                 |       | Certificate of  Formation of Boise Building Solutions Manufacturing, L.L.C., dated  August 6, 2004                                                                                                     |       | S-4                                     |       | 333-125768      |   | 3.15 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.10                |       | Operating Agreement of  Boise Building Solutions Manufacturing, L.L.C., effective September 20,  2004                                                                                                  |       | S-4                                     |       | 333-125768      |   | 3.16 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.11                |       | Certificate of  Formation of Boise Building Solutions Distribution, L.L.C., dated August 26,  2004                                                                                                     |       | S-4                                     |       | 333-125768      |   | 3.17 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.12                |       | Operating Agreement of  Boise Building Solutions Distribution, L.L.C., effective September 20,  2004                                                                                                   |       | S-4                                     |       | 333-125768      |   | 3.18 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.13                |       | Certificate of Amendment to the Certificate of  Incorporation of Boise Aviation Holdings, Inc., dated September 8,  2004 (changing name to Boise Building Solutions Manufacturing Holdings Corp.) |       | S-4                                     |       | 333-125768      |   | 3.19 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.14                |       | Bylaws of Boise  Building Solutions Manufacturing Holdings Corp.                                                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.20 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.15                |       | Amended and Restated  Certificate                                                                                                                                                                           |       | S-4                                     |       | 333-125768      |   | 3.21 |   | 6/13/05 |   |   |

 

141

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                               | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | of Incorporation of BC Chile Investment Corporation  dated October 27, 2004                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 3.16                |       | Amended and Restated  Bylaws of BC Chile Investment Corporation                                                                                                                                                                                                                                                                                                                                                                                          |       | S-4                                     |       | 333-125768      |   | 3.22 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 3.17                |       | Amended and Restated  Certificate of Incorporation of BC Brazil Investment Corporation dated  October 27, 2004                                                                                                                                                                                                                                                                                                                                      |       | S-4                                     |       | 333-125768      |   | 3.23 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 3.18                |       | Amended and Restated  Bylaws of BC Brazil Investment Corporation                                                                                                                                                                                                                                                                                                                                                                                         |       | S-4                                     |       | 333-125768      |   | 3.24 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 4                   |       | Indenture dated  October 29, 2004, between Boise Cascade, L.L.C., Boise Cascade Finance  Corporation, Boise Cascade Holdings, L.L.C., as Guarantor, the other  Guarantors named therein, and U.S. Bank National Association, as Trustee                                                                                                                                                                                                             |       | S-1                                     |       | 333-122770      |   | 4.3 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 9                   |       | None                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 10.1                |       | Registration Rights  Agreement dated October 29, 2004, between Boise Cascade Corporation (now  OfficeMax Incorporated), Forest Products Holdings, L.L.C., and Boise Cascade                                                                                                                                                                                                                                                                         |       | S-1                                     |       | 333-122770      |   | 10.5 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 10.2                |       | Loan and Security  Agreement, dated as of February 22, 2008, by and among Boise Cascade,  L.L.C., Boise Building Solutions Distribution, L.L.C. and Boise Building  Solutions Manufacturing, L.L.C., as borrowers, Boise Building Solutions  Manufacturing Holdings Corp., BC Chile Investment Corporation, and BC Brazil  Investment Corporation, as guarantors, the Lenders from time to time party  thereto, and Bank of America, N.A., as Agent |       | 8-K                                     |       | 333-122770      |   | 10.6 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 10.3                |       | First Amendment to Loan  and Security Agreement dated April 17, 2008                                                                                                                                                                                                                                                                                                                                                                                |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 4/21/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 10.4                |       | Second Amendment to  Loan and Security Agreement dated May 28, 2009                                                                                                                                                                                                                                                                                                                                                                                 |       | 8-K                                     |       | 333-122770      |   | 10.1 |   | 6/2/09 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
| 10.5                |       | Subordinated Guaranty,  dated as of February 22, 2008, by the                                                                                                                                                                                                                                                                                                                                                                                       |       | 8-K                                     |       | 333-122770      |   | 10.9 |   | 2/28/08 |   |   |

 

142

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                              | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                                            | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | subsidiary guarantors of Boise Inc., party thereto                                                                                                                                                                                                                                                      |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.6                |       | Promissory Note payable  to Boise Cascade, L.L.C., in aggregate principal amount of $41 million issued  by Boise Inc., a Delaware corporation f/k/a Aldabra 2 Acquisition Corp., and  each Subsidiary Obligor party thereto and related Subordinated Guaranty, each  dated as of February 22, 2008 |       | 8-K                                     |       | 333-122770      |   | 10.1 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.7                |       | Letter Agreement with  Boise Inc. and Boise Paper Holdings, L.L.C., dated May 22, 2008                                                                                                                                                                                                             |       | 8-K                                     |       | 333-122770      |   | 10.1 |   | 5/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.8                |       | Securities Purchase  Agreement dated June 10, 2008, between Boise Cascade Holdings, L.L.C.,  and each party listed as Purchaser on signature page                                                                                                                                                  |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 6/12/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.9                |       | Securityholders  Agreement dated October 29, 2004, between Boise Cascade Corporation (now  OfficeMax Incorporated), Forest Products Holdings, L.L.C., and Boise Cascade                                                                                                                            |       | 8-K                                     |       | 333-122770      |   | 10.2 |   | 8/2/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.10               |       | Stock Purchase Agreement  dated July 1, 2008, between BC Brazil Investment Corporation and Aracruz  Cellulose, S.A.                                                                                                                                                                                |       | 8-K                                     |       | 333-122770      |   | 10.1 |   | 7/2/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.11               |       | Form of Contingent  Value Rights Agreement among Terrapin Partners Venture Partnership, Boise  Cascade, L.L.C., Aldabra 2 Acquisition Corp., and Certain Institutional  Shareholders                                                                                                          |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 2/7/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.12               |       | Investor Rights  Agreement, dated as of February 22, 2008, by and between Aldabra 2  Acquisition Corp., Boise Cascade, L.L.C., Boise Cascade Holdings, L.L.C., and  other shareholder parties thereto                                                                                              |       | 8-K                                     |       | 333-122770      |   | 10.2 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.13               |       | Intellectual Property  License Agreement, dated as of February 22, 2008, by and between Boise  Cascade, L.L.C., and Boise Paper Holdings, L.L.C.                                                                                                                                                   |       | 8-K                                     |       | 333-122770      |   | 10.3 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 10.14               |       | Outsourcing Agreement,  dated as                                                                                                                                                                                                                                                                        |       | 8-K                                     |       | 333-122770      |   | 10.4 |   | 2/28/08 |   |   |

 

143

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                             | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                           | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | of February 22,  2008, by and between Boise Cascade, L.L.C., and Boise Paper Holdings, L.L.C.                                                                                                                                     |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.15 +             |       | Employment Agreement  dated November 20, 2008, between Duane C. McDougall and Boise Cascade,  L.L.C.                                                                                                                              |       | 8-K                                     |       | 333-122770      |   | 10.2 |   | 11/25/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.16 +             |       | Amendment to Employment  Agreement dated February 20, 2009, between Boise Cascade, L.L.C., and  Duane McDougall                                                                                                                   |       | 8-K                                     |       | 333-122770      |   | 10.3 |   | 2/26/09 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.17 +             |       | Second Amendment to  Employment Agreement effective August 16, 2009, between Boise Cascade,  L.L.C., and Duane McDougall                                                                                                          |       | 10-Q                                    |       | 333-122770      |   | 10.1 |   | 11/13/09 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.18 +             |       | Employment Agreement  dated October 29, 2004, between Boise Cascade and W. Thomas Stephens                                                                                                                                        |       | S-1                                     |       | 333-122770      |   | 10.11 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.19 +             |       | Amendment to Employment  Agreement dated February 6, 2008, between Boise Cascade and W. Thomas  Stephens                                                                                                                          |       | 10-K                                    |       | 333-122770      |   | 10.14 |   | 2/20/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.20 +             |       | Amendment to Employment  Agreement dated February 22, 2008, between Boise Cascade, L.L.C., and W.  Thomas Stephens                                                                                                                |       | 8-K                                     |       | 333-122770      |   | 10.7 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.21 +             |       | Amendment to Employment  Agreement dated March 12, 2008, between Boise Cascade, L.L.C., and W.  Thomas Stephens                                                                                                                   |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 3/18/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.22 +             |       | Retirement Agreement  dated November 20, 2008, among W. Thomas Stephens, Boise Cascade Holdings,  L.L.C., Boise Cascade, L.L.C., and Forest Products Holdings, L.L.C., and  certain affiliates of Mr. Stephens named therein |       | 8-K                                     |       | 333-122770      |   | 10.1 |   | 11/25/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.23 +             |       | Form of Officer  Severance Agreements (between Boise Cascade, L.L.C., and all elected  officers, excluding Chief Executive Officer)                                                                                               |       | 8-K                                     |       | 333-122770      |   | 10.8 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.24 +             |       | Letter Agreement  effective August 16, 2009, Amending Severance Agreement between Wayne                                                                                                                                           |       | 10-Q                                    |       | 333-122770      |   | 10.3 |   | 11/13/09 |   |   |

 

144

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                                                                        | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                      | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | Rancourt and Boise  Cascade, L.L.C.                                                                                                                               |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.25 +             |       | Executive Officer  Severance Pay Policy, as amended through November 1, 2007                                                                                 |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 11/2/07 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.26 +             |       | Boise Cascade, L.L.C.,  Supplemental Pension Plan, as amended through November 1, 2009                                                                       |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.27 +             |       | Boise Cascade, L.L.C.,  Supplemental Early Retirement Plan for Executive Officers, as amended through  March 1, 2010                                         |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.28 +             |       | Boise Cascade Supplemental Life Plan, as amended  December 19, 2006                                                                                          |       | 10-K                                    |       | 333-122770      |   | 10.20 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.29 +             |       | Boise Cascade Financial  Counseling Program, as amended through December 12, 2007                                                                            |       | 8-K                                     |       | 333-122770      |   | 99.4 |   | 12/18/07 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.30 +             |       | Boise Incentive and  Performance Plan, effective October 29, 2004                                                                                            |       | S-1                                     |       | 333-122770      |   | 10.16 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.31 +             |       | 2008 Annual Incentive  Award Notifications with respect to Boise Cascade, L.L.C., Incentive and  Performance Plan                                                 |       | 10-Q                                    |       | 333-122770      |   | 10 |   | 5/8/08 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.32 +             |       | Boise Cascade, L.L.C.,  2010 Cash Long-Term Incentive Plan adopted October 28, 2009, effective  January 1, 2010.                                        |       |                                    |       |            | ** ** |   |   |   |   | **X** |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.33 +             |       | Form of Retention  Award Agreement effective August 16, 2009                                                                                            |       | 10-Q                                    |       | 333-122770      |   | 10.4 |   | 11/13/09 |   |   |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.34 +             |       | Boise Cascade, L.L.C.,  2004 Deferred Compensation Plan, as amended through November 1, 2009                                                                 |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.35 +             |       | Boise Cascade Holdings,  L.L.C., Directors Deferred Compensation Plan, as amended through  November 1, 2009                                                  |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                              |       |                                    |       |            |   |   |   |   |   |   |
| 10.36 +             |       | Management Equity  Agreement dated November 29, 2004, between Forest Products Holdings,  L.L.C., and each of the persons listed on the signature pages  |       | S-1   Amend. No. 3                 |       | 333-122770      |   | 10.25 |   | 5/2/05 |   |   |

 

145

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                      | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                    | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | thereto                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.37 +             |       | Management Equity  Agreement dated April 3, 2006, between Forest Products Holdings, L.L.C.,  and each of the persons listed on the signature pages thereto                                                            |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 4/6/06 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.38 +             |       | Amendment dated  February 20, 2009, to Management Equity Agreement                                                                                                                                                         |       | 8-K                                     |       | 333-122770      |   | 10.2 |   | 2/26/09 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.39 +             |       | Form of Repurchase  Agreement and Amendment No. 1 to Management Equity Agreement dated  May 23, 2008, among Forest Products Holdings, L.L.C., and each of the  persons named on the signature pages thereto |       | 8-K                                     |       | 333-122770      |   | 10.2 |   | 5/28/08 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.40 +             |       | Management Equity  Agreement dated November 20, 2008, between Duane C. McDougall and Forest  Products Holdings, L.L.C.                                                                                                     |       | 8-K                                     |       | 333-122770      |   | 10.3 |   | 11/25/08 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.41 +             |       | Amendment No. 1, effective August 16,  2009, to Management Equity Agreement dated November 20, 2008, between  Duane C. McDougall and Forest Products Holdings, L.L.C.                                            |       | 10-Q                                    |       | 333-122770      |   | 10.2 |   | 11/13/09 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.42 +             |       | Director Equity Agreement dated April 3, 2006,  between Forest Products Holdings, L.L.C., and each of the persons listed on  the signature pages thereto                                                              |       | 8-K                                     |       | 333-122770      |   | 99.2 |   | 4/6/06 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 10.43 +             |       | Amendment to Director  Equity Agreement entered into February 20, 2009                                                                                                                                                     |       | 8-K                                     |       | 333-122770      |   | 10.3 |   | 2/26/09 |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 11                  |       | Inapplicable                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 12                  |       | Ratio of Earnings to  Fixed Charges                                                                                                                                                                                             |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 13                  |       | None                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 14 (a)              |       | Boise Cascade Code of  Ethics                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 16                  |       | None                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 18                  |       | None                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 21                  |       | Boise Cascade  Subsidiaries                                                                                                                                                                                                     |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                                                                                                                            |       |                                    |       |            |   |   |   |   |   |   |
| 22                  |       | Inapplicable                                                                                                                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |

 

146

----

Tableof Contents

 
| ** **          | ** ** | ** **                                                                                                            | ** ** | **Incorporated by Reference** | ** ** | ** **      |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                          | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 23                  |       | Inapplicable                                                                                                          |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 24                  |       | Inapplicable                                                                                                          |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 31.1                |       | CEO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                     |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 31.2                |       | CFO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                     |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 99                  |       | Consolidated Financial  Statements of Boise Inc., pursuant to Rule 3-09 of Regulation S-X  (filed herewith) |       |                                    |       |            | ** ** | ** ** | ** ** | ** ** | ** ** | **X** |
|                |       |                                                                                                                  |       |                                    |       |            |   |   |   |   |   |   |
| 100                 |       | Inapplicable                                                                                                          |       |                                    |       |            |   |   |   |   |   |   |

 

----

+                                           Indicates exhibits that constitutemanagement contracts or compensatory plans or arrangements.

 

(a)                                    Our Code of Ethics can be found on ourwebsite (www.bc.com) by clicking on *About Boise Cascade*and then *Code of Ethics*.

 

147

----