Tableof Contents

 

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSIONWashington, DC 20549**

**FORM 10-K**

** **
| **x** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------------|

 

**For the yearended December 31, 2008**

 
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

** **

**For thetransition period from                    to                    **

 

**Commission File Number:  333-122770**

 

**Boise CascadeHoldings, L.L.C.**(Exact name of registrant 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 of principalexecutive offices)  (Zip Code)

** **

**(208)384-6161**

(Registrant’s telephonenumber, including area code)

 

Securities registeredpursuant to Section 12(b) of the Act: ** None**

 

Securities registeredpursuant to Section 12(g) of the Act**:  None**

 

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

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.   Yes x   No o

 

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90days.     Yes o     No x

 

We are a voluntary filer of reports required of companies with publicsecurities under Sections 13 or 15(d) of the Securities Exchange Actof 1934, and we have filed all reports which would have been required of usduring the past 12 months had we been subject to such provisions.

 

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

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

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the ExchangeAct).      Yes o     No x

 

The registrant, a limited liability company, has no voting or nonvotingequity held by nonaffiliates and no common stock outstanding. Equity unitsissued and outstanding on February 28, 2009, were as follows:

 
| **Series**                  | ** ** | **Units  Outstanding as of February 28, 2009** |
|-----------------------------|------------|-----------------------------------------------------|
| Series A Common  Units |       |                                                | 66,000,000 |   |
| Series B Common  Units |       |                                                | 535,329,693 |   |
| Series C Common  Units |       |                                                | 31,165,150 |   |

 

These units are neither registered nor publiclytraded.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

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Table of Contents

 

**Table ofContents**

 
|     | **PART I**                                                                                                      |   |
|----------|----------------------------------------------------------------------------------------------------------------------|--------|
|     |                                                                                                                 |   |
| Item 1.  | Business                                                                                                             | 1      |
|     | Corporate Structure                                                                                                  | 1      |
|     | Building  Materials Distribution                                                                                     | 2      |
|     | Wood Products                                                                                                        | 4      |
|     | Corporate  and Other                                                                                                 | 7      |
|     | Competition                                                                                                          | 7      |
|     | Environmental  Issues                                                                                                | 8      |
|     | Capital  Investment                                                                                                  | 8      |
|     | Seasonality                                                                                                          | 8      |
|     | Working  Capital                                                                                                     | 8      |
|     | Acquisitions and Divestitures                                                                                        | 9      |
|     | Employees                                                                                                            | 9      |
|     | Identification of Executive Officers                                                                                 | 9      |
|     |                                                                                                                 |   |
| Item 1A. | Risk Factors                                                                                                         | 9      |
|     |                                                                                                                 |   |
| Item 1B. | Unresolved  Staff Comments                                                                                           | 14     |
|     |                                                                                                                 |   |
| Item 2.  | Properties                                                                                                           | 14     |
|     | Building Materials Distribution                                                                                      | 15     |
|     | Wood Products                                                                                                        | 15     |
|     |                                                                                                                 |   |
| Item 3.  | Legal Proceedings                                                                                                    | 15     |
|     |                                                                                                                 |   |
| Item 4.  | Submission  of Matters to a Vote of Securityholders                                                                  | 15     |
|     | ** **                                                                                                           |   |
|     | **PART II**                                                                                                     |   |
|     |                                                                                                                 |   |
| Item 5.  | Market for  Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases  of Equity Securities | 16     |
| Item 6.  | Selected Financial  Data                                                                                             | 17     |
|     |                                                                                                                 |   |
| Item 7.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                          | 19     |
|     | Executive  Overview                                                                                                  | 19     |
|     | Sale of Our Paper and Packaging & Newsprint  Assets                                                         | 20     |
|     | Effects  of the Sale                                                                                                 | 21     |
|     | Our  Segments                                                                                                        | 22     |
|     | Recent Trends and Operational Outlook                                                                                | 22     |
|     | Factors That Affect Our Operating Results                                                                            | 23     |
|     | Our  Operating Results                                                                                               | 27     |
|     | Industry Mergers and Acquisitions                                                                                    | 34     |
|     | Liquidity and Capital Resources                                                                                      | 34     |
|     | Contractual  Obligations                                                                                             | 40     |
|     | Off-Balance-Sheet Activities                                                                                         | 42     |
|     | Guarantees                                                                                                           | 42     |
|     | Inflationary and Seasonal Influences                                                                                 | 42     |
|     | Disclosures of Financial Market Risks                                                                                | 42     |
|     | Financial  Instruments                                                                                               | 43     |
|     | Environmental                                                                                                        | 43     |
|     | Critical Accounting Estimates                                                                                        | 44     |
|     | New and Recently Adopted Accounting Standards                                                                        | 49     |
|     | Non-GAAP  Financial Measures                                                                                         | 50     |
|     |                                                                                                                 |   |
| Item 7A. | Quantitative  and Qualitative Disclosures About Market Risk                                                          | 52     |

 

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| Item 8.     | Financial  Statements and Supplementary Data                                                                                | 53     |
|-------------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|        |                                                                                                                        |   |
|        | 1.           Nature  of Operations and Basis of Presentation              | 58     |
|        | 2.           Summary  of Significant Accounting Policies                  | 59     |
|        | 3.           Sale  of Our Paper and Packaging & Newsprint Assets | 65     |
|        | 4.           Investment  in Equity Affiliate                              | 66     |
|        | 5.           Transactions  With Related Parties                           | 68     |
|        | 6.           Other (Income)  Expense, Net                                 | 69     |
|        | 7.           Leases                                                       | 69     |
|        | 8.           Income Taxes                                                 | 70     |
|        | 9.           Goodwill  and Intangible Assets                              | 72     |
|        | 10.     Asset  Retirement Obligations                                                                   | 73     |
|        | 11.     Debt                                                                                            | 74     |
|        | 12.     Financial Instruments                                                                           | 75     |
|        | 13.     Retirement  and Benefit Plans                                                                   | 76     |
|        | 14.     Redeemable  Equity Units                                                                        | 81     |
|        | 15.     Capital                                                                                         | 86     |
|        | 16.     Segment Information                                                                             | 88     |
|        | 17.     Commitments  and Guarantees                                                                     | 93     |
|        | 18.     Consolidating  Guarantor and Nonguarantor Financial Information                                 | 94     |
|        | 19.     Legal  Proceedings and Contingencies                                                            | 105    |
|        | 20.     Quarterly  Results of Operations (unaudited)                                                    | 105    |
|        |                                                                                                                        |   |
|        | Report of Independent Registered Public Accounting  Firm                                                                    | 106    |
|        |                                                                                                                        |   |
| Item 9.     | Changes In and Disagreements With Accountants  on Accounting and Financial Disclosure                                       | 107    |
|        |                                                                                                                        |   |
| Item 9A(T). | Controls and Procedures                                                                                                     | 107    |
|        |                                                                                                                        |   |
| Item 9B.    | Other Information                                                                                                           | 108    |
|        |                                                                                                                        |   |
|        | **PART III**                                                                                                           |   |
|        |                                                                                                                        |   |
| Item 10.    | Directors, Executive Officers, and  Corporate Governance                                                                    | 109    |
|        |                                                                                                                        |   |
| Item 11.    | Executive Compensation                                                                                                      | 114    |
|        |                                                                                                                        |   |
| Item 12.    | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                            | 139    |
|        |                                                                                                                        |   |
| Item 13.    | Certain  Relationships and Related Transactions, and Director Independence                                                  | 141    |
|        |                                                                                                                        |   |
| Item 14.    | Principal  Accounting Fees and Services                                                                                     | 143    |
|        |                                                                                                                        |   |
|        | **PART IV**                                                                                                            |   |
|        |                                                                                                                        |   |
| Item 15.    | Exhibits and  Financial Statement Schedules                                                                                 | 145    |
|        |                                                                                                                        |   |
|        | Signatures                                                                                                                  | 146    |
|        |                                                                                                                        |   |
|        | Index  to Exhibits                                                                                                          | 147    |

 

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**PART 1**

 

We have publicly traded, registered debt securities,which require us to file reports with the Securities and Exchange Commission (SEC).All of our SEC filings, which include this Annual Report on Form 10-K,Quarterly Reports on Form 10-Q, Registration Statements, Current Reportson Form 8-K, and all related amendments are available free of charge viaElectronic Data Gathering Analysis and Retrieval (EDGAR) through the SECwebsite at www.sec.gov. We also provide copies of our SEC filings at no chargeupon request and make electronic copies of our reports available through ourwebsite at www.bc.com as soon as reasonably practicable after we file orfurnish 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*** |
|----------------|----------------|

 

BoiseCascade Holdings, L.L.C., or “BC Holdings,” “the Company,” “we,” “us,” or “our”is a building products company headquartered in Boise, Idaho. We manufactureengineered wood products, plywood, lumber, and particleboard and distribute abroad line of building materials, including wood products we manufacture. Ouroperations began on October 29, 2004 (inception), when we acquired theforest products and paper assets of OfficeMax (the Forest ProductsAcquisition). Before the Forest Products Acquisition, OfficeMax was known asBoise Cascade Corporation. We acquired the name “Boise Cascade” as part of theForest Products Acquisition.

 

On February 22, 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. (formerlyAldabra 2 Acquisition Corp.) for cash and securities equal to$1.6 billion, plus working capital adjustments. Immediately following theSale, Boise Cascade, L.L.C., distributed the securities received in thetransaction to us. As a result, we became a 49% owner of Boise Inc. andcontinue to have a significant indirect financial interest in the results ofthe sold businesses. The equity interest we own in Boise Inc. represents asignificant continuing involvement as defined in Statement of FinancialAccounting Standards (SFAS) No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets.*As a result, thefinancial data in this report includes the results of the Paper and Packaging &Newsprint segments through February 21, 2008, and we did not define thesold assets as discontinued operations. See Note 4, Investment in EquityAffiliate, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K for moreinformation related to our investment in Boise Inc.

 

***CorporateStructure***

 

The following sets forth our corporate structure and equity ownership at December 31,2008 (based on voting power):

 

 

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Prior to the Sale, we operated our business using five reportablesegments:  Building MaterialsDistribution, Wood Products, Paper, Packaging & Newsprint, andCorporate and Other. After the Sale, we operate our business using threereportable segments:  Building MaterialsDistribution, Wood Products, and Corporate and Other. We present informationpertaining to our segments and the geographic areas in which they operate inNote 16, Segment Information, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” ofthis Form 10-K. The “Business” discussion below focuses on our retainedoperating businesses.

 

Asused in this 2008 Annual Report on Form 10-K, the terms “BC Holdings” and“we” refer to Boise Cascade Holdings, L.L.C., and its consolidatedsubsidiaries and, where the context relates to periods prior to the ForestProducts Acquisition, to their predecessors in interest. The terms “BoiseForest Products Operations” and “Predecessor” refer to the results of theforest products and paper assets of OfficeMax that we acquired in the ForestProducts Acquisition. The terms “we,” “us,” and “our” mean BC Holdingswith respect to periods after the Forest Products Acquisition and Boise ForestProducts Operations with respect to periods prior to the Forest ProductsAcquisition.

 

The consolidated financial information included inthis Annual Report on Form 10-K presents the financial results of BCHoldings for the years ended December 31, 2008, 2007, 2006, and 2005, andthe period of October 29 (inception) through December 31, 2004, andthe results of OfficeMax’s forest products operations for the period of January 1through October 28, 2004. When we refer to the 2004 results in this Form 10-K,we are referring to the entire year, both the period owned by the Predecessorcompany and the period owned by BC Holdings.

 

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

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

# *Products*

# * *

We are a leading nationalstocking wholesale distributor of building materials. We distribute a broadline of building materials, including engineered wood products (EWP), orientedstrand board (OSB), plywood, lumber, and general line items such as framingaccessories, composite decking, roofing, siding, and insulation. We purchasemost of these building materials from third-party suppliers and market themprimarily to customers that resell building materials to professional buildersin the residential, light commercial construction, and repair-and-remodelingmarkets. We believe our broad product line provides our customers with aone-stop resource for their needs and lowers per-unit freight costs. We alsohave expertise in special-order sourcing and merchandising support, and ournationwide supplier relationships allow us to offer excellent customer serviceon top brands in the building materials industry.

 

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

 
| ** **                                 | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|--------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                 | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                 | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
|                                       |       | **(millions)**                            |       |
|                                       |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Sales                                      |       | $                                         | 2,109.4    |                                                         | $          | 2,564.0 |   | $ | 2,950.3 |   | $ | 3,052.3 |   | $ | 401.7 |   | $ | 2,442.4 |   |
|                                       |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Segment income  before interest and taxes  |       | $                                         | 19.5       |                                                         | $          | 51.8 |   | $ | 75.3 |   | $ | 99.9 |   | $ | 10.1 |   | $ | 78.8 |   |
| Depreciation,  amortization, and depletion |       | 7.7                                       |       | 7.4                                                          |       | 9.2 |   | 9.1 |   | 1.5 |   | 6.1 |   |
| EBITDA (a)                                 | ** ** | **$**                                     | **27.2**   | ** **                                                   | **$**      | **59.2** | ** ** | **$** | **84.6** | ** ** | **$** | **109.0** | ** ** | **$** | **11.6** | ** ** | **$** | **84.9** | ** ** |

 

----

(a)                                  Segment EBITDA is calculated as segment income(loss) before interest (interest expense, interest income, and change in fairvalue of interest rate swaps), income taxes, and depreciation, amortization,and depletion. EBITDA is the primary measure used by our chief operatingdecision makers to evaluate segment operating performance and to decide how toallocate resources to segments. See “Item 6. Selected FinancialInformation” of this Form 10-K for a description of our reasons for usingEBITDA, for a discussion of the limitations of such a measure, and for areconciliation of our EBITDA to net income (loss).

 

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# *Facilities*

# * *

We operate 30 wholesalebuilding materials distribution facilities located strategically throughout theUnited States. Since 2003, we have relocated or expanded several facilities.

 

# *Raw Materials and Input Costs*

# * *

In our Building Materials Distribution segment, theprimary cost is for products procured for resale, which represents over 90% ofour segment’s total costs. We purchase the majority of the building materialswe distribute from third-party suppliers. Approximately 27% of the lumber,commodity panels, and engineered wood products purchased by Building Materials Distribution during 2008were purchased from our Wood Products segment. Our vendor base includes over1,200 suppliers. We generally do not have long-term supply contracts withour vendors. This flexibility and our national presence allow us to obtain favorableprice and term arrangements.

 

# *Sales, Marketing, and Distribution*

# * *

Utilizing centralizedinformation systems, each of our distribution centers implements its owndistribution and logistics model tailored to the customers it serves. Weoperate a fleet of trucks to deliver materials on a regularly scheduled basis.We have a large decentralized sales force able to use timely and accuratemarket information and local product knowledge to support customers and newproducts.

 

# *Customers*

# * *

Our customer base in this segment includes a widerange of customers across multiple market segments and various end markets. In2008, a majority of our sales in this segment were to pro dealers and retaildistributors that sell building materials to professional builders in theresidential, light commercial construction, and repair-and-remodeling markets.We also service retail lumberyards, home improvement centers, and otherindustrial accounts.

 

# *Business Plan*

# * *

We intend to continue to expand our building materialsdistribution network into new geographic markets and to grow in our existingmarkets by increasing market share and broadening our product line. Sales inthis segment are strongly correlated with new residential construction in theUnited States. The business has grown successfully over the last decade byacquiring facilities, adding new products, opening new locations, relocatingand expanding existing facilities, and capturing local market share throughsuperior customer service. The pace at which we execute our business plan willbe dependent on future market conditions and the competitive environment.

 

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***Wood Products***

*** ***

# *Products*

# * *

Over the past ten years, we have shifted our productfocus from commodity products, such as plywood and lumber, to EWP, whichtraditionally has had more stable prices and higher margins. We are a leadingproducer of EWP, consisting of laminated veneer lumber (LVL), a high-strengthengineered lumber often used in beams; I-joists, a structural support typicallyused in floors and roofs; and laminated beams. We believe we are thesecond-largest EWP manufacturer in North America, with an estimated market shareof approximately 20% in 2008. EWP accounted for 33% of our sales in thissegment in 2008. A 33% decline in housing starts during 2008 led to a 39%decline in our EWP sales, compared with 2007. Prior to the decline in 2008, ourEWP sales grew at a compound annual rate of 12% from 1998 through 2007. We alsoproduce plywood, particleboard, dimension lumber, and high-quality ponderosapine lumber, a premium lumber grade sold primarily to manufacturers ofspecialty wood windows, moldings, and doors. Our wood products are usedprimarily in the residential, light commercial construction, andrepair-and-remodeling markets. Most of these products are sold to wholesalers,major retailers, and industrial converters or through our own wholesalebuilding materials distribution outlets.

 

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

 
| ** **                                          | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                          | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                          | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
|                                                |       | **(millions)**                            |       |
| **Capacity**(a) (b)                            |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Laminated veneer  lumber (LVL) (cubic feet) (c)     |       | 27.5                                      |       | 27.5                                                         |       | 27.5 |   | 25.0 |   | 20.0 |   | 20.0 |   |
| Plywood and  veneer (sq. ft.) (3/8” basis) (d) |       | 1,600                                     |       | 1,600                                                        |       | 1,600 |   | 1,620 |   | 1,600 |   | 1,600 |   |
| Lumber (board  feet) (e)                            |       | 230                                       |       | 250                                                          |       | 270 |   | 270 |   | 275 |   | 275 |   |
| Particleboard  (sq. ft.) (3/4” basis)          |       | 170                                       |       | 170                                                          |       | 170 |   | 160 |   | 200 |   | 200 |   |
|                                                |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| **Production**(b)                                   |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Laminated veneer  lumber (LVL) (cubic feet) (c)     |       | 11.2                                      |       | 17.2                                                         |       | 18.7 |   | 19.6 |   | 3.0 |   | 15.2 |   |
| I-joists  (equivalent lineal feet) (c)              |       | 109                                       |       | 194                                                          |       | 202 |   | 228 |   | 37 |   | 192 |   |
| Plywood and  veneer (sq. ft.) (3/8” basis) (d) |       | 1,351                                     |       | 1,467                                                        |       | 1,546 |   | 1,603 |   | 271 |   | 1,395 |   |
| Lumber (board  feet) (e)                            |       | 189                                       |       | 237                                                          |       | 244 |   | 259 |   | 45 |   | 243 |   |
| Particleboard  (sq. ft.) (3/4” basis)          |       | 105                                       |       | 150                                                          |       | 158 |   | 163 |   | 21 |   | 135 |   |

 

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

 

(b)                                 In 2008, we sold our wholly owned subsidiaryin Brazil, which manufactured veneer. The annual capacity and production ofthat subsidiary have been excluded from this table.

 

(c)                                  A portion of LVL production is used tomanufacture I-joists at two EWP plants. Capacity is based on LVL productiononly.

 

(d)                                 Production and capacity applicable to plywoodonly. Approximately 13%, 20%, 22%, and 20%, respectively, of the plywood weproduced in 2008, 2007, 2006, and 2005 was utilized internally to produce EWP.For the period of October 29 (inception) through December 31,2004, and the period of January 1 through October 28, 2004, internalutilization of plywood to produce EWP was 18% and 17%, respectively.

 

In December 2008, wecommitted to closing the plywood manufacturing facility in White City, Oregon,which is scheduled to occur in March 2009. This mill representsapproximately 12% of the plywood capacity and 6% of the plywood productionreflected in the table in 2008.

 

(e)                                  In March 2008, we permanently closed ourlumber facility in White City, Oregon. This mill represents approximately 2% ofthe lumber production reflected in the table for the year ended December 31,2008.

 

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

 
| ** **                                                     | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                                     | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
|                                                           |       | **(millions)**                            |       |
|                                                           |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Sales                                                          |       | $                                         | 795.9      |                                                         | $          | 1,010.2 |   | $ | 1,155.9 |   | $ | 1,294.4 |   | $ | 200.1 |   | $ | 1,159.9 |   |
|                                                           |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Segment income  (loss) before interest and taxes (a) |       | $                                         | (55.1      | )                                                            | $          | 23.6 |   | $ | 37.2 |   | $ | 119.4 |   | $ | 15.6 |   | $ | 203.0 |   |
| Depreciation,  amortization, and depletion                     |       | 27.7                                      |       | 30.0                                                         |       | 27.6 |   | 23.0 |   | 3.3 |   | 23.5 |   |
| EBITDA (b) (c)                                       | ** ** | **$**                                     | **(27.4**  | **)**                                                        | **$**      | **53.7** | ** ** | **$** | **64.9** | ** ** | **$** | **142.4** | ** ** | **$** | **18.9** | ** ** | **$** | **226.5** | ** ** |

 

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(a)                                  Included a $5.7 million net gain relatedto the sale of our wholly owned subsidiary in Brazil in 2008.

 

Included $3.8 million ofexpense related to the closure of our veneer operations in St. Helens,Oregon, in 2008.

 

Included $7.5 million ofexpense recognized in December 2008, when we committed to closing theplywood manufacturing facility in White City, Oregon, which is scheduled tooccur in March 2009.

 

(b)                                 The period of January 1 through October 28,2004, included a $46.5 million pretax gain for the sale of ourPredecessor’s 47% interest in Voyageur Panel.

 

(c)                                  Segment EBITDA is calculated as segment income(loss) before interest (interest expense, interest income, and change in fairvalue of interest rate swaps), income taxes, and depreciation, amortization,and depletion. EBITDA is the primary measure used by our chief operatingdecision makers to evaluate segment operating performance and to decide how toallocate resources to segments. See “Item 6. Selected FinancialInformation” of this Form 10-K for a description of our reasons for usingEBITDA, for a discussion of the limitations of such a measure, and for areconciliation of our EBITDA to net income (loss).

 

# *Facilities*

# * *

We currently operate anintegrated network of three EWP facilities and eight plywood andveneer plants, six of which manufacture inputs used in our EWP facilities.We also operate four sawmills and one particleboard plant. Thefollowing table lists annual capacities of our Wood Products facilities as of December 31,2008, 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                  |       | 11.2           |       |
| I-joists  (equivalent lineal feet)                       |       |                      |       |                  |       | 109            |       |
| Plywood and  veneer (sq. ft.) (3/8” basis) (c) |       | 8                         |       | 1,600                 |       | 1,351          |       |
| Lumber (board  feet) (d)                                 |       | 4                         |       | 230                   |       | 189            |       |
| Particleboard  (sq. ft.) (3/4” basis)               |       | 1                         |       | 170                   |       | 105            |       |

 

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(a)                                  Capacity is production assuming normal operating shiftconfigurations. Accordingly, production can exceed capacity under someoperating conditions.

 

(b)                                 A portion of LVL production is used tomanufacture I-joists at two EWP plants. Capacity is based on LVL productiononly.

 

(c)                                  Production and capacity applicable to plywood only.Approximately 13% of the plywood we produced in 2008 was utilized internally toproduce EWP.

 

In December 2008, wecommitted to closing our plywood manufacturing facility in White City, Oregon,which is scheduled to occur in March 2009. This mill representsapproximately 12% of the plywood capacity and 6% of the plywood production in2008.

 

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(d)                                 In March 2008, we permanently closed ourlumber facility in White City, Oregon. This mill represents approximately 2% ofthe 2008 lumber production.

 

*RawMaterials and Input Costs*

 

Our plywood and veneerfacilities use Douglas fir, white woods, and pine logs as raw materials. We useponderosa pine, spruce, and white fir logs to manufacture various grades oflumber. Our EWP facilities in Louisiana and Oregon use veneers andparallel-laminated veneer panels produced by our facilities and purchased fromthird parties, together with OSB purchased from third parties, to manufactureLVL and I-joists. Our manufacturing facilities are located in close proximityto active wood markets. We have long-term market-based contracts for asignificant portion of our fiber needs. Other important materials used tomanufacture and prepare our wood products for sale include resins, adhesives,plastic strapping, and lumber wrap, which we purchase both on the open marketand through long-term contracts.

 

# *During 2008, energy, primarily electricity, naturalgas, and fuel oil, accounted for approximately 5% of the sum of our materials,labor, and other operating expenses, including from related parties, in thissegment. We purchase substantial portions of our natural gas and electricityunder supply contracts, most of which are with local providers in regions inwhich our facilities are located. Our gas contracts have pricing mechanismsbased primarily on current market prices, and our electricity contracts have pricingmechanisms based primarily on published tariffs. Depending on marketconditions, we may use derivative instruments such as natural gas swaps,options, or a combination of these instruments to mitigate price risk.*

# * *

*Sales,Marketing, and Distribution*

 

Sales of plywood, lumber, andparticleboard are managed centrally by product. Our EWP sales force is managedcentrally through a main office that oversees regional sales teams. Our salesforce provides a variety of technical support services for our EWP, includingintegrated design, engineering, product specification software, distributorinventory management software, and job-pack preparation systems.

 

Thefollowing table lists sales volumes for our Wood Products facilities for theperiods indicated:

 
| ** **                                        | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|---------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                        | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                        | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
|                                              |       | **(millions)**                            |       |
|                                              |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Laminated veneer  lumber (LVL)  (cubic feet) |       | 7.6                                       |       | 10.6                                                         |       | 12.1 |   | 12.3 |   | 1.8 |   | 10.1 |   |
| I-joists  (equivalent lineal feet)                |       | 117                                       |       | 188                                                          |       | 219 |   | 243 |   | 31 |   | 192 |   |
| Plywood (sq.  ft.) (3/8” basis)              |       | 1,228                                     |       | 1,223                                                        |       | 1,268 |   | 1,328 |   | 243 |   | 1,228 |   |
| Lumber (board  feet)                              |       | 191                                       |       | 231                                                          |       | 277 |   | 327 |   | 60 |   | 303 |   |
| Particleboard (sq.  ft.) (3/4” basis)        |       | 104                                       |       | 151                                                          |       | 157 |   | 165 |   | 22 |   | 134 |   |

 

# *Customers*

# * *

Our Building MaterialsDistribution segment is our Wood Products segment’s largest customer,representing approximately 34% of Wood Products overall sales, includingapproximately 65% of its EWP sales, in 2008. Our third-party customers in thissegment include wholesalers, major retailers, and industrial converters in bothdomestic and export markets.

 

*BusinessPlan*

 

We plan to further expand our market position in EWP.We believe EWP will continue to gain market share from traditional buildingproducts and that margins for EWP, over time, will continue to exceed those formost commodity wood-based building products. We are focused on leveraging ourcompetitive cost structure, comprehensive customer service offering, designsupport capabilities, and

 

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efficient distribution network to continue to gainmarket share among home builders, building products retailers, and otherdistributors. To that end, we have increased LVL capacity7.5 million cubic feet, which represents a 38% increase since 2004. Thiscapacity provides a platform to further expand our presence in EWP when futuremarket conditions and the competitive environment support expansion.

 

***Corporate and Other***

 

Our Corporate and Othersegment primarily includes 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. During the years ended December 31, 2008,2007, 2006, and 2005, segment sales related primarily to our rail and trucktransportation businesses and were $8.6 million, $58.9 million,$60.7 million, and $70.0 million, respectively. Segment sales were$13.1 million and $77.4 million for the period of October 29(inception) through December 31, 2004, and the period of January 1through October 28, 2004, respectively.

 

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

 
| ** **                                       | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|--------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                       | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                       | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
| ** **                                       | ** ** | **(millions)**                            | ** ** |
|                                             |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Sales                                            |       | $                                         | 8.6        |                                                         | $          | 58.9 |   | $ | 60.7 |   | $ | 70.0 |   | $ | 13.1 |   | $ | 77.4 |   |
|                                             |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Segment income  (loss) before interest and taxes |       | $                                         | (25.5      | )                                                            | $          | (23.1 | ) | $ | (37.1 | ) | $ | (29.4 | ) | $ | (6.8 | ) | $ | (56.8 | ) |
| Depreciation,  amortization, and depletion       |       | 0.5                                       |       | 3.8                                                          |       | 5.4 |   | 5.5 |   | 0.9 |   | 11.0 |   |
| EBITDA (a)                                       | ** ** | **$**                                     | **(25.0**  | **)**                                                        | **$**      | **(19.4** | **)** | **$** | **(31.9** | **)** | **$** | **(23.8** | **)** | **$** | **(5.9** | **)** | **$** | **(45.8** | **)** |

 

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(a)                                  Segment EBITDA is calculated as segment income(loss) before interest (interest expense, interest income, and change in fairvalue of interest rate swaps), income taxes, and depreciation, amortization,and depletion. EBITDA is the primary measure used by our chief operatingdecision makers to evaluate segment operating performance and to decide how toallocate resources to segments. See “Item 6. Selected FinancialInformation” of this Form 10-K for a description of our reasons for usingEBITDA, for a discussion of the limitations of such a measure, and for areconciliation of our EBITDA to net income (loss).

 

***Competition***

 

Themarkets in which we compete are highly competitive. The competitive environment in 2008 wasparticularly difficult because of weak demand resulting from the significantdecline in new residential construction in the U.S. over the last27 months. Industry capacity in a number of products, including those weproduce and distribute, far exceeds the current level of demand. Our products and services compete withsimilar products manufactured and distributed by others. Many factors influenceour competitive position in the markets in which we compete. Those factorsinclude price, service, quality, product selection, and convenience oflocation.

 

Some of our competitors arelarger than we are and have greater financial resources. These resources mayafford those competitors greater purchasing power, increased financialflexibility, and more capital resources for expansion and improvement, whichmay enable those competitors to compete more effectively than we can.

 

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*Building Materials Distribution*.  Thebuilding materials distribution markets in which we operate are highlyfragmented, and we compete in each of our geographic and product markets withnational, regional, and local distributors. We compete on the basis ofdelivered cost, product availability, quality of service, and compatibilitywith customers’ needs, and our competition consists of distributors of alltypes of building materials. We compete with other national stockingdistributors as well as wholesale brokers and buying cooperatives, some ofwhich have sales greater than ours and/or have more extensive relationshipswith pro dealers and retail distributors. If one or more of these competitorsare able to leverage geographic coverage and/or customer relationships into newmarkets, our growth strategy in this segment could be negatively affected. Inrecent years, there has been consolidation among home builders, pro dealers,and big box retailers. As the customer base consolidates, this dynamic couldimpact our ability to maintain margins. Proximity to customers is an important factor inminimizing shipping costs and facilitating quick order turnaround and on-timedelivery. 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*.  Ourmarkets in this segment are large and highly competitive. There are severalmajor producers 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. We believe ourcost-competitive production facilities and our customer service are ourprincipal competitive advantages in this segment. Most of our competitors arelocated in the United States and Canada, although competition from manufacturersin other countries has increased in recent years. Many of these foreigncompetitors have lower operating costs than we do. 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, though, also enjoy strong reputations for product quality andcustomer service, and these competitors may have strong relationships withcertain distributors, making it difficult for our products to gain additionalmarket share. Some of our competitors in this segment are more verticallyintegrated than we are and/or have access to internal sources of wood fiber,which may allow them to subsidize their base manufacturing business in periodsof 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 under the caption “Investment Activities” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Form 10-K.

 

***Seasonality***

 

Seasonal changes in levels of building activity affectour building products businesses, which are dependent on housing starts,repair-and-remodel activity, and light commercial and industrial conversionactivities. In addition, seasonally cold weather increases costs, especiallyenergy consumption, at most of our manufacturing facilities. Seasonality alsoaffects working capital levels as described below.

 

***Working Capital***

 

Working capital levels fluctuate through the year andare impacted by seasonality and changing sales patterns. Typically, we buildworking capital (log inventories) in our Wood Products segment in the fall andearly winter to ensure ample supply of fiber to our mills when logging activityis normally hindered by weather in the winter and spring. Changes in salesvolumes affect accounts receivable levels in both our Building MaterialsDistribution and Wood Products segments. We typically have higher sales andworking capital in the second and third quarters of the year because ofincreased construction activity (due to warmer weather).

 

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***Acquisitions andDivestitures***

 

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” and “Industry Mergers and Acquisitions” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Form 10-K.

 

***Employees***

 

As of February 28, 2009, we had approximately 4,600 employees.Approximately 1,700, or 37%, of these employees work pursuant to collectivebargaining agreements. Labor contracts covering approximately 700 employeeswith the Carpenters Industrial Council expire on July 15, 2009, at ourFlorien and Oakdale, Louisiana, plywood plants. We do not anticipate that wewill start bargaining these contracts until late in the second quarter of 2009.We do not expect material work interruptions or increases in our costs duringthe 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.

 

***ITEM1A.******                                       ******RISK FACTORS***

 

This Annual Report on Form 10-K containsforward-looking statements. Statements that are not historical or currentfacts, including statements about our expectations, anticipated financialresults, projected capital expenditures, and future business prospects, areforward-looking statements. You can identify these statements by our use ofwords 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 “Recent Trends and Operational Outlook” section of Management’sDiscussion and Analysis of Financial Condition and Results of Operations. Wecannot guarantee that our actual results will be consistent with theforward-looking statements we make in this report. You should review carefullythe risk factors listed below, as well as those factors listed in otherdocuments we file with the SEC. We do not assume an obligation to update anyforward-looking statement.

 

***Theproducts we manufacture, purchase, and resell are commodities whose price isdetermined by the market’s supply and demand for such products, and the marketsin which we operate are cyclical. ***Manyof the building products we produce or distribute, including oriented strandboard, plywood, lumber, and particleboard, are commodities that are widelyavailable from other producers or distributors. Commodity products have fewdistinguishing qualities from producer to producer, and as a result,competition for these products is based primarily on price, which is determinedby supply relative to demand. As a result, prices for these products are drivenby factors outside our control, and we have little influence over the timingand extent of price changes, which are often volatile. The price for any one ormore of these products may fall below our cash production costs, requiring usto either incur short-term losses on product sales or cease production at oneor 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. The cost of these rawmaterials can and do fluctuate based upon factors beyond our control, asdescribed below. If the prices for our products decline, or if our raw materialsor energy costs increase, or both, our profitability and cash flow could bematerially and adversely affected.

 

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 extentlight commercial construction and residential repair-and-remodeling activity.Demand for

 

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new residential construction is influenced by seasonal weather factors,mortgage availability and rates, unemployment levels, household formationrates, immigration rates, homeowner vacancies, demand for second homes,existing home prices, consumer confidence, and other general economic factors.Industry supply is influenced primarily by operating rates of existingfacilities but is also influenced over time by the introduction of new producttechnologies and capacity additions. The balance of supply and demand in theU.S. is also heavily influenced by imported products, principally from Canada.

 

Due to residential construction in excess of demand,household formation, and immigration during the last up cycle in housingdemand, U.S. housing starts have fallen dramatically over the last27 months. This has resulted in lower building products shipments andpricing for us and many others in the industry. The impact on housing demand inthis cyclical downturn has been exacerbated by much higher levels ofresidential housing foreclosures than seen in prior cyclical downturns and therelated crisis in credit markets, which has severely restricted traditionalsources of construction and mortgage financing for residential realty. Thelength and magnitude of industry cycles have varied over time, and we areuncertain as to how long the current supply-demand imbalances will persist.

 

***Thestate of the credit markets could adversely affect our costs of doing business,demand for our products, and our financial performance.***  Recent turmoil in the credit markets hasincreased our exposure to several risk factors, including the impact onbuilding product prices, margins, and sales volumes resulting from lack offinancing for housing and commercial construction. It has also affected ourcustomers, whose sales, cash flows, and financing are dependent upon theiraccess to credit markets, and the access of their customer base to creditmarkets to finance building projects. Significant financial failures in ourcustomer base may cause us to suffer increased bad debt losses and reducecredit availability under our five-year $350 million senior securedasset-based revolving credit facility (the Revolving Credit Facility). We areunable to predict the timing of any recovery in the credit markets or whethermarkets will continue to deteriorate.

 

***Thestate of the housing, construction, and home improvement markets couldadversely affect demand for our products.***  Over the last two years, the housing,residential construction, and home improvement markets have deteriorateddramatically. Higher unemployment rates, increasing mortgage delinquency andforeclosure rates, reduction in the availability of mortgage financing andconsumer credit, lower housing turnover, and home price depreciation, couldlimit consumers’ discretionary spending and affect their confidence level. Thiscould lead to further reduced spending on new single-family home constructionas well as home improvement projects, which in turn would result in decreaseddemand for our products.

 

***Thevalue of our pension investments is dependent on public equity and debtmarkets, which have been volatile. Our requirements for cash contributions toour pension plans will be highly dependent on future pension investmentresults, interest rates, the pension regulatory environment, and to a lesserextent, our benefit plan design.*** Our target asset allocation in our pensionplans is approximately 67% equity securities and 33% fixed-income securities.In 2008, the significant decline in global equity markets and turmoil in thecredit markets caused our pension investment portfolio to suffer significantlosses. As a result of investment losses, new benefits earned, and actuarialassumption changes, our funding shortfall increased from $86.9 million at December 31,2007, to $162.6 million at December 31, 2008, measured on a projectedbenefit obligation basis. While the Worker, Retiree, and Employee Recovery Actof 2008 provides some relief as to the timing of our required future cashcontributions, we expect to make material contributions to our pension plansfor the next several years barring a dramatic recovery in equity and debtmarket security valuations or a sizable increase in the discount rate used tomeasure our liabilities. We are required to contribute $4.4 million to ourpension plans in 2009. In March 2009, we made $25.0 million ofdiscretionary contributions to improve the funded status of our plans. Therecan be no assurances our investment portfolio will not suffer further losses orinterest rates will not decline in the future and exacerbate our currentfunding shortfall.

 

***Wemay be unable to find short-term investments that meet our investment safetycriteria.***  Returnson the short-term investments recorded in “Cash and cash equivalents” on ourbalance sheet have been and may continue to be adversely affected by difficultmarkets. Until normal conditions in short-term credit markets are restored, it willcontinue to be more difficult to find short-term investment opportunities thatmeet our investment safety criteria. For more information, see the discussionin “Liquidity and Capital Resources” in “Item 7. Management’s Discussionand Analysis of Financial Condition and Results of Operations” of this Form 10-K.

 

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***We face strong competition in our markets.  ***Theforest products industry is highly competitive. We face competition fromnumerous competitors, domestic as well as foreign. A few of our competitors ineach of our businesses are larger companies that have greater financial andother resources, greater manufacturing economies of scale, and/or loweroperating costs than we do. This competition will continue to pressure ourfinancial results during the various stages of the business cycle and thecurrent cyclical downturn. Future merger and acquisition activity by ourcompetitors, suppliers, or customers could negatively affect our competitiveposition in the market.

 

***Currentadverse conditions may increase the credit risk from our customers. ***Our Building MaterialsDistribution and Wood Products segments extend credit to numerous customers whoare heavily exposed to the effect of the downturn in the housing market.Current housing market conditions could result in financial failures of one ormore of our significant customers, which could impair our ability to fullycollect receivables from such customers.

 

***Our manufacturing businesses may have difficulty obtaininglogs and fiber at favorable prices or at all****.  *Wood fiber is our principalraw material, which accounted for approximately 39% of the aggregate amount ofmaterials, labor, and other operating expenses, including from related parties,for our Wood Products segment in 2008. Wood fiber is a commodity, and priceshave historically been cyclical. Availability of residual wood fiber for ourparticleboard operation has been negatively affected by significant millclosures and curtailments that have occurred among solid-wood productproducers.

 

Future domestic or foreign legislation and litigationconcerning the use of timberlands, the protection of endangered species, thepromotion of forest health, and the response to and prevention of catastrophicwildfires can also affect log and fiber supply. Availability of harvested logsand fiber may be further limited by fire, insect infestation, disease, icestorms, windstorms, hurricanes, flooding, and other natural and man-madecauses, thereby reducing supply and increasing prices. In addition, since anumber of our manufacturing facilities use wood-based biomass as an alternativeenergy source, an increase in wood fiber costs or a reduction in availabilitycan increase the price of or reduce the total usage of biomass, which couldresult in higher energy costs.

 

***Some of our wood products are vulnerable to long-termdeclines in demand due to competing technologies or materials.  ***Inparticular, demand for plywood may decline as customers continue to shift tooriented strand board, a product we do not manufacture. Any substantial shiftin demand from our products to competing technologies or materials could resultin a material decrease in sales of our products.

 

***A material disruption at one of our manufacturing facilitiescould prevent us from meeting customer demand, reduce our sales, and/ornegatively affect our net income.  ***Any of ourmanufacturing facilities, or any of our machines within an otherwiseoperational facility, could cease operations unexpectedly due to a number ofevents, including:

 

·                        Maintenance outages;

 

·                        Prolonged power failures;

 

·                        An equipment failure,particularly a press at one of our major EWP production facilities;

 

·                        Disruptionsin the supply of raw materials, such as wood fiber, energy, or chemicals;

 

·                        A chemicalspill or release;

 

·                        Closurebecause of environmental-related concerns;

 

·                        Disruptionsin the transportation infrastructure, including roads, bridges, railroadtracks, and tunnels;

 

·                        Fires,floods, earthquakes, hurricanes, or other catastrophes;

 

·                        Terrorismor threats of terrorism;

 

·                        Labordifficulties; or

 

·                        Otheroperational problems.

 

Future events may cause shutdowns, which may result in downtimeand/or may cause damage to our facilities. Any such downtime or facility damagecould prevent us from meeting customer demand for

 

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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 operations require substantial capital, and we may nothave adequate capital resources to provide for all of our capitalrequirements.  ***Our manufacturing businesses arecapital-intensive, and we regularly incur capital expenditures to expand ouroperations, maintain our equipment, increase our operating efficiency, andcomply with environmental laws. During 2008, our total capital expenditures,excluding acquisitions, were approximately $51.9 million, includingapproximately $10.2 million related to the Paper and Packaging &Newsprint businesses we sold on February 22, 2008. We expect to spendapproximately $30 million to $35 million, excluding acquisitions, oncapital expenditures during 2009.

 

***We are subject to significant environmental regulation andenvironmental compliance expenditures, as well as other potential environmentalliabilities.  ***We are subject to a wide range ofgeneral and industry-specific environmental laws and regulations, particularlywith respect to air emissions, wastewater discharges, solid and hazardous wastemanagement, and site remediation. Our capital expenditures for environmentalcompliance were approximately $7 million in 2008 and approximately $9 millionin 2007 and 2006. We expect to incur approximately $1 million in 2009. Weexpect to continue to incur capital and operating expenditures in order tomaintain compliance with applicable environmental laws and regulations. If wefail to comply with applicable environmental laws and regulations, we may facecivil or criminal fines, penalties, or enforcement actions, including orderslimiting our operations or requiring corrective measures, installation ofpollution control equipment, or other remedial actions.

 

As owners and operatorsof 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 laws whetheror not we knew of, or were responsible for, the presence of these substances onour property, and in some cases, our liability may not be limited to the valueof the property.

 

Enactment of newenvironmental laws or regulations or changes in existing laws or regulationsmight require significant expenditures. We may be unable to generate funds orother sources of liquidity and capital to fund unforeseen environmentalliabilities or expenditures. In addition, we may be affected negatively ifcarbon emission laws are enacted that require the company to install additionalequipment or pay for existing emissions.

 

***Labor disruptionsor increased labor costs could adversely affect our business.  ***Wecould experience a material labor disruption or significantly increased laborcosts at one or more of our facilities, either in the course of negotiations ofa labor agreement or otherwise, any of which could prevent us from meetingcustomer demand or increase costs, thereby reducing our sales andprofitability. As of February 28, 2009, we had approximately 4,600employees. Approximately 1,700, or 37%, of these employees work pursuant tocollective bargaining agreements. Labor contracts covering approximately700 employees with the Carpenters Industrial Council expire on July 15,2009, at our Florien and Oakdale, Louisiana, plywood plants. We do notanticipate that we will start bargaining these contracts until late in thesecond quarter of 2009. We do not expect material work interruptions orincreases in our costs during the course of the negotiations with ourcollective 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.

 

***Increases in the cost of our purchased energy or chemicalswould lead to higher manufacturing costs, thereby reducing our margins.**** *Energy accounted for approximately5% of the aggregate amount of materials, labor, and other operating expenses,including from related parties, for our Wood Products segment in 2008. Pricesfor energy, particularly natural gas, diesel fuel, and electricity, have beenvolatile in recent years. These fluctuations affect our manufacturing costs andcontribute to earnings volatility. Increaseddemand (which could be driven by a recovery of economic activity) or furthersupply constraints could drive prices higher. The rates we are charged are affectedby the increase in natural gas prices, although the degree of impact depends oneach utility’s mix of energy resources and regulatory situation.

 

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Other raw materials we use include various chemicalcompounds, primarily resins and glues. Purchases of chemicals accounted forapproximately 6% of the aggregate amount of materials, labor, and otheroperating expenses, including from related parties, for our Wood Productssegment in 2008. The costs of these chemicals have been volatile historicallyand are influenced by capacity utilization, energy prices, and other factorsbeyond our control.

 

For most of our products,the relationship between industry supply and demand, rather than changes in thecost of raw materials, determines our ability to increase prices. Consequently,we may be unable to pass increases in our operating costs to our customers inthe short term. Any sustained increase in chemical or energy prices wouldreduce our operating margins and potentially require us to limit or ceaseoperations of one or more of our machines or facilities.

 

***If ourlong-lived assets become impaired, we may be required to record noncashimpairment charges that could have a material impact on our results ofoperations.***  In accordance with SFAS No. 144,*Accounting for the Impairment or Disposal ofLong-Lived Assets*, we review the carrying value of long-lived assetsfor impairment when events or changes in circumstances indicate that thecarrying amount of assets may not be recoverable. As discussed in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” 2008 results for our business segments were weak, compared withthose achieved in the periods of 2004 through the first half of 2007, whensingle-family housing starts were more robust. Although we expect marketconditions during 2009 to remain difficult, we currently believe we haveadequate support for the carrying value of all of our assets based onanticipated undiscounted cash flows that will result from our estimates offuture demand, pricing, and production costs, assuming certain levels ofcapital expenditures. However, should the markets for our products deterioratefurther or should we decide to invest capital differently and should other cashflow assumptions change, it is possible that we will be required to recordnoncash impairment charges in the near term that could have a material impacton our results of operations.

 

***The terms of the Revolving Credit Facility and the indenturegoverning our notes restrict our ability to operate our business and to pursueour business strategies. ***The Revolving Credit Facility and the indenturegoverning our notes contain, and any future indebtedness of ours would likelycontain, a number of restrictive covenants that impose customary operating andfinancial restrictions on us. The Revolving Credit Facility and the indenturegoverning our notes limit our ability, among other things, to:

 

·                  Make materialacquisitions;

 

·                  Incur additionalindebtedness;

 

·                  Makedistributions to our equity holders;

 

·                  Enter intotransactions with our affiliates;

 

·                  Incur liens;

 

·                  Enter into newlines of business; and

 

·                  Engage inconsolidations, mergers, or sales of substantially all of our assets.

 

Our indebtedness also requires periodic interestpayments, which reduce the cash we have available to fund our operations ormake capital expenditures. While we do not anticipate any liquidity issues atthis time, our ability to meet future cash interest requirements will depend onour results of operations, as well as maintaining sufficient borrowingavailability under the Revolving Credit Facility. A portion of the interest onour indebtedness is based on floating interest rates. An increase in the LondonInterbank Offered Rate (LIBOR) or the prime rate may increase our interestexpense.

 

***Thevalue of our investment in Boise Inc. is and may continue to be impaired.***  Recent adverse events in equity markets andthe financial performance of Boise Inc. have significantly reduced thevalue of our investment in that company and have caused us to reduce thecarrying value of that investment on our financial statements. For additionalinformation see “Our Operating Results” in “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inthis Form 10-K.

 

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***Because we accountfor our investment in Boise Inc. under the equity method of accounting, BoiseInc.’s reported earnings will materially affect our reported financialresults. ***In 2008, ourreported earnings were materially affected by our recording a $208.1 millionother-than-temporary impairment charge to reflect the decrease in the fairvalue of our investment below its carrying value. In addition, our reportedearnings are affected by recording our proportionate share of Boise Inc.’snet income or loss in our income statement. Although Boise Inc. has noobligation to pay us dividends, a proportionate share of Boise Inc.’s netincome or loss flows through our income statement. Boise Inc. has significantfinancial leverage, and its operating earnings have been historically cyclical.This may result in volatility in our reported results of operations.

 

***As a result of the Sale, we nowrely on Boise Inc. for many of our administrative services.***  Inconjunction with the Sale, we entered into an Outsourcing Services Agreementunder which Boise Inc. provides a number of corporate staff services to us atcost. These services include information technology, accounting, and humanresource services. Most of the Boise Inc. staff who provide these services areproviding the same services they provided when they were our employees.Nevertheless, we cannot be assured that these employees will remain with BoiseInc. or that there will not be a disruption in the continuity or level ofservice provided. If Boise Inc. is unwilling or unable to provide services atthe same quality levels as those services have been provided in the past, ourbusiness and compliance activities and results of operations could be substantiallyand negatively affected.

 

***ITEM1B.******                                       ******UNRESOLVED STAFF COMMENTS***

 

We have no unresolved comments from the Commissionstaff.

 

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

 

Weown substantially all of our manufacturing facilities. Our properties are ingood operating condition and are suitable and adequate for the operations forwhich they are used. We own substantially all equipment used in our facilities.Information concerning production capacity and the utilization of ourmanufacturing 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, 2009. We lease a portion of the corporate headquartersbuilding in Boise, Idaho.

 

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***Building Materials Distribution***

 

The following tablesummarizes our 30 Building Materials 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                                     |       |
| 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                                     |       |

 

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

 

The following tablesummarizes our Wood Products facilities:

 
| **Facility Type**              | ** ** | **Number of  Facilities** | ** ** | **Locations**                              |
|--------------------------------|------------|---------------------------|------------|--------------------------------------------|
| LVL/I-joist plants             |       | 3                         |       | Louisiana, Oregon, and  Canada             |
| Plywood and veneer  plants (a) |       | 8                         |       | Louisiana (2), Oregon  (5), and Washington |
| Sawmills                       |       | 4                         |       | Oregon (2) and  Washington (2)        |
| Particleboard plant            |       | 1                         |       | Oregon                                     |
| Wood beam plant                |       | 1                         |       | Idaho                                      |

 

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(a)                                  Includes the plywood manufacturing facility inWhite City, Oregon. In December 2008, we committed to closing thefacility, which is scheduled to occur in March 2009.

 

***ITEM3.******                                                ******LEGAL PROCEEDINGS***

 

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.******                                                ******SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS***

 

None.

 

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**PART II**

 
| ***ITEM 5.*** | ***MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,  AND ISSUER 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, 2009, were as follows:

 
| Series A  Common Units |   | 66,000,000  |
|-----------------------------|--------|-------------|
| Series B  Common Units |   | 535,329,693 |
| Series C  Common Units |   | 31,165,150  |

 

As ofFebruary 28, 2009, OfficeMax owned all of the Series A equity units.Forest Products Holdings, L.L.C. (FPH) and OfficeMax owned 426,329,693 and109,000,000 Series B equity units, respectively. FPH holds all 31,165,150 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, 2008 and 2007,$19.2 million and $12.9 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).

 

Our parent company, FPH, from time to time issues orawards grants of equity to our employees and directors. Each issue or award ofequity by FPH to our employees or directors is matched by a parallel issuanceof the same amount of our equity on the same terms to FPH. However, under theterms of our operating agreements neither we nor FPH have authority to issuesuch equity absent specific ad hoc authorization by our respective boardsof directors.

 

We donot have compensation plans that provide for the issuance of equity in ourcompany. The Management Equity Agreement described elsewhere in this AnnualReport on Form 10-K provides for the grant of equity units in FPH, ourmajority owner.

 

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***ITEM 6.******                                                ******SELECTED FINANCIAL DATA***

 

The followingtable sets forth our selected financial data for the periods indicated andshould be read in conjunction with the disclosures in “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and “Item 8.Financial Statements and Supplementary Data” of this Form 10-K.

 
| ** **                                                                         | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                                                         | ** ** | **2008 (a)**                         | ** ** | **2007 (b)**                                            | ** ** | **2006 (c)** | ** ** | **2005 (d)** | ** ** | **2004 (e)** | ** ** | **2004 (f)** | ** ** |
| ** **                                                                         | ** ** | **(millions)**                            | ** ** |
| **Statement of income (loss) data**                                                |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Net sales                                                                          | ** ** | **$**                                     | **2,977**  | ** **                                                   | **$**      | **5,413** | ** ** | **$** | **5,780** | ** ** | **$** | **5,907** | ** ** | **$** | **873** | ** ** | **$** | **4,862** | ** ** |
|                                                                               |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                  | ** ** | **$**                                     | **(288**   | **)**                                                        | **$**      | **128** | ** ** | **$** | **72** | ** ** | **$** | **121** | ** ** | **$** | **25** | ** ** | **$** | **69** | ** ** |
|                                                                               |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Earnings before interest, taxes,  depreciation, and amortization (EBITDA) (g) | ** ** | **$**                                     | **(218**   | **)**                                                        | **$**      | **349** | ** ** | **$** | **339** | ** ** | **$** | **401** | ** ** | **$** | **65** | ** ** | **$** | **382** | ** ** |
|                                                                               |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| **Balance sheet data (at end of year)**                                            |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| **Assets**                                                                         |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Current assets                                                                     |       | $                                         | 644        |                                                         | $          | 2,381 |   | $ | 1,083 |   | $ | 1,136 |   | $ | 1,112 |   | $ | 1,049 |   |
| Property and equipment, net                                                        |       | 301                                       |       | 337                                                          |       | 1,503 |   | 1,549 |   | 1,510 |   | 2,191 |   |
| Investment in equity affiliate                                                     |       | 21                                        |       | —                                                       |       | — |   | — |   | — |   | — |   |
| Deferred financing costs                                                           |       | 8                                         |       | 23                                                           |       | 31 |   | 38 |   | 84 |   | 17 |   |
| Note receivable from related party                                            |       | —                                    |       | —                                                       |       | — |   | — |   | 158 |   | — |   |
| Other                                                                              |       | 26                                        |       | 33                                                           |       | 88 |   | 91 |   | 68 |   | 109 |   |
| ** **                                                                         | ** ** | **$**                                     | **1,000**  | ** **                                                   | **$**      | **2,774** | ** ** | **$** | **2,705** | ** ** | **$** | **2,814** | ** ** | **$** | **2,932** | ** ** | **$** | **3,366** |   |
|                                                                               |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| **Liabilities and capital**                                                        |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Current liabilities                                                                |       | $                                         | 145        |                                                         | $          | 605 |   | $ | 504 |   | $ | 546 |   | $ | 438 |   | $ | 701 |   |
| Long-term debt, less current portion                                               |       | 315                                       |       | 1,113                                                        |       | 1,214 |   | 1,366 |   | 1,967 |   | 1,109 |   |
| Note payable to related party, net                                            |       | —                                    |       | —                                                       |       | — |   | 271 |   | — |   | — |   |
| Other                                                                              |       | 184                                       |       | 64                                                           |       | 148 |   | 153 |   | 157 |   | 691 |   |
| Redeemable equity units                                                            |       | 6                                         |       | 27                                                           |       | 24 |   | 13 |   | 10 |   | — |   |
| Capital                                                                            |       | 350                                       |       | 965                                                          |       | 815 |   | 465 |   | 360 |   | 865 |   |
| ** **                                                                         | ** ** | **$**                                     | **1,000**  | ** **                                                   | **$**      | **2,774** | ** ** | **$** | **2,705** | ** ** | **$** | **2,814** | ** ** | **$** | **2,932** | ** ** | **$** | **3,366** |   |

 

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(a)                                  The following were included in our 2008 netloss:

 

·                  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.;

 

·                  $11.0 millionof net expense for facility closure costs and asset sales; and

 

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

 

(b)                                 The following were included in 2007 netincome:

 

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

 

·                  Approximately $8.4 million of income related to the change in the fairvalue of interest rate swaps in connection with the repayment of some of ourvariable-rate debt, partially offset by $4.6 million of expense related tochanges in the fair value of our interest rate swaps that we accounted for aseconomic hedges; and

 

·                  $6.3 million of expense related to the write-off of deferred financingcosts in connection with the repayment of debt.

 

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

 

(d)                                 The following were included in 2005 netincome:

 

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·                  $9.9 million net gain for the change in the fair value of interestrate swaps;

 

·                  $43.0 million of expense related to thewrite-off of deferred financing costs in connection with the repayment of debt;and

 

·                  $9.9 million gain for changes in ourretiree healthcare programs.

 

(e)                                  We used purchaseaccounting to account for the acquisition of the forest products and paperassets from OfficeMax (the Forest Products Acquisition). As a result ofpurchase price accounting, we increased the value of our inventory, whichincreased the costs and expenses recognized by us upon the sale of theinventory by $20.2 million for the period of October 29 (inception)through December 31, 2004.

 

(f)                                    Net income for the period of January 1 through October 28,2004, included the following:

 

·                  $46.5 million pretax gain for the sale of ourPredecessor’s 47% interest in Voyageur Panel;

 

·                  $7.1 million of costs incurred in connection with the February 2004sale of our Predecessor’s plywood and lumber operations in Yakima, Washington;

 

·                  $12.7 million of expense, primarily for a one-timeretention bonus OfficeMax granted to our employees; and

 

·                  $14.6 million of noncash restricted stock expenses.

 

(g)                                   The following table reconciles net income(loss) to EBITDA for the periods indicated:

 
| ** **                                  | ** ** | **BC Holdings**                      | ** ** | **Predecessor**                                              | ** ** |
|---------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                  | ** ** | **Year Ended December 31** | ** ** | **October 29  (inception)  through  December 31,** | ** ** | **January 1  through  October 28,** | ** ** |
| ** **                                  | ** ** | **2008**                                  | ** ** | **2007**                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2004** | ** ** |
| ** **                                  | ** ** | **(millions)**                            | ** ** |
|                                        |       |                                      |       |                                                         |       |   |   |   |   |   |   |   |   |
| Net income (loss)                           |       | $                                         | (288       | )                                                            | $          | 128 |   | $ | 72 |   | $ | 121 |   | $ | 25 |   | $ | 69 |   |
| Change in fair value of interest rate swaps |       | 6                                         |       | (4                                                           | )          | — |   | (10 | ) | — |   | — |   |
| Interest expense                            |       | 34                                        |       | 97                                                           |       | 112 |   | 166 |   | 22 |   | 72 |   |
| Interest income                             |       | (8                                        | )          | (4                                                           | )          | (4 | ) | (3 | ) | (2 | ) | — |   |
| Income tax provision (benefit)              | ** ** | **—**                                |       | 8                                                            |       | 4 |   | (2 | ) | — |   | 47 |   |
| Depreciation, amortization, and depletion   |       | 36                                        |       | 124                                                          |       | 155 |   | 129 |   | 20 |   | 194 |   |
| EBITDA                                      | ** ** | **$**                                     | **(218**   | **)**                                                        | **$**      | **349** | ** ** | **$** | **339** | ** ** | **$** | **401** | ** ** | **$** | **65** | ** ** | **$** | **382** | ** ** |

 

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 useful toinvestors because it provides a means to evaluate the operating performance ofour segments and our company on an ongoing basis using criteria that are usedby our internal decision makers and because it is frequently used by investorsand other interested parties in the evaluation of companies. We believe EBITDAis a meaningful measure because it presents a transparent view of our recurringoperating performance and allows management to readily view operating trends,perform analytical comparisons, and identify strategies to improve operatingperformance. For example, we believe that the inclusion of items such as taxes,interest expense, and interest income distorts management’s ability to assessand view the core operating trends in our segments. EBITDA, however, is not ameasure of our liquidity or financial performance under generally acceptedaccounting principles (GAAP) and should not be considered as an alternative tonet income (loss), income (loss) from operations, or any other performancemeasure derived in accordance with GAAP or as an alternative to cash flow fromoperating activities as a measure of our liquidity. The use of EBITDA insteadof net income (loss) or segment income (loss) has limitations as an analyticaltool, including the inability to determine profitability; the exclusion ofinterest expense, interest income, change in the fair value of interest rateswaps, and associated significant cash requirements; and the exclusion ofdepreciation, amortization, and depletion. Management compensates for theselimitations by relying on our GAAP results. Our measures of EBITDA are notnecessarily comparable to other similarly titled captions of other companiesdue to potential inconsistencies in the methods of calculation.

 

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| ***ITEM  7.*** | ***MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*** |
|----------------|---------------------------------------------------------------------------------------------------|

 

This Management’s Discussion andAnalysis of Financial Condition and Results of Operations includes statementsregarding our expectations with respect to our future performance, liquidity,and capital resources. Such statements, along with any other nonhistoricalstatements in the discussion, are forward-looking. These forward-lookingstatements are subject to numerous risks and uncertainties, including, but notlimited to, the risks and uncertainties described in “Item 1A. RiskFactors” 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.

 

***Executive Overview***

 

*Background*

 

Ouroperations began on October 29, 2004 (inception), when we acquired theforest products and paper assets of OfficeMax (the Forest ProductsAcquisition). Before the Forest Products Acquisition, OfficeMax was known asBoise Cascade Corporation. We acquired the name “Boise Cascade” as part of theForest Products Acquisition.

 

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 cash andsecurities equal to $1.6 billion, plus working capital adjustments. Seethe discussion under “Sale of Our Paper and Packaging & NewsprintAssets” below for more information. After the Sale, we became a focused buildingproducts company headquartered in Boise, Idaho. We manufacture engineered woodproducts, plywood, lumber, and particleboard and distribute a broad line of buildingmaterials, including wood products we manufacture.

 

*Overview*

 

We begin this discussion and analysis with ageneral overview of the effects of the “Sale of Our Paper and Packaging &Newsprint Assets,” including the impact on our segment reporting, anticipatedimpact of decreased leverage, changes in pension expense as a result ofoperating as a smaller company, and the effect of entering into an OutsourcingServices Agreement with Boise Inc. through which they provide us with a numberof corporate staff services to us at cost.

 

Next, we discuss our three operating segments– Building Materials Distribution, Wood Products, and Corporate and Other. Thediscussion of “Recent Trends and Operational Outlook” and “Factors That AffectOur Operating Results,” is intended to give the reader an overview of the goalsand challenges of our business and the direction in which our business andproducts are moving. Recent results for our business segments remain weak,compared with those we achieved in the periods of 2004 through the first halfof 2007, when single-family housing starts were more robust. Tightening creditmarkets and an overhang of homes available for sale have created uncertaintyfor potential home buyers. The result has been very weak demand for buildingproducts and continued downward pricing pressure. Our results are also affectedby, among other things, volatility in raw material prices, including chemicalcosts, labor costs, and energy costs. We do not expect housing starts toimprove in 2009. See additional comments below in “Recent Trends andOperational Outlook.”

 

The analysisthen reviews “Our Operating Results” for 2008, compared with 2007, and 2007,compared with 2006. Following the analysis of our results, relevant mergeractivity in our industry is discussed in “Industry Mergers and Acquisitions.”

 

The analysis then provides discussion of changes in our balance sheetand cash flows and our financial commitments in the section entitled “Liquidityand Capital Resources.” The analysis then addresses our “ContractualObligations” and “Disclosures of Financial Market Risks.” These sections arefollowed by a discussion of the “Critical Accounting Estimates” that ourmanagement believes are important to understanding the assumptions andjudgments incorporated in our reported financial results.

 

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

 

On February 22, 2008, BoiseCascade, L.L.C., our wholly owned direct subsidiary, sold its Paper andPackaging & Newsprint assets and most of its Corporate and Otherassets (the Sale) to Boise Inc. (formerly Aldabra 2 AcquisitionCorp.) for $1,277.2 million of cash consideration, $285.2 million of netstock consideration, 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 ourinvestment in Boise Inc., in accordance with Emerging Issues Task Force(EITF) No. 01-02, *Interpretations ofAccounting Principles Board (APB) Opinion No. 29.*

 

Immediately following the Sale,Boise Cascade, L.L.C., distributed the stock and paid-in-kind note receivableto us. Subsequent to the distribution to us, the note receivable fromBoise Inc. increased $17.3 million for working capital adjustments,and in June 2008, we sold the note receivable for $52.7 million afterselling expenses. For more information, see Note 5, Transactions WithRelated Parties, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K. As aresult, we became a 49% owner of Boise Inc. and continue to have asignificant indirect financial interest in the results of the sold businesses.We account for our interest in Boise Inc. using the equity method ofaccounting. See the “Our Operating Results” section of Management’s Discussionand Analysis and Results of Operations of this Form 10-K for moreinformation related to our investment in Boise Inc.

 

*Use of Sale Proceeds*

 

With the proceeds from the Sale andan initial borrowing under our five-year $350 million senior securedasset-based revolving credit facility (the Revolving Credit 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 tax distributions to our equity holders to permit theequity holders to pay a portion of the income taxes related to the gain on theSale. In connection with the Sale, we accrued $200 million for thesedistributions; however, the taxable gain on the Sale was partially offset by 2008taxable losses. At December 31, 2008, we recorded $11.0 million in “Accruedliabilities, Other” on our Consolidated Balance Sheet for our final expectedtax distribution related to the gain on the Sale;

 

·                  Paid$18.3 million to repurchase equity units from management investors thatterminated employment with us in connection with the Sale; and

 

·                  In January 2009,we paid $2.5 million of the $4.4 million accrued under the deferredcompensation agreements for employees terminated in connection with the Sale.

 

Thedisposition of the net proceeds from the sale of the note receivable from BoiseInc. and any future disposition by us of Boise Inc. shares must complywith the terms of our senior subordinated notes indenture, which generallyrequires us to use the net proceeds (as defined in the indenture) from assetsales within one year to repay senior indebtedness, acquire additional assets,or make a tender offer at par for a portion of the senior subordinated notes.

 

*Pro Forma*

 

The followingpro forma financial information was derived from the consolidated financialstatements of Boise Cascade Holdings, L.L.C. (BC Holdings). The pro formafinancial information gives effect to the Sale as if it were consummated on January 1,2008. The pro forma financial information is intended for informationalpurposes only and is not necessarily indicative of the results of operationsthat may have actually occurred if the Sale had been consummated on January 1,2008, or the operating results that may be obtained in the future.

 

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| ** **        | ** ** | **Year Ended  December 31,** | ** ** |
|-------------------|------------|----------------------------------------|------------|
| ** **        | ** ** | **2008**                               | ** ** |
| ** **        | ** ** | **(millions)**                         | ** ** |
|              |       |                                   |       |
| Sales             |       | $                                      | 2,635.1    |   |
|              |       |                                   |       |
| Net income (loss) |       | $                                      | (304.8     | )(a) |

 

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(a)                                  The pro forma net loss for the year ended December 31,2008, included pro forma expense of $16.2 million related to our equityinterest in Boise Inc.; included a $208.1 million write-down of ourinvestment in Boise Inc.; included $6.3 million of expense related tochanges in the fair value of our interest rate swaps, which we terminated in February 2008;included $4.1 million of related-party interest income from the note receivablefrom Boise Inc., which was sold in June 2008; and excluded $2.9 millionof gain on the Sale.

 

***Effects of the Sale***

 

*Segments*

 

Prior to theSale, we operated our business using five reportable segments:  Building Materials Distribution, WoodProducts, Paper, Packaging & Newsprint, and Corporate and Other. Afterthe Sale, we operate our business using three reportable segments:  Building Materials Distribution, WoodProducts, and Corporate and Other. There are no differences in our basis ofmeasurement of segment profit or loss from the basis used in prior periods. Theequity interest we own in Boise Inc. after the Sale represents a significantcontinuing involvement as defined in Statement of Financial AccountingStandards (SFAS) No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets.*As a result, wecontinue to show the results of the Paper and Packaging & Newsprintsegments through February 21, 2008, and we did not define the sold assetsas discontinued operations.

 

*DecreasedLeverage*

 

With the proceeds from the Sale andan initial borrowing under the Revolving Credit Facility, we repaid$1,085.6 million of long-term debt, including all of the borrowings underthe previous revolving credit facility, Tranche E term loan, delayed-drawterm loan, borrowings secured by our receivables, and $160.0 million ofour 7.125% senior subordinated notes. At December 31, 2008, we had$315.0 million of debt outstanding, compared with $1,171.1 million atDecember 31, 2007. For more information, see “FinancingActivities” under “Liquidity and Capital Resources” in this Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

 

*Pension andBenefit Plans*

 

Effective January 1, 2008, wespun off the portion of each benefit plan attributable to employees or retireesof the Paper and Packaging & Newsprint businesses. Effective February 22,2008, under the terms of the Purchase and Sale Agreement with Boise Inc., wetransferred sponsorship of the spunoff plans to Boise Paper Holdings, L.L.C., asubsidiary of Boise Inc., and only those employees, terminated vestedparticipants, and retirees whose employment was with our Wood Products,Building Materials Distribution, and some corporate and discontinued operationscontinue to be covered under the plans remaining with us. As a result of theSale, our annual pension expense and contributions to the plans going forwardwill be less than they would have been had the Sale not occurred.

 

*OutsourcingServices Agreement*

 

In connection with the Sale, we entered into anOutsourcing Services Agreement under which Boise Inc. provides a number ofcorporate staff services to us at cost. These services include informationtechnology, accounting, and human resource services. The initial term of theagreement is for three years. It will automatically renew for one-year termsunless either party provides notice of termination to the other party at least12 months in advance of the applicable term. 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 absorption fee of $5.0 million isallocated among the services provided under the contract and declines to zeroin total and on an allocable basis over the initial three-year term of theagreement. In 2008, we recognized $12.1 million of costs related to thisagreement, of which we recorded $1.7 million in “Materials, labor, and

 

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other operating expenses from related parties,”$2.3 million in “Selling and distribution expenses,” and $8.1 millionin “General and administrative expenses from related party” in our ConsolidatedStatement of Loss.

 

*Assets and Liabilities Held for Sale*

 

In September 2007, in anticipation ofthe Sale, we reclassified the assets and liabilities of our Paper and Packaging &Newsprint segments, as well as some of the assets and liabilities included inour Corporate and Other segment, to “Assets held for sale” and “Liabilitiesrelated to assets held for sale” on our Consolidated Balance Sheet and stoppeddepreciating and amortizing those assets. As discussed above, we sold theseassets to Boise Inc. on February 22, 2008.

 

***Our Segments***

 

After theSale, we operate our business using three reportable segments:  Building Materials Distribution, WoodProducts, and Corporate and Other. These segments represent distinct businessesthat are managed separately because of differing products and services. Each ofthese businesses requires distinct operating and marketing strategies.Management reviews the performance of the company based on these segments.

 

*BuildingMaterials Distribution. *OurBuilding Materials Distribution segment is a leading national stockingwholesale distributor of building materials. We distribute a broad line ofbuilding materials, including engineered wood products (EWP), oriented strandboard (OSB), plywood, lumber, and general line items such as framingaccessories, composite decking, roofing, siding, and insulation. We purchasemost of these building materials from third-party suppliers and market themprimarily to customers that resell building materials to professional buildersin the residential, light commercial construction, and repair-and-remodelingmarkets.

 

*WoodProducts. *Our Wood Products segment manufactures and sells 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 also produce plywood, particleboard, dimension lumber, andhigh-quality ponderosa pine lumber, a premium lumber grade sold primarily to manufacturersof specialty wood windows, moldings, and doors. Our wood products are usedprimarily in residential, light commercial construction, andrepair-and-remodeling markets. Most of these products are sold to wholesalers,major retailers, and industrial converters or through our own wholesalebuilding materials distribution outlets. During 2008, approximately 46% of thewood products we manufactured, including approximately 67% of our EWP, weresold to our Building Materials Distribution segment.

 

*Corporateand Other*.  OurCorporate and Other segment primarily includes corporate support staffservices, related assets and liabilities, and foreign exchange gains andlosses. These support services include, but are not limited to, finance,accounting, legal, information technology, and human resource functions. Sincethe Sale, we have purchased many of these services from Boise Inc. underan Outsourcing Services Agreement, under which Boise Inc. provides anumber of corporate staff services to us at cost. See Note 5, TransactionsWith Related Parties, of the Notes to Consolidated Financial Statements in “Item8. Financial Statements and Supplementary Data” of this Form 10-K for moreinformation. Prior to the Sale, this segment also included certain rail andtruck transportation businesses and related assets. During the years ended December 31,2008, 2007, and 2006, segment sales related primarily to our rail and trucktransportation businesses and were $8.6 million, $58.9 million, and$60.7 million, respectively.

 

***Recent Trends and Operational Outlook***

 

The U.S.Census Bureau reported 2008 housing starts in the U.S. at 0.9 millionunits, which is significantly below historical trends of an average ofapproximately 1.7 million units per year over the prior ten years. In December 2008and January 2009, the number of seasonally adjusted annualized unitsdeclined to 0.6 million units and 0.5 million units, respectively.Housing starts in 2004 and 2005 were approximately 2.0 million per year,with 2006 and 2007 coming in around 1.8 million units and 1.4 millionunits, respectively. This above-trend period was fueled by low mortgage rates,a strong economy with low unemployment, and the growth of the subprime mortgagemarket and the various mortgage securitization mechanisms developed byfinancial institutions. In the second half of 2007, turbulence in the mortgage

 

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market and a significantoversupply of homes for sale led to a sharp drop-off in housing constructionand demand for our products. The inventory of unsold homes is elevated relativeto historical levels and foreclosure rates have increased in many parts of theUnited States. Housing markets across the country have been negatively affectedby recent events.

 

While ourproducts are used in repair-and-remodel activities, as well as light commercialconstruction, our results are principally driven by new single-family homeconstruction. In many parts of the country, demand for building productscontinues to be weak, and there is ongoing pricing pressure as supplierscompete for the limited business available.

 

Input costsare another key factor of our recent results. Energy costs, includingelectricity, natural gas, and diesel fuel, were higher than historical norms inthe spring and summer of 2008. This raised our freight and manufacturing costsboth directly and indirectly by raising key variable-cost inputs, such as gluesand resins. Global supply and demand factors, as well as the weak U.S. dollar,contributed to the persistence of higher energy and other commodity pricetrends. These trends in energy and commodity prices reversed in the second halfof the year as the markets began to anticipate a global economic slowdown. Ourlog costs have started to decline as a result of weak industry conditions.

 

We expectmarket conditions during 2009 to remain difficult. During 2008, 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. In 2008, wepermanently closed our White City, Oregon, lumber operation and ourSt. Helens, Oregon, veneer operation. We also sold our Braziliansubsidiary. In March 2009, we will close our plywood operation in WhiteCity, Oregon. It is likely that we will need to continue our practice ofrolling curtailments at a number of our facilities, doing so in a manner thatallows us to retain our skilled workforce and keep our inventories in balancein light of weak demand and product pricing. We will continue to evaluate thelong-term viability and value to our business strategy of our remainingoperating facilities and may conclude that additional facilities should beclosed or sold in response to market conditions.

 

***Factors That Affect Our Operating Results***

 

Our results ofoperations and financial performance are influenced by a variety of factors,including the following:

 

·                  General economicconditions, including but not limited to housing starts, repair-and-remodelactivity and nonresidential construction, and relative currency values;

 

·                  Mortgage pricingand availability, as well as other consumer financing mechanisms, thatultimately impact demand for our products;

 

·                  Volatility inraw material costs, including energy prices and log costs;

 

·                  The commoditynature of our products and their price movements, which are driven largely bysupply and demand;

 

·                  Pricingvolatility in our distribution business;

 

·                  Industry cyclesand capacity utilization rates;

 

·                  The cost andability to obtain necessary financing;

 

·                  Continuedcompliance with government regulations;

 

·                  Legislative orregulatory environments, requirements, or changes affecting the businesses inwhich we are engaged;

 

·                  Labor andpersonnel relations and shortages of skilled and technical labor;

 

·                  Credit orcurrency risks affecting our revenue and profitability;

 

·                  Major equipmentfailure;

 

·                  Severe weatherphenomena such as drought, hurricanes, tornadoes, and fire;

 

·                  Our ability toimplement our strategies;

 

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·                  Actions of suppliers, customers, andcompetitors, including merger and acquisition activities;

 

·                  Financial results of Boise Inc.,which we account for under the equity method of accounting;

 

·                  Boise Inc.’sperformance under the Outsourcing Services Agreement; and

 

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

 

*Commodityand Differentiated Products and Services*

 

Many of theproducts we manufacture and distribute are widely available and can be readilyproduced or distributed by our competitors. Because commodity products have fewdistinguishing qualities from producer to producer, competition for theseproducts is based primarily on price, which is determined by supply relative todemand. Generally, market conditions beyond our control determine the price forour commodity products, and the price for any one or more of these products mayfall below our cash production costs or our cost of procurement. Therefore, ourprofitability with respect to these products depends on managing our coststructure, particularly raw material and energy costs, which also exhibitcommodity characteristics.

 

Not all of ourproducts are viewed as commodities in the marketplace. Our engineered woodproducts (EWP) are differentiated from competing products based on quality andproduct design, as well as related customer service. In the case of EWPproducts, we are generally able to influence price based on the strength ofdifferentiation and levels of customer service and are generally able to sellthese products at higher margins than our commodity products. A fundamentalcomponent of our strategy is to grow EWP as a share of our total Wood Productssegment sales. We believe this product is less susceptible to commodity pricingdynamics.

 

Comparing 2008with 2007, sales of EWP from our Wood Products segment decreased fromapproximately 42% of segment sales in 2007 to 33% of sales in 2008. The ongoingweakness in new residential construction has impeded our ability to grow our EWPsales. Comparing 2008 with 2007, our laminated veneer lumber (LVL) and I-joistsales volumes decreased 28% and 38%, respectively.

 

Our BuildingMaterials Distribution segment distributes a significant number of commodityand branded building materials. While we must be competitive on price, ourassociates and management team understand the positive impact excellentcustomer service, process innovation, and local market adaptation can have ondifferentiating our function in the marketplace and generating superior returnson invested capital.

 

*Demand*

 

Historically,demand for the products we manufacture, as well as the products we purchase anddistribute, has been closely correlated with new residential construction inthe United States and to a lesser extent light commercial construction andresidential repair-and-remodeling activity. Demand for new residentialconstruction is influenced by seasonal weather factors, mortgage availabilityand rates, unemployment levels, household formation rates, immigration rates,homeowner vacancies, demand for second homes, existing home prices, consumerconfidence, and other general economic factors. Industry supply is influencedprimarily by operating rates of existing facilities but is also influenced overtime by the introduction of new product technologies and capacity additions.The balance of supply and demand in the U.S. is also heavily influenced byimported products, principally from Canada.

 

Housing startsin the U.S. have fallen dramatically since early 2006, resulting in much lowerbuilding products shipments and pricing for us and many others in the industry.The length and magnitude of industry cycles have varied over time, and we areuncertain as to how long the current supply-demand imbalances will persist.Many of the wood products we produce or distribute, including oriented strandboard (OSB), plywood, lumber, and particleboard, are commodities that arewidely available from other producers or distributors. Even our noncommodityproducts, such as EWP, are affected by commodity prices since the cost ofproducing EWP is affected by veneer and OSB prices. Commodity products have fewdistinguishing qualities from producer to producer, and as a result,competition for these products is based primarily on price, which is determinedby supply relative to demand.

 

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*Supply*

 

Industrysupply of wood products is affected by the number of operational or idledfacilities, the building of new capacity, and the shutting down of existingcapacity. Capacity also tends to increase gradually over time withoutsignificant capital expenditures, as manufacturers improve production efficiencies.Generally, more capacity is added or employed when supply is tight and marginsare relatively high, and capacity is idled or eliminated when capacitysignificantly exceeds demand and margins are poor.

 

While newcapacity additions are constrained by the high capital investment and long leadtimes required to plan, obtain regulatory approvals for, and build a new mill,a favorable pricing environment may prompt manufacturers to initiate expansionprojects.

 

Some major OSBproducers have announced indefinite shutdowns or permanent closures of existingfacilities, and others have announced delays in previously announced capacityadditions. A number of OSB producers have announced the intention to produce astrand lumber product that is intended to be a substitute for EWP in someapplications. One of the strand lumber mills recently announced commencement ofproduction. The ability of the facility to cost-effectively produce such aproduct that meets required performance standards and its impact on the EWP marketare uncertain. A number of lumber and plywood producers have also announcedtemporary, indefinite, or permanent facility curtailments in response to theweak demand environment.

 

Industry supply of wood products is also influenced by the level of importsand overseas production capacity, which has grown in recent years. The relativeweakness of the U.S. dollar has mitigated the level of imports in recent years.

 

*OperatingCosts*

 

Our majorcosts in our Wood Products segment are labor, wood fiber, energy, andchemicals. Given the significance of raw material and energy costs to our totaloperating expenses and our limited ability to control these costs, volatilityin these costs can materially affect our margins. In addition, the timing anddegree of price cycles of raw materials and energy differ with respect to eachtype of raw material and energy we use.

 

In ourBuilding Materials Distribution segment, the primary cost is for productsprocured for resale, which represents over 90% of our total costs. Occupancy,labor, and delivery costs are also important factors that affect our earningsin this segment.

 

*Labor.*  Ourlabor costs tend to increase steadily due to inflation in healthcare and wagecosts.

 

As of February 28,2009, we had approximately 4,600 employees. Approximately 1,700, or 37%, ofthese employees work pursuant to collective bargaining agreements. Laborcontracts covering approximately 700 employees with the CarpentersIndustrial Council expire on July 15, 2009, at our Florien and Oakdale, Louisiana,plywood plants. We do not anticipate that we will start bargaining thesecontracts until late in the second quarter of 2009. We do not expect materialwork interruptions or increases in our costs during the course of thenegotiations with our collective bargaining units. Nevertheless, if ourexpectations are not accurate, we could experience a material labor disruptionor significantly increased labor costs at one or more of our facilities, any ofwhich could prevent us from meeting customer demand or reduce our sales andprofitability.

 

*Wood fiber.*  Ourprimary raw material is wood fiber. For the years ended December 31, 2008,2007, and 2006, wood fiber accounted for 39%, 42%, and 40% of materials, labor,and other operating expenses, including from related parties, in our WoodProducts segment.

 

Our primarysources of logs and wood fiber are timber and byproducts of timber, such aswood shavings and sawdust. Our wood fiber costs also include purchases ofsemifinished materials, such as OSB and lumber, for use in EWP production. Weacquire substantially all of our fiber from outside sources. In our WoodProducts segment, we convert logs into lumber and veneer, and in turn, weconvert veneer into EWP and plywood. Logs are a lower percentage of the totalcost of materials, labor, and other operating expenses in producing EWP thancommodity products, such as lumber and plywood. While log costs are still asignificant component of costs, as we produce more EWP relative to commodityproducts

 

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over time, direct-log costsdecline as a percentage of the total cost of materials, labor, and otheroperating expenses. We also convert residual wood fiber from our operations, aswell as from third parties, into particleboard.

 

Curtailmentsof solid wood manufacturing in the Northwest led to limited availability andhigher prices for residual fiber in the first half of 2008. Pulp millcurtailments in the Northwest in the second half of 2008, as well as stepstaken by pulp producers to manufacture wood chips, resulted in weaker pricesfor residual fiber as the year progressed. This negatively impacted ourbyproducts sales of wood chips from our lumber, veneer, and plywood operationsin the second half of 2008, and we expect this oversupply situation to continueinto 2009.

 

*Other rawmaterials and energy purchasing and pricing. *We purchase other raw materials and energy usedto manufacture 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 our long-termcontracts provide us with supplies of raw materials and energy that are morestable than open-market purchases, in many cases, they may not alleviatefluctuations in market prices.

 

Our costs for raw materials are influenced byincreases in energy costs. Specifically, some of our key chemicals, includingglues and resins consumed in our Wood Products segment, are heavily influencedby energy costs. A number of our major suppliers have obtained price increasestied to their increased energy costs. For our commodity products, therelationship between industry supply and demand, rather than changes in thecost of raw materials, determines our ability to increase prices. Consequently,we may be unable to pass increases in our operating costs to our customers inthe short term.

 

*Energy. *Prices for energy,particularly electricity, natural gas, and diesel, have been volatile in recentyears, at times substantially exceeding historical averages. For the yearsended December 31, 2008, 2007, and 2006, energy costs representedapproximately 5%, 4%, and 4% of materials, labor, and other operating expenses,including from related parties, in our Wood Products segment. Relative to theprior year, fuel costs increased in our Building Materials Distributionsegment.

 

*Chemicals. *Important chemicalswe use in the production of our wood products are resins and glues. For theyears ended December 31, 2008, 2007, and 2006, purchases of chemicalsrepresented 6%, 7%, and 6% of materials, labor, and other operating expenses,including from related parties, in our Wood Products segment. We experienced higher chemicalcosts in the current year, compared with historical standards, due primarily tochemical market supply and demand dynamics.

 

*Inflationaryand seasonal influences. *Our major costs of production arelabor, wood fiber, energy, and chemicals. Energy costs, particularly forelectricity, natural gas, and fuel oil, have been volatile in recent years. Wealso experienced higher volatility in chemical costs in 2008, compared withhistorical trends, due primarily to chemical market supply and demand dynamicsand the impact of energy markets on chemical producers. Seasonal changesin levels of building activity affect our building products businesses, whichare dependent on housing starts, repair-and-remodel activity, and lightcommercial and industrial conversion activities. We typically have higher salesand working capital in the second and third quarters because of increasedconstruction activity (due to warmer weather). In addition, seasonally coldweather increases costs, especially energy consumption, at most of ourmanufacturing facilities.

 

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***Our Operating Results***

 

The following tables setforth the results of operations in dollars and as a percentage of sales for theyears ended December 31, 2008, 2007, and 2006:

 
| ** **                                                           | ** ** | **Year Ended December 31** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                           | ** ** | **2008**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                                           | ** ** | **(millions)**                            | ** ** |
| **Sales**                                                            |       |                                      |       |   |   |   |   |
| Trade                                                                |       | $                                         | 2,831.3    |   | $ | 4,797.8 |   | $ | 5,204.0 |   |
| Related parties                                                      |       | 146.2                                     |       | 615.7 |   | 575.9 |   |
|                                                                 |       | 2,977.5                                   |       | 5,413.5 |   | 5,779.9 |   |
|                                                                 |       |                                      |       |   |   |   |   |
| **Costs  and expenses**                                              |       |                                      |       |   |   |   |   |
| Materials,  labor, and other operating expenses                      |       | 2,620.1                                   |       | 4,705.3 |   | 5,063.1 |   |
| Materials,  labor, and other operating expenses from related parties |       | 70.0                                      |       | — |   | — |   |
| Depreciation,  amortization, and depletion                           |       | 36.3                                      |       | 123.9 |   | 155.3 |   |
| Selling and  distribution expenses                                   |       | 231.6                                     |       | 285.7 |   | 283.6 |   |
| General and  administrative expenses                                 |       | 36.6                                      |       | 84.1 |   | 88.4 |   |
| General and  administrative expenses from related party              |       | 8.1                                       |       | — |   | — |   |
| Gain on sale of  Paper and Packaging & Newsprint assets     |       | (2.9                                      | )          | — |   | — |   |
| Other (income)  expense, net                                         |       | 10.6                                      |       | (5.7 | ) | 6.1 |   |
|                                                                 |       | 3,010.4                                   |       | 5,193.3 |   | 5,596.5 |   |
|                                                                 |       |                                      |       |   |   |   |   |
| Income (loss)  from operations                                       | ** ** | **$**                                     | **(32.9**  | **)** | **$** | **220.2** | ** ** | **$** | **183.4** | ** ** |

 
| ** **                                                                      | ** ** | **(percentage of sales)** | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------|------------|
| **Sales**                                                                       |       |                      |       |   |   |   |   |
| Trade                                                                           |       | 95.1                      | %          | 88.6 | % | 90.0 | % |
| Related parties                                                                 |       | 4.9                       |       | 11.4 |   | 10.0 |   |
|                                                                            |       | 100.0                     | %          | 100.0 | % | 100.0 | % |
|                                                                            |       |                      |       |   |   |   |   |
| **Costs  and expenses**                                                         |       |                      |       |   |   |   |   |
| Materials,  labor, and other operating expenses, including from related parties |       | 90.3                      | %          | 86.9 | % | 87.6 | % |
| Depreciation,  amortization, and depletion                                      |       | 1.2                       |       | 2.3 |   | 2.7 |   |
| Selling and  distribution expenses                                              |       | 7.8                       |       | 5.3 |   | 4.9 |   |
| General and  administrative expenses, including from related party              |       | 1.5                       |       | 1.5 |   | 1.5 |   |
| Gain on sale of  Paper and Packaging & Newsprint assets                |       | (0.1                      | )          | — |   | — |   |
| Other (income)  expense, net                                                    |       | 0.4                       |       | (0.1 | ) | 0.1 |   |
|                                                                            |       | 101.1                     | %          | 95.9 | % | 96.8 | % |
|                                                                            |       |                      |       |   |   |   |   |
| Income (loss)  from operations                                                  | ** ** | **(1.1**                  | **)%**     | **4.1** | **%** | **3.2** | **%** |

 

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***Sales Volumes and Prices***

 

Set forth below are our segment sales volumes and averagenet selling prices for our principal products in our Building MaterialsDistribution and Wood Products segments for the years ended December 31,2008, 2007, and 2006:

 
| ** **                       | ** ** | **Year Ended December 31** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | **2008**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                       | ** ** | **(millions)**                            | ** ** |
| **Segment  Sales**               |       |                                      |       |   |   |   |   |
| Building  Materials Distribution |       | $                                         | 2,109.4    |   | $ | 2,564.0 |   | $ | 2,950.3 |   |
| Wood Products                    |       | 795.9                                     |       | 1,010.2 |   | 1,155.9 |   |
|                                  |            |                                           |            |  |  |  |  |  |  |  |

 
| ** **              | ** ** | **(percentage of Building Materials Distribution sales)** | ** ** |
|-------------------------|------------|-----------------------------------------------------------|------------|
| **Product  Line Sales** |       |                                                      |       |   |   |   |   |
| Commodity               |       | 46.2                                                      | %          | 44.0 | % | 45.2 | % |
| Engineered wood         |       | 11.9                                                      |       | 14.7 |   | 15.7 |   |
| General line            |       | 41.9                                                      |       | 41.3 |   | 39.1 |   |

 
| ** **                                  | ** ** | **(millions)** | ** ** |
|---------------------------------------------|------------|----------------|------------|
| **Sales  Volumes**                          |       |           |       |   |   |   |   |
| **Wood  Products**                          |       |           |       |   |   |   |   |
| Laminated veneer  lumber (LVL) (cubic feet) |       | 7.6            |       | 10.6 |   | 12.1 |   |
| I-joists  (equivalent lineal feet)          |       | 117            |       | 188 |   | 219 |   |
| Plywood (sq.  ft.) (3/8” basis)        |       | 1,228          |       | 1,223 |   | 1,268 |   |
| Lumber (board  feet)                        |       | 191            |       | 231 |   | 277 |   |
| Particleboard  (sq. ft.) (3/4” basis)  |       | 104            |       | 151 |   | 157 |   |

 
| ** **                                       | ** ** | **(dollars per unit)** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|
| **Average  Net Selling Prices**                  | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Wood  Products**                               | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Laminated veneer  lumber (LVL) (100 cubic feet)  |       | $                      | 1,573      |   | $ | 1,702 |   | $ | 1,896 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 942                    |       | 1,026 |   | 1,110 |   |
| Plywood (1,000  sq. ft.) (3/8” basis)       |       | 248                    |       | 264 |   | 256 |   |
| Lumber (1,000  board feet)                       |       | 369                    |       | 437 |   | 478 |   |
| Particleboard  (1,000 sq. ft.) (3/4” basis) |       | 357                    |       | 317 |   | 339 |   |
|                                                  |            |                        |            |  |  |  |  |  |  |  |

 

***OperatingResults***

 

***2008 ComparedWith 2007***

 

Total sales decreased $2.4 billion, or 45%, to$3.0 billion in 2008 from $5.4 billion in 2007. The decrease wasdriven primarily by the sale of our Paper and Packaging & Newsprintassets in first quarter 2008. The sold businesses had sales of $2.3 billion in2007. For the period of January 1 through February 21, 2008, the soldbusinesses had sales of $359.9 million. Sales decreased in our BuildingMaterials Distribution and Wood Products segments due to weaker product demandand prices as new residential housing demand in the U.S. declined.

 

*Building Materials Distribution.*  Sales decreased $454.6 million, or 18%,to $2,109.4 million in 2008from $2,564.0 million in 2007. The decrease was driven primarily by a 19%decline in the volume of product sold, offset in part by a 1% increase inproduct prices. The reduced volumes were the result of decreased demand in newresidential construction markets. Relative to 2007, EWP sales represented alower percentage of our overall Building Materials Distribution sales, as EWPsales are more dependent on new residential construction than the commodityproducts we sell.

 

*WoodProducts.* Salesdecreased $214.3 million, or 21%, to $795.9 million in 2008 from $1,010.2 million in2007. The decrease in sales was driven primarily by lower volumes and/or pricesfor all of our products. In 2008, the decline in EWP volumes and prices had thebiggest impact on our reported sales. Compared with 2007, sales volumes for LVLand I-joists declined 28% and 38%, respectively, while the average net sellingprices for both LVL and I-joists decreased approximately 8%. Also contributingto the decrease in sales during the year were lower sales prices for plywood,lower sales volumes for particleboard, and lower sales volumes and prices forlumber.

 

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##### ***Costs and Expenses***

##### *** ***

Materials, labor, and other 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 decrease was driven primarily bythe sale of our Paper and Packaging & Newsprint assets in firstquarter 2008. The sold businesses had materials, labor, and other operatingexpenses, including from related parties, of $2.0 billion in 2007. For theperiod of January 1 through February 21, 2008, the sold businesses hadmaterials, labor, and other operating expenses, including from related parties,of $321.6 million. In our building products businesses, materials, labor,and other operating expenses, including from related parties, decreased due tolower purchased materials costs in our Building Materials Distribution segmentdue to lower sales volumes. Also contributing to the decline were lower logcosts, offset in large part by higher conversion costs, in our Wood Productssegment. Fiber costs for our Wood Products segment declined, primarily due tolower log prices and lower log consumption.

 

Depreciation, amortization, and depletion expenses decreased$87.6 million, or 71%, to $36.3 million in 2008, compared with $123.9million in 2007. The year ended December 31, 2007, included approximately$84.6 million of depreciation and amortization expense related to the soldPaper, Packaging & Newsprint, and Corporate and Other segments thatwas 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. Ofthe $84.6 million of depreciation and amortization expense recorded duringthe year ended December 31, 2007, $45.0 million related to our Papersegment, $37.7 million related to our Packaging & Newsprintsegment, and $1.9 million related to our 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 by lowercompensation 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** | **)** |

 

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(a)                                  In 2008, we permanently closed our veneeroperation in St. Helens, Oregon, and recorded $1.8 million of expenserelated to the closure in “Other (income) expense, net” and $2.0 million ofexpense for the write-down of log inventories in “Materials, labor, and otheroperating expenses” in our Consolidated Statement of Loss.

 

InDecember 2008, we committed to closing the plywood manufacturing facilityin White City, Oregon, and we recorded $7.5 million of expense related to theplanned closure. The facility is scheduled to close in March 2009.

 

(b)                                 In 2008, we sold the note receivable fromBoise Inc. for $52.7 million after selling expenses, and we recordedan $8.4 million loss on the sale.

 

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(c)                                  In 2008, we sold our indirect wholly ownedsubsidiary in Brazil, Boise Cascade do Brasil LTDA., to Aracruz Celulose, S.A.,for $45.5 million after selling expenses, and we recorded a $5.7 millionnet 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 of thesale of our Paper and Packaging & Newsprint assets in first quarter2008, which reported $160.5 million of income from operations in 2007 and$23.1 million of income from operations for the period of January 1through February 21, 2008. We also reported lower operating incomein our Building Materials Distribution and Wood Products segments asunprecedented turmoil in the mortgage market and a significant oversupply ofhomes for sale led to a sharp drop-off in housing construction and demand forour products. The impact of reduced demand on sales prices and volume isdiscussed in more detail below.

 

*BuildingMaterials Distribution. *Segmentincome decreased $32.3 million, or 62%, from $51.8 million in 2007 to$19.5 million in 2008. The decrease was driven primarily by lower grossmargin dollars available to cover relatively fixed expenses, such as occupancy,payroll, and delivery costs, as sales volumes declined year over year.

 

*Wood Products.*Segment income (loss) decreased $78.7 million, or 333%, from incomeof $23.6 million in 2007 to a loss of $55.1 million in 2008. Thedecrease was driven primarily by a combination of lower sales volumes and/orprices for most of our products, coupled with higher conversion costs. Thesenegatives were slightly offset by lower log costs. In addition, during 2008,the Wood Products segment recorded a $5.9 million net loss related tononstrategic asset sales and/or expenses related to facility closures, comparedwith a $0.9 million net gain recorded in 2007.

 

*Other*

 

*Equityin net loss of affiliate and impairment of investment in equity affiliate*.  In connection with the Sale, we received 37.9million, or 49%, of Boise Inc.’s shares. We recorded our investment in “Investmentin equity affiliate” on our Consolidated Balance Sheet. This ownership interestprovides us with the ability to exercise significant influence. Accordingly, weaccount for our investment under the equity method of accounting. We adjust theamount of our investment monthly for our proportionate share of Boise Inc.’snet income or loss and our share of other comprehensive income or loss based onthe most recently available financial statements. Our ownership interest andconsequently our proportionate share of Boise Inc.’s net income or loss,changes when we or Boise Inc. engage in transactions of Boise Inc. common stockwith third parties. Changes in ownership interest may also result in ourrecording an ownership interest dilution gain or loss.

 

In 2008, we recorded $219.4 million of expenserelated to our investment in Boise Inc. in our Consolidated Statement ofLoss. Of the $219.4 million of expense, we recorded $208.1 million ofexpense in “Impairment of investment in equity affiliate” and $11.3 million ofexpense in “Equity in net loss of affiliate” in our Consolidated Statement ofLoss as follows (in millions):

 
| Impairment of  investment in equity affiliate (a)            |       | $      | (208.1     | )     |
|--------------------------------------------------------------|------------|--------|------------|-------|
|                                                         |       |   |       |
| Equity in Boise  Inc.’s net loss                        |       | (22.8  | )          |
| Adjustment for impairment  recognized by Boise Inc. (b) |       | 6.2    |       |
| Amortization of  basis differential (c)                      |       | 5.3    |       |
| Equity in net  loss of affiliate                             |       | (11.3  | )          |
|                                                         |       |   |       |
| Total                                                        | ** ** | **$**  | **(219.4** | **)** |

 

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(a)                                  On September 30, 2008, we concluded thatour investment in Boise Inc. met the definition of other than temporarilyimpaired as defined in APB Opinion No. 18, *The EquityMethod of Accounting for Investments in Common Stock*. We made thisdetermination based primarily on the length of time and extent to which thefair value of our investment had been trading below its carrying value. TheBoise Inc. stock trading price declined from $8.56 on February 21,2008, to $1.56 on September 30, 2008. Accordingly, we recorded a$208.1 million charge in “Impairment of investment in equity affiliate” inour Consolidated Statement of Loss in 2008. This charge reflects the decreasein the fair value of the investment below its carrying value. The fair value ofour investment in Boise Inc. was calculated based on our 37.9 million ofBoise Inc. shares and Boise Inc.’s stock price on September 30,2008, of $1.56.

 

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(b)                                 In accordance with APB No. 18, 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, weconcluded we had already expensed $6.2 million of the $19.8 million chargeBoise Inc. recorded for long-lived asset impairment. Accordingly, weadjusted our equity in net loss of Boise Inc. for the $6.2 million we hadalready expensed.

 

(c)                                  At December 31, 2008, the carrying valueof our investment in Boise Inc. was approximately $199.2 million less thanour share of Boise Inc.’s underlying equity in net assets. The differenceis due to the write-down of our investment in Boise Inc. In accordancewith APB Opinion No. 18, we are amortizing the difference to income on astraight-line basis over 10.4 years, which represents the remainingweighted-average useful life of Boise Inc.’s assets. In 2008, theamortization of the basis differential resulted in our recognizing$5.3 million of income in “Equity in net loss of affiliate” and willresult in our recognizing approximately $19.2 million of income per yearfor the next 10.4 years, which will be increased or decreased by ourproportionate share of Boise Inc.’s net income or loss.

 

In accordance with SECRegulation S-X Rule 3-09, *SeparateFinancial Statements of Subsidiaries not Consolidated and 50 Percent or LessOwned Persons,*we filed Boise Inc.’s 2008 audited consolidatedfinancial statements as Exhibit 99 to this Form 10-K.

 

*Changein fair value of interest rate swaps. *The yearsended December 31, 2008 and 2007, included $6.3 million of expenseand $3.7 million of income related to changes in the fair value of our interestrate swaps. We terminated all of the 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 is primarilyattributable 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 ayear ago. The decrease in long-term debt is primarily attributable tothe use of the majority of the proceeds from the Sale to reduce debt. For moreinformation, see “Financing Activities” under “Liquidity and Capital Resources”in this Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.

 

*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 31,2008, 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.

 

***2007 ComparedWith 2006***

 

# *Sales*

# * *

Total salesdecreased $366.4 million, or 6%, to $5.4 billion in 2007 from$5.8 billion in 2006. Relative to 2006, sales decreased in BuildingMaterials Distribution and Wood Products and increased in Paper and Packaging &Newsprint. The decrease in sales in Building Materials Distribution and WoodProducts was driven primarily by lower residential construction demand. Theincrease in sales in Paper was driven primarily by higher sales prices, asproducers curtailed production in response to lower demand. The increase inPackaging & Newsprint sales was driven primarily by higher salesprices for corrugated products and linerboard, as continued strong demand keptsupply and demand well balanced. In addition, in both our Paper and Packaging &Newsprint segments, the weak U.S. dollar helped reduce the competitiveness ofimports while increasing the competitiveness of U.S. exports.

 

*Building MaterialsDistribution.*  Sales decreased$386.3 million, or 13%, to $2,564.0 million in 2007 from$2,950.3 million in 2006. Sales volumes and prices decreased approximately10% and 4%, respectively. The reduced volumes and prices were the result ofdecreased demand in new residential construction markets.

 

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*Wood Products*. Sales decreased$145.7 million, or 13%, to $1,010.2 million in 2007 from$1,155.9 million in 2006. Lower sales were the result of lower salesvolumes for all of our products and lower sales prices for engineered woodproducts, lumber, and particleboard. The reduction in sales volumes and salesprices was the result of lower demand in new residential construction markets.

 

*Paper. *Sales increased$101.5 million, or 7%, to $1,596.2 million in 2007 from$1,494.7 million in 2006. The increase in sales was the result ofincreased sales prices, as producers closed, converted, or curtailed operationsto keep production balanced with demand.

 

*Packaging & Newsprint. *Sales increased$16.6 million, or 2%, to $783.1 million in 2007 from$766.5 million in 2006. The increase in sales was driven by increasedsales prices for corrugated products and linerboard, offset in part by lowersales prices for newsprint. The increase in sales prices for corrugatedproducts was due to strong demand, while the decrease in newsprint sales priceswas driven by continued lower demand trends, due in part to the growth ofonline media.

 

*Costs and Expenses*

 

Materials, labor, and other operating expensesdecreased $357.8 million, or 7%, to $4.7 billion in 2007 from $5.1 billionin 2006. This decrease was driven primarily by lower purchased materials costsin our Building Materials Distribution segment of $368.1 million and lower woodcosts in our Wood Products segment of $35.1 million, as decreasedresidential construction activity led to lower demand for these materials. Inaddition, compared with 2006, we had $9.2 million lower energy costs inour manufacturing businesses. These lower costs were offset in part by higherconversion costs in our Wood Products segment. Compared with 2006, fiber costsincreased approximately $19.0 million and $25.4 million in our Paperand Packaging & Newsprint segments, respectively. These increases infiber costs resulted primarily from a 12% per ton increase and 25% per tonincrease in wood costs in our Paper and Packaging & Newsprint segments. Inour Paper segment, fiber costs increased in early 2007, compared with 2006, asa result of reduced residual availability in the Pacific Northwest and higher purchasedpulp and purchased wastepaper costs. In our Packaging & Newsprintsegment, fiber costs increased as unusually wet weather in Louisiana reducedaccess to lowland forests, forcing us to procure wood from further distances.Compared with 2006, chemical costs increased $9.6 million and$3.8 million in our Paper and Packaging & Newsprint segments,respectively, as a result of higher prices for many of the commodity chemicalinputs to our processes. Our Paper segment’s chemical cost increases were theresult of higher prices for pulp, bleaching, and additives. In addition, weexperienced increased fixed costs.

 

Depreciation, amortization, and depletion expenses decreased$31.4 million, or 20%, to $123.9 million in 2007 from $155.3 millionin 2006. The year ended December 31, 2007, included $41.8 million oflower depreciation and amortization expense as a result of discontinuingdepreciation and amortization on the assets recorded as held for sale in ourPaper, Packaging & Newsprint, and Corporate and Other segments. Thisreduction in depreciation and amortization expenses was partially offset by anincrease in depreciation expense as the result of our reviewing the estimateduseful lives of some of our depreciable assets earlier in the year anddetermining that some of our assets would be used for a shorter period of timethan the depreciable lives previously assigned to them. As a result, we revisedour depreciation estimates to reflect the remaining expected use of the assets.This change in estimates increased depreciation, amortization, and depletionexpenses by approximately $11 million in 2007.

 

Selling and distribution expenses increased$2.1 million, or 1%, to $285.7 million in 2007 from$283.6 million in 2006. As a percentage of sales, selling and distributionexpenses increased to 5.3% in 2007 from 4.9% in 2006. The increase wasdriven primarily by increased distribution costs in our Building MaterialsDistribution segment as a result of incremental costs related to the additionallease expense for expansion of our distribution centers in California, Florida,and Ohio and the relocation of our distribution center in Georgia, primarilyoffset by lower depreciation expense in this segment.

 

General and administrative expenses decreased$4.3 million, or 5%, to $84.1 million in 2007 from $88.4 millionin 2006. Relative to 2006, general and administrative expensesdecreased, primarily due to lower training and compensation costs.

 

Other (income) expense, net, was $5.7 million ofincome in 2007, compared with $6.1 million of expense in 2006. In 2007,other (income) expense, net, primarily included $4.4 million of income forchanges in our retiree healthcare programs and $2.3 million of income fromthe sales of assets, net. The

 

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income in 2007 was offset in part by $1.0 millionof expense for project costs and other miscellaneous items. In 2006, other(income) expense, net, included $3.7 million of income for changes in ourretiree healthcare programs, offset by $4.5 million of expense for specialprojects, $3.7 million of expense related to the loss on sale of assets,which includes $1.7 million of expense for the loss on the sale of ourheadquarters building, and other miscellaneous income and expense items.

 

*Income (Loss) From Operations*

 

Income from operations increased $36.8 million, or 20%, from$183.4 million in 2006 to $220.2 million in 2007. The increase wasprimarily the result of improved performance in the Paper segment, offset inpart by lower income in the Wood Products, Building Materials Distribution, andPackaging & Newsprint segments.

 

*Building Materials Distribution. *Segment income decreased $23.5 million,or 31%, from $75.3 million in 2006 to $51.8 million in 2007.The decreasewas primarily due to lower sales volumes and sales prices, which were driven bylower demand in new residential construction markets. These decreases wereoffset in part by lower costs for purchased materials.

 

*WoodProducts.*Segment income decreased $13.6 million, or 37%, from $37.2 millionin2006 to $23.6 million in 2007. The decrease was driven primarily bylower sales prices and sales volumes, coupled with higher conversion costs.These decreases were offset in part by lower log and other raw material costs.

 

*Paper. *Segment income increased$69.2 million, or 110%, to $132.3 million in 2007, compared with$63.1 million in 2006. The increase was driven by higher sales prices, offsetin part by higher fiber and chemical costs. In addition, we recorded $21.7 millionof lower depreciation and amortization expenses as a result of discontinuingdepreciation and amortization on the assets recorded as held for sale.

 

*Packaging &Newsprint. *Segment income decreased $5.2 million, or 11%, from$45.3 million in 2006 to $40.1 million for 2007. The decrease wasdriven primarily by lower newsprint prices, coupled with higher fiber costs,offset in part by higher prices for corrugated products and linerboard. Inaddition, we recorded $19.1 million of lower depreciation and amortizationexpenses as a result of discontinuing depreciation and amortization onthe assets recorded as held for sale.

 

*Other*

 

*Change in fair value of interest rate swaps.*For theyear ended December 31, 2007, we recorded $3.7 million of income in “Changein fair value of interest rate swaps,” which included $8.4 million ofincome 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.

 

*Interestexpense. *For the yearended December 31, 2007, interest expense was $96.8 million, comparedwith $112.4 million in 2006. The decrease in interest expense is primarilyattributable to repaying the note payable to a related-party entity, Boise Land &Timber Corp., in November 2006, as well as a $46.0 million decrease in debtoutstanding at December 31, 2007, compared with December 31, 2006.Partially offsetting the decrease in interest expense were the write-off of$4.5 million of deferred financing costs resulting from the repayment ofour $250 million unsecured floating-rate notes and the $1.8 millionwrite-off resulting from the repayment of our Tranche D term loan andreduction in borrowing capacity under our previous revolving credit facility.

 

*Incometax (provision) benefit. *Income taxexpense was $8.0 million in 2007, compared with $3.6 million in 2006.For the year ended December 31, 2007, the increase primarily related toincome tax expense related to our cash flow hedges and the true-up ofmiscellaneous state income tax items. For the year ended December 31,2007, our effective tax rate for our separate subsidiaries that are taxed ascorporations was 40.3%, comparedwith 37.3% for 2006. The primary reason for the difference in tax rates is theeffect of state income taxes and the mix of domestic and foreign sources ofincome. The 2006 income tax expense relates primarily to expense recognized byour taxable subsidiaries.

 

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***Industry Mergers and Acquisitions***

 

Wehave not seen significant merger and acquisition activity in the buildingproducts area other than the acquisition of International Paper’s wood productsfacilities by Georgia-Pacific in 2007.

 

We may engage in acquisition or divestiturediscussions, including those entered into during the year, as discussed in “Saleof Our Paper and Packaging & Newsprint Assets” in this Management’sDiscussion and Analysis of Financial Condition and Results of Operations, withother companies and make divestitures from time to time. We review ouroperations and dispose of assets that fail to meet our criteria for return oninvestment or cease to warrant retention for other reasons. In 2008, we soldour Brazilian subsidiary. For additional information related to the sale of ourBrazil operations, see the discussion of “Other (income) expense, net” in “Costsand Expenses” under “Our Operating Results” in this Management’s Discussion andAnalysis of Financial Condition and Results of Operations.

 

***Liquidity and Capital Resources***

 

During 2008, our liquidity position strengthened as weused the proceeds from the Sale and an initial borrowing under the RevolvingCredit Facility to repay $1,085.6 million of long-term debt. In addition,we received $121.8 million in net proceeds from the sale of othernonstrategic assets (see Investment Activities below for more information). At December 31,2008, we had $275.8 million of cash and cash equivalents, compared with$57.6 million at December 31, 2007. We are obligated under our 7.125%senior subordinated notes to use the net proceeds (as defined in the indenture)of $98.3 from the sale of nonstrategic assets within one year to repay seniorindebtedness, acquire additional assets, or make a tender offer at par for aportion of the senior subordinated notes. At December 31, 2008, we hadapproximately $72.5 million of cash that remained governed by the seniorsubordinated note asset sale provision. The one year provision in our seniorsubordinated note agreement requires that we use $27.0 million and$45.5 million of the proceeds by June 10 and July 1, 2009,respectively. Weexpect to use $15 million to $20 million of the remaining cash fromthese asset sales to make capital expenditures with the remainder expected tobe used to repay indebtedness under the Revolving Credit Facility.

 

At December 31, 2008, the net cash proceedsreceived from the asset sales were invested in high-quality, short-terminvestments, which we record in “Cash and cash equivalents.” The securities inwhich we are investing include money market funds that invest solely in U.S.Treasury securities, commercial paper issued by leading financial institutionsrated at least upper medium grade (A-1) or prime (P-1), commercial paper issuedby asset-backed conduits where the backup liquidity facility is provided by aleading financial institution and the program is rated at least A-1 or P-1, andsimilar instruments where we believe the risk of default or illiquidity isminimal. We diversify our short-term investments to reduce our credit exposureto a single obligor.

 

Against the backdrop of a weak economy and a sharpdrop-off in housing construction and demand for our products, there isuncertainty around the amount of cash flow we will generate in 2009. However,we believe that our cash and short-term investments, as well as our availableborrowing capacity, will be adequate to fund debt service requirements andprovide cash, as required, to support our ongoing operations, capital expenditures,and working capital needs for the next 12 months. If a contractuallycommitted lender fails to honor its commitment under the Revolving CreditFacility, the other lenders would remain committed for their portion of thetotal facility. A total of 12 lenders participated in the Revolving CreditFacility at December 31, 2008, and the largest single commitment under theRevolving Credit Facility was $75 million. In early 2009, two of ourlenders merged and, on a combined basis, represent a commitment of$112 million. At December 31, 2008, we had $75.0 million ofoutstanding loans under the Revolving Credit Facility. 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, 2008, 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. Thus, at December 31,2008, our aggregate liquidity from unrestricted cash and cash equivalents andunused borrowing capacity under the Revolving Credit Facility totaled$333.9 million calculated as follows:

 

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| Net availability  under Revolving Credit Facility |   | $     | 103.1  |   |
|---------------------------------------------------|--------|-------|--------|--------|
| Cash                                              |   | 275.8 |   |
| Availability  threshold                           |   | (45.0 | )      |
|                                              |   | $     | 333.9  |   |

 

In 2008, the significant decline in global equitymarkets and turmoil in the credit markets caused our pension investmentportfolio to suffer significant losses. As a result of investment losses, newbenefits earned, and actuarial assumption changes, our funding shortfallincreased from $86.9** **millionat December 31, 2007, to $162.6** **millionat December 31, 2008, measured on a projected benefit obligation basis.While the Worker, Retiree, and Employee Recovery Act of 2008 provides somerelief as to the timing of our required future cash contributions, we expect tomake material contributions to our pension plans for the next several yearsbarring a dramatic recovery in equity and debt market security valuations or asizable increase in the discount rate used to measure our liabilities. We arerequired to contribute $4.4 million to our pension plans in 2009. In March 2009,we made $25.0 million of discretionary contributions to improve the fundedstatus of our plans.

 

Our ability to continue to fund our debt servicerequirements and operations may be affected by general economic, financial,competitive, legislative, and regulatory factors, and as a result, we cannotassure that our business will generate sufficient cash flow from operations orthat future borrowings will be available for use under the Revolving CreditFacility in an amount sufficient to enable us to pay our indebtedness or tofund our other liquidity needs.

 

***Sources and Uses of Cash***

 

In 2008, our primary source of cash was revenuegenerated from the sale of our building products. As discussed under “OperatingResults” in this Management’s Discussion and Analysis and Results ofOperations, sales decreased in 2008 primarily due to the sale of our Paper andPackaging & Newsprint businesses in first quarter 2008. The sales ofour building products also decreased in 2008 due to weaker product demand andprices as new residential housing demand in the U.S. declined. We also generatecash from borrowings on our credit facilities. See the discussion of our creditfacilities including our covenants under “Financing Activities” below. Inrecent years, we have generated cash proceeds from the sale of nonstrategicassets (see the “Investment Activities” discussion below).

 

Our primary uses of cash are for expenses related tothe 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.See the “Contractual Obligations” section of this Management’s Discussion andAnalysis and Results of Operations for information related to our enforceableand legally binding obligations at December 31, 2008.

 

***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 2008, 2007, and 2006 as follows:

 

*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, the decrease in cash provided by operations relatesprimarily to the following:

 

·                        *Items in net income (loss) provided $1.8 million of cash during2008, compared with $275.4 million of cash in 2007*.  The decrease is due to the sale of our Paperand Packaging & Newsprint assets in first quarter 2008 and lowerincome in our Building Materials Distribution and Wood Products segments due tosignificant deterioration in the U.S. housing market. As discussed under “Our Operating Results”above, this lower income was driven primarily by lower sales activity,resulting in fewer gross margin dollars being generated to cover cash operatingcosts, in our Building Materials Distribution segment and by a combination oflower sales volumes

 

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and/or prices for most of our products, coupled with higher conversioncosts, in our Wood Products segment.

 

·                  *Changes in working capital*. Unfavorable changes in working capital used $4.6 million of cash fromoperations. Working capital is subject to cyclical operating needs, the timingof the collection of receivables, the payment of payables and expenses, andseasonal fluctuations in our operations. During 2008, the increase in workingcapital was primarily attributable to a decrease in accounts payable andaccrued liabilities, offset by decreases in accounts receivable, inventory, andother assets. The decrease in accounts receivable reflects a lower level ofsales 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 “OurOperating Results” above for more information.

 

·                        *More cashcontributions to our pension and postretirement benefit plans.*  During 2008, we used $21.0 million of cash tomake pension contributions and other postretirement benefit payments, comparedwith $1.1 million during 2007. Of the 2008 contributions,$11.0 million was included in the pension assets transferred in the Sale.

 

*2007Compared With 2006*

 

In 2007, our operating activities provided$250.1 million of cash, compared with $253.7 million in 2006.Relative to 2006, the decrease in cash provided by operations related primarilyto the following:

 

·                  *Changesin working capital.*  In 2007,changes in working capital used $26.4 million of cash from operations,compared with $8.0 million in 2006. During the year ended December 31,2007, the increase in working capital was primarily attributable to a decreasein accounts payable and accrued liabilities in Building Materials Distributionand Wood Products, as well as higher inventories in these segments. The lowerlevels of accounts payable and accrued liabilities in Building MaterialsDistribution reflected a lower level of sales activity due to the continuedhousing market slowdown. Higher inventory levels in Building MaterialsDistribution were primarily the result of the expansion of and additions to ourdistribution operations, which resulted in those locations carrying higherlevels of inventory relative to 2006. Wood Products experienced higher levelsof inventories primarily as a result of higher EWP and, to a lesser extent, loginventories. Relative to 2006, the increase in EWP inventories was primarilythe result of returning to traditional inventory levels in 2007 fromlower-than-usual levels in the prior year. The increase in inventories andlower level of accounts payable and accrued liabilities were partially offsetby lower receivables.

 

·                  *Lowercash contributions to our pension and postretirement benefit plans. *Partially offsetting the unfavorablechanges in working capital was $19.6 million of lower pension and otherpostretirement benefit contributions in 2007 relative to 2006.

 

***InvestmentActivities***

 

Cash investing activities provided$1,271.4 million in 2008, compared with $186.7 million used in 2007and $150.7 million used in 2006. In all periods, capital expenditures for property and equipmentconsisted primarily of expansion, business improvement and quality/efficiencyprojects, replacement projects, and ongoing environmental compliance.

 

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*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 of our Paper and Packaging &Newsprint assets, we received $1,201.9 million, which is net of$38.0 million of cash contributed to Boise Inc. and$37.3 million of selling expenses, which included $24.9 million offinancing costs that we agreed to pay for Boise Inc. We also receivedapproximately $45.5 million of cash for the sale of our Brazil operationsand $23.6 million of cash for the sale of our Vancouver, Washington, andIndependence, Oregon, closed mill sites and other miscellaneous assets. During2008, cash investing activities also included$52.7 million of net proceeds from the sale of the note receivable fromBoise 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).

 

Detailsof 2008 capital investment by segment are included in the table below:

 
| ** **                               | ** ** | **Year Ended December 31, 2008** | ** ** |
|------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                               | ** ** | **Acquisition/  Expansion**                          | ** ** | **Quality/  Efficiency (a)** | ** ** | **Replacement,  Environmental,  and Other** | ** ** | **Total** | ** ** |
| ** **                               |       |                                                 |       | **(millions)** |   |   |   |
|                                     |       |                                                 |       |   |   |   |   |   |   |
| Building  Materials Distribution         |       | $                                                    | 0.6        |   | $ | — |   | $ | 4.5 |   | $ | 5.1 |   |
| Wood Products                            |       | 5.0                                                  |       | 3.2 |   | 26.4 |   | 34.6 |   |
| Paper (b)                                |       | 0.6                                                  |       | 1.0 |   | 3.4 |   | 5.0 |   |
| Packaging &  Newsprint (b) |       | 3.1                                                  |       | 0.8 |   | 1.3 |   | 5.2 |   |
| Corporate and  Other                     |       | 1.2                                                  |       | 0.2 |   | 0.6 |   | 2.0 |   |
| ** **                               | ** ** | **$**                                                | **10.5**   | ** ** | **$** | **5.2** | ** ** | **$** | **36.2** | ** ** | **$** | **51.9** |   |

 

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(a)                                  Quality and efficiency projects includequality improvements, modernization, energy, and cost-saving projects.

 

(b)                                 Included purchases for the period of January 1to February 22, 2008, the date of the Sale.

 

We expect capital investments in 2009 to totalapproximately $30 million to $35 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 2009 will be forexpansion, business improvement and quality/efficiency projects, replacementprojects, and ongoing environmental compliance. During 2008, we spentapproximately $7 million on environmental compliance. We expect to spendapproximately $1 million in 2009 for this purpose.

 

*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

 

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sale of assets, which included$10.1 million of net proceeds from the sale of our newly constructedbuilding materials distribution center in Milton, Florida, which we completedduring the second quarter. In connection with the sale of our 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 the Additional Consideration Agreement. As partof the Forest Products Acquisition, we entered into an Additional ConsiderationAgreement with OfficeMax, pursuant to which we agreed to adjust the purchaseprice based on changes in paper prices over the six-year period following theForest Products Acquisition. Under the Additional Consideration Agreement, wecould pay to OfficeMax, or OfficeMax could pay to us, a maximum aggregateamount of $125.0 million, in each case net of payments received. Aftereach anniversary of the Forest Products Acquisition, we reviewed paper priceswith the provisions of the Additional Consideration Agreement to determinewhether any amounts were owed or receivable under the agreement. For the firstand second anniversary periods, which ended October 29, 2005 and 2006,neither Boise nor OfficeMax owed additional consideration for the purchaseprice. Based on paper prices during the third anniversary period ended October 29,2007, we paid OfficeMax $32.5 million. This agreement was terminated inconnection with the Sale, and we will neither receive payments from, nor makesubsequent payments to, OfficeMax under this agreement.

 

*2006*

 

In 2006, investing activities included$153.5 million of capital expenditures for the purchase of property andequipment. Investing activities also included approximately $42.6 millionof cash paid for the purchase of Central Texas Corrugated’s assets in Waco,Texas. These expenditures were partially offset by $43.5 million ofproceeds from sales of assets, including $27.2 million of proceeds fromthe sale of our headquarters building in Boise, Idaho; $11.0 million ofproceeds from the sale of our Lakeville, Minnesota, and Rochelle, Illinois,distribution facilities; and $5.3 million of proceeds from othermiscellaneous asset sales.

 

***Financing Activities***

 

In 2008, we used $1,028.8 million in cash forfinancing activities, compared with $51.0 million in 2007 and$145.9 million in 2006.

 

In 2008, cash used for financing activities related primarilyto the repayment of long-term debt. During the period of January 1 to February 21,2008, we borrowed $125.0 million under our receivables securitizationfacility and $40.0 million under our previous revolving credit facility tomake $7.4 million of tax distributions to our equity holders, contribute$20.0 million to our pension plans, and fund working capital and otheroperating requirements. In 2008, with proceeds from the Sale and an initialborrowing under the Revolving Credit Facility, we have repaid$1,085.6 million of outstanding debt and terminated all of our creditfacilities 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.

 

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 the repaymentof our senior unsecured floating-rate notes, which was primarily funded withthe proceeds from a $200.0 million delayed-draw term loan. Cash used forfinancing activities also included a $15.0 million net increase inborrowings 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.

 

In 2006, we made $151.9 million of net debt repayments to thirdparties, which included $96.9 million of prepayments on our Tranche Dterm loan and a $55.0 million decrease in our borrowings under ouraccounts receivable securitization program. The debt was paid with$38.2 million of proceeds from asset sales, $25.6 million of proceeds

 

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from unwinding and resetting the fixedinterest rate we pay on our interest rate swap agreements, and other cashflows. In addition, in November 2006, we repaid the note payable to BoiseLand & Timber Corp., a subsidiary of Boise Land & TimberHoldings Corp. (Timber Holdings), and immediately thereafter, Timber Holdingsmerged with and into us. As part of the merger, FPH and OfficeMax (owners ofTimber Holdings) used $280.4 million of the loan repayment proceeds tomake an additional investment in us, which we recorded as “Capitalcontributions from members” in our 2006 Consolidated Statement of Cash Flows.After the purchase, OfficeMax continued to own 100% of our Series A equityunits, and FPH and OfficeMax continued to hold 80.1% and 19.9%, respectively,of our Series B equity units. In 2006, we used $19.3 million of cashto pay our equity investors amounts to fund their tax obligations related totheir investments in us.

 

The followingdiscussion describes our debt structure in more detail.

 

*Debt Structure*

 

At December 31, 2008 and 2007, our short- andlong-term debt were as follows:

 
| ** **                                       | ** ** | **December 31** | ** ** |
|--------------------------------------------------|------------|----------------------|------------|
| ** **                                       | ** ** | **2008**             | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **(millions)**       | ** ** |
|                                             |       |                 |       |   |   |
| Asset-based  revolving credit facility, due 2013 |       | $                    | 75.0       |   | $ | — |   |
| Tranche E  term loan, due 2014              |       | —               |       | 521.1 |   |
| 7.125% senior  subordinated notes, due 2014      |       | 240.0                |       | 400.0 |   |
| Delayed-draw  term loan, due 2014                |       | —               |       | 199.5 |   |
| Borrowings  secured by receivables               |       | —               |       | 40.0 |   |
| Current portion  of long-term debt               |       | —               |       | (47.3 | ) |
| Long-term debt,  less current portion            |       | 315.0                |       | 1,113.3 |   |
| Short-term borrowings                            |       | —               |       | 10.5 |   |
| Current portion  of long-term debt               |       | —               |       | 47.3 |   |
| Total debt                                       | ** ** | **$**                | **315.0**  | ** ** | **$** | **1,171.1** | ** ** |

 

As discussed in “Sale of Our Paper and Packaging & NewsprintAssets” above, with the proceeds from the Sale and an initial borrowing underthe Revolving Credit Facility, we repaid $1,085.6 million of long-termdebt, including all of the borrowings under the previous revolving creditfacility, Tranche E term loan, delayed-draw term loan, borrowings secured byour receivables, and $160.0 million of our 7.125% senior subordinatednotes.

 

*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 as borrowers,entered into the Revolving Credit Facility with Bank of America. As part of thesyndication process, the Revolving Credit Facility was amended in April 2008to revise the pricing and incorporate additional covenants. At December 31,2008, we had $75.0 million of borrowings outstanding under the RevolvingCredit Facility. Borrowings under the Revolving Credit Facility are based oneither the prime rate or the London Interbank Offered Rate (LIBOR). Pricing issubject to quarterly adjustment based on the average availability under theRevolving 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 periodof February 22, 2008, through December 31, 2008, the average interestrate for our borrowings under the Revolving Credit Facility was 5.0%. Lettersof credit are subject to a 0.125% fronting fee payable to the issuing bank anda fee 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 minimum and maximum borrowings under the Revolving Credit Facilitywere $64.1 million and $75.0 million between February 22, 2008,and December 31, 2008. The weighted average amount of borrowingsoutstanding under the Revolving Credit Facility during the period from February 22,2008, through December 31, 2008, was $72.7 million. The RevolvingCredit Facility 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 ourdomestic subsidiaries (other than the three borrowers noted above) and issecured by a first-priority security interest in the stock of our foreignsubsidiaries and substantially all of our domestic assets, except for property,plant, and equipment. At

 

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December 31,2008, we had $75.0 million of outstanding loans under the Revolving CreditFacility. Borrowings under the Revolving Credit Facility are constrained by aborrowing base formula dependent upon levels of eligible inventory andreceivables reduced by outstanding letters of credit and, when our fixed-chargecoverage ratio is below 1:1, as it was on December 31, 2008, by a furtherrequirement that we maintain a combination of unrestricted cash and borrowingbase less outstanding loans at or in excess of the greater of $45 millionor 15% of the borrowing base determined under the Revolving Credit Facility.

 

In addition, the Revolving Credit Facility contains a restriction oncapital investments that is applicable when a minimum availability threshold isnot met. That covenant was not applicable on December 31, 2008. TheRevolving Credit Facility also contains customary nonfinancial covenants,including a negative pledge covenant and restrictions on distributions toequity holders, acquisitions, and divestitures. These covenants will becomemore restrictive if a minimum availability threshold is not maintained.

 

*Letters of Credit*

 

At December 31, 2008, we had $14.2 millionof letters of credit outstanding. 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 subordinated notes due in 2014. Netproceeds from the notes were used to fund a portion of the purchase price forthe 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. Inconnection with the Sale, we repurchased $160.0 million of the notes atpar on April 15, 2008. In first quarter 2009, we repurchased$8.0 million of senior subordinated notes for $4.1 million, plusaccrued interest. We may continue to make modest open market purchases fromtime to time.

 

*Other*

 

At December 31, 2008 and 2007, we had $7.9 million and$23.1 million of costs recorded in “Deferred financing costs” on ourConsolidated Balance Sheets. With the proceeds from the Sale, we repaid asignificant portion of our debt. In connection with repaying the debt, weexpensed approximately $17.6 million of deferred financing costs in 2008.We recorded the charges in “Gain on sale of Paper and Packaging &Newsprint assets” in our Consolidated Statement of Loss. In addition, weincurred approximately $4.5****million offinancing costs related to the Revolving Credit Facility, which is included,net of amortization, in “Deferred financing costs” on our December 31,2008, Consolidated Balance Sheet.

 

For the years ended December 31, 2008, 2007, and 2006, cash paymentsfor interest, net of interest capitalized, were $36.0 million,$96.1 million, and $95.1 million, respectively.

 

At December 31, 2008, the estimated currentmarket value of our fixed-rate debt, based on then-current interest rates forsimilar obligations with like maturities, was approximately $99.5 millionless than the amount reported on our Consolidated Balance Sheet.

 

***Contractual Obligations***

 

In the table below, we set forth our enforceable andlegally binding obligations as of December 31, 2008. Some of the amountsincluded in the table are based on management’s estimates and assumptions aboutthese obligations, including their duration, the possibility of renewal,anticipated actions by third parties, and other factors. Because theseestimates and assumptions are necessarily subjective, our actual payments mayvary from those reflected in the table. Purchase orders made in the ordinarycourse of business are excluded from the table below. Any amounts for which weare liable under purchase orders are reflected on the Consolidated BalanceSheets as accounts payable and accrued liabilities.

 

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| ** **                                                  | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                  | ** ** | **2009**                                  | ** ** | **2010-2011** | ** ** | **2012-2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                                  | ** ** | **(millions)**                            | ** ** |
|                                                        |       |                                      |       |   |   |   |   |   |   |   |   |
| Long-term debt  (a)                                         |       | $                                         | —     |   | $ | — |   | $ | 75.0 |   | $ | 240.0 |   | $ | 315.0 |   |
| Interest (b)                                                |       | 19.3                                      |       | 38.6 |   | 36.8 |   | 17.1 |   | 111.8 |   |
| Operating leases  (c)                                       |       | 11.7                                      |       | 20.5 |   | 15.8 |   | 38.6 |   | 86.6 |   |
| Purchase  obligations                                       |       |                                      |       |   |   |   |   |   |   |   |   |
| Raw materials  and finished goods inventory (d)             |       | 74.6                                      |       | 146.6 |   | 129.6 |   | 64.2 |   | 415.0 |   |
| Utilities (e)                                               |       | 8.9                                       |       | 0.1 |   | — |   | — |   | 9.0 |   |
| Other                                                       |       | 1.8                                       |       | 1.2 |   | — |   | — |   | 3.0 |   |
| Other long-term  liabilities reflected on our Balance Sheet |       |                                      |       |   |   |   |   |   |   |   |   |
| Compensation and  benefits (f)                              |       | 7.5                                       |       | 98.5 |   | 54.4 |   | 15.2 |   | 175.6 |   |
| Other (g)                                                   |       | 3.4                                       |       | 2.7 |   | 1.5 |   | 8.0 |   | 15.6 |   |
| ** **                                                  | ** ** | **$**                                     | **127.2**  | ** ** | **$** | **308.2** | ** ** | **$** | **313.1** | ** ** | **$** | **383.1** | ** ** | **$** | **1,131.6** |   |

 

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(a)                                  These borrowings are further explained in “FinancingActivities” under “Liquidity and Capital Resources” in this Management’sDiscussion and Analysis of Financial Condition and Results of Operations. Thetable assumes our long-term debt is held to maturity.

 

(b)                                 Amounts represent estimated interest payments as of December 31,2008, and assumes 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. Our operatinglease obligations would change if we exercised these renewal options and/or ifwe entered into additional operating lease agreements. For more information,see Note 7, Leases, of the Notes to Consolidated Financial Statements in“Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

 

(d)                                 Amounts represent contracts to purchase approximately$415.0 million of wood fiber based on contract terms or first quarter 2009pricing. 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, 2008, 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 consist primarily of pension and otherpostretirement benefit obligations, including current portion of$3.3 million.

 

(g)                                 Includes current liabilities of $3.5 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. We expect to make tax distributions to ourequity holders based on the greater of either our regular taxable income or ouralternative minimum taxable income. The regular taxable income is distributedat 38.9%. The alternative minimum taxable income is distributed at 20% forOfficeMax and 28% for all of our other equity holders.

 

The Series A equity units issued to OfficeMax inconnection with the Forest Products Acquisition accrue dividends daily at arate of 8% per annum on OfficeMax’s capital contribution (net of anydistributions previously received) 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, 2008 and 2007,$19.2 million and $12.9 million, respectively, of dividends wereaccrued on our Consolidated Balance Sheets as an increase in the value of the Series Aequity units. Neither the original investment nor the accumulateddividends on the Series A equity units are subject to a fixed retirementor redemption schedule.

 

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

 

At December 31, 2008 and 2007, we had no materialoff-balance-sheet arrangements with unconsolidated entities.

 

***Guarantees***

 

Note 17, Commitments and Guarantees, of the Notesto Consolidated Financial Statements in “Item 8. Financial Statements andSupplementary Data” of this Form 10-K describes the nature of ourguarantees, including the approximate terms of the guarantees, how theguarantees arose, the events or circumstances that would require us to performunder the guarantees, and the maximum potential undiscounted amounts of futurepayments we could be required to make.

 

***Inflationary and Seasonal Influences***

 

Our major costs ofproduction are labor, wood fiber, energy, and chemicals. Energy costs,particularly for electricity, natural gas, and fuel oil, have been volatile inrecent years. We also experienced higher volatility in chemical costs in 2008,compared with historical trends, due primarily to chemical market supply anddemand dynamics and the impact of energy markets on chemical producers.Seasonal changes in levels of building activity affect our building productsbusinesses, which are dependent on housing starts, repair-and-remodel activity,and light commercial and industrial conversion activities. We typically havehigher sales and working capital in the second and third quarters because ofincreased construction activity (due to warmer weather). In addition,seasonally cold weather increases costs, especially energy consumption, at mostof our manufacturing facilities.

 

***Disclosures of Financial Market Risks***

 

We are exposed to risks such as changes in interestrates, energy prices, and foreign currency exchange rates. In accordance withSFAS No. 133, *Accounting for DerivativeInstruments and Hedging Activities*, as amended, we record allderivative instruments as assets or liabilities on our Consolidated BalanceSheets at fair value. Changes in the fair value of derivatives are recorded ineither “Net income (loss)” or “Other comprehensive income (loss),” asappropriate. The gain or loss on derivatives designated as cash flow hedges isincluded in “Other comprehensive income (loss)” in the period in which changesin fair value occur and is reclassified to income (loss) in the period in whichthe hedged item affects income (loss), and any ineffectiveness is recognizedcurrently in our Consolidated Statements of Income (Loss). The gain or loss onderivatives designated as fair value hedges and the offsetting gain or loss onthe hedged item attributable to the hedged risk are included in income (loss)in the period in which changes in fair value occur. The gain or loss onderivatives that have not been designated as hedging instruments is included inincome (loss) in the period in which changes in fair value occur.

 

*Interest Rate Risk*

 

With the proceeds from the Sale, we significantly decreased ourvariable-rate debt. As a result, we terminated all of our interest rate swapagreements for approximately $11.9 million in February 2008. Theinterest rate swaps were considered economic hedges. During2008, we recorded the fair value of the interest rate swaps, or$6.3 million of expense, in “Change in fair value of interest rate swaps”in our Consolidated Statement of Loss.

 

At December 31,2007, we had four interest rateswaps to hedge our exposure to interest rate fluctuations associated with aportion of our variable-rate debt. At December 31, 2007, these interestrate swaps were considered economic hedges, and accordingly, we recognized$4.6 million of expense in 2007 related to changes in the fair value ofthese instruments in “Change in fair value of interest rate swaps” in ourConsolidated Statement of Income. During 2007, in connection with the repaymentof some of our variable-rate debt, these swaps were de-designated as cash flowhedges, and approximately $8.4 million of income related to the change inthe fair value of the interest rate swaps was reclassified out of “Accumulatedother comprehensive income” in our Consolidated Statement of Capital.

 

*ForeignCurrency Risk*

 

At December 31, 2008, we had no foreign currency hedges.

 

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*Energy Risk*

 

Occasionally,we enter into natural gas swaps, options, or a combination of these instrumentsto hedge the variable cash flow risk of natural gas purchases at index prices.As of December 31, 2008, we had no material derivative instruments relatedto our forecasted natural gas purchases.

 

*Contingent Value Rights*

 

As part of the Sale, Terrapin Partners VenturePartnership and Boise Cascade, L.L.C., issued 21.2 million contingentvalue rights (CVRs) to holders of Boise Inc.’s stock. In February 2009, wesettled our obligation related to the CVRs using 0.8 millionBoise Inc. shares.

 

***Financial Instruments***

 

The table below provides information as of December 31,2008, about our financial instruments that are sensitive to changes in interestrates. The table presents principal cash flows and related weighted averageinterest rates by expected maturity dates. For obligations with variableinterest rate sensitivity, the table sets forth payout amounts based on currentrates and does not attempt to project future rates. Other instruments subjectto market risk, such as obligations for pension plans and other postretirementbenefits, are not reflected in the table.

 
| ** **                                    | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | **December 31** | ** ** |
|-----------------------------------------------|------------|----------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|-------------------|------------|----------------------|------------|
| ** **                                    | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | **2008**             | ** ** | **2007** | ** ** |
| ** **                                    | ** ** | **2009**       | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **There  -after** | ** ** | **Total**            | ** ** | **Fair  Value** | ** ** | **Total** | ** ** | **Fair  Value** | ** ** |
| ** **                                    | ** ** | **(millions)** | ** ** |
| **Long-term debt, including current portion** |       |           |       |       |       |       |       |       |       |       |       |              |       |                 |       |   |   |   |   |   |   |
| Fixed-rate debt  payments (a)                 |       |           |       |       |       |       |       |       |       |       |       |              |       |                 |       |   |   |   |   |   |   |
| Senior  subordinated notes               |       | $              | —     |       | $          | —     |       | $          | —     |       | $          | —            |       | $                    | —     |   | $ | 240.0 |   | $ | 240.0 |   | $ | 140.5 |   | $ | 400.0 |   | $ | 386.7 |   |
| Average interest  rates                       |       | —         |       | —     |       | —     |       | —     |       | —     |       | 7.1               | %          | 7.1                  | %          | — |   | 7.1 | % | — |   |
| Variable-rate  debt payments (a)              |       | $              | —     |       | $          | —     |       | $          | —     |       | $          | —            |       | $                    | 75.0       |   | $ | — |   | $ | 75.0 |   | $ | 75.0 |   | $ | 760.6 |   | $ | 760.6 |   |
| Average interest  rates                       |       | —         |       | —     |       | —     |       | —     |       | 3.0        | %          | —            |       | 3.0                  | %          | — |   | 6.3 | % | — |   |

 

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(a)                                  Theseobligations are further explained in “Financing Activities”under “Liquidity and Capital Resources” in this Management’s Discussion andAnalysis of Financial Condition and Results of Operations. The table assumesour long-term debt is held to maturity.

 

***Environmental***

 

Our businesses are subject to a wide range of generaland industry-specific environmental laws and regulations. In particular, we areaffected by laws and regulations covering air emissions, wastewater discharges,solid and hazardous waste management, and site remediation. Compliance with theselaws and regulations is a significant factor in the operation of ourbusinesses. We believe that we have created a corporate culture of strongcompliance by taking a conservative approach to environmental issues in orderto assure that we are operating well within the bounds of regulatoryrequirements. However, we cannot assure you that we will at all times be infull compliance with environmental requirements, and we cannot assure you thatwe will not incur fines and penalties in the future. In 2008, we paid aninsignificant amount of environmental fines and penalties across all of oursegments.

 

We incur substantial capital and operatingexpenditures to comply with federal, state, and local environmental laws andregulations. Failure to comply with these laws and regulations could result incivil or criminal fines or penalties or in enforcement actions. Our failure tocomply could also result in governmental or judicial orders that stop orinterrupt our operations or require us to take corrective measures, installadditional pollution control equipment, or take other remedial actions. During2008, we spent approximately $7 million on capital expenditures to complywith environmental requirements. We expect to spend approximately $1 million in2009 for this purpose.

 

As an owner and operator of real estate, we may beliable under environmental laws for the cleanup of past and present spills andreleases of hazardous or toxic substances on or from our properties andoperations. We can be found liable under these laws if we knew of, or wereresponsible for, the presence of such substances. In some cases, this liabilitymay exceed the value of the property itself.

 

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OfficeMax retains responsibility for environmentalliabilities that occurred with respect to businesses, facilities, and otherassets not purchased by us in the Forest Products Acquisition. In addition,OfficeMax generally indemnifies us for hazardous substance releases and otherenvironmental violations that occurred prior to the Forest Products Acquisitionor arose out of pre-Forest Products Acquisition operations at the businesses,facilities, and other assets purchased by us. However, OfficeMax may not havesufficient funds to fully satisfy its indemnification obligations whenrequired, and in some cases, we may not be contractually entitled toindemnification 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 discharge any such liabilities on the basis of common law rules ofindemnification. However, Boise Inc. may not have sufficient funds to dischargeits obligations when required or to indemnify us from third party claimsarising out of any such failure.

 

***Critical Accounting Estimates***

 

Critical accounting estimates are those that are mostimportant to the portrayal of our financial condition and results. Theseestimates require management’s most difficult, subjective, or complexjudgments, often as a result of the need to estimate matters that areinherently uncertain. We review the development, selection, and disclosure ofour critical accounting estimates with the Audit Committee of our board ofdirectors. Our current critical accounting estimates are as follows:

 

***Other-Than-Temporary Impairment ofEquity Method Investment***

 

We account for the impairment of our equity method investment in accordancewith APB Opinion No. 18, *The EquityMethod of Accounting**forInvestments in Common Stock*. An equity method investment is impairedif the fair value of the investment is less than its carrying value. Once aninvestment is determined to be impaired, the investor is required to evaluatewhether the impairment is other than temporary.

 

This is a critical accounting estimate because judgment is required forpurposes of determining whether an impairment of an equity method investment isother than temporary. Factors to consider in making the determination include:

 

(i)            The lengthof time and extent to which the fair value of the investment is less than itscarrying amount;

 

(ii)           Thefinancial condition and near-term prospects of the equity method investee,including recent operating losses or specific events that may negativelyinfluence the future earnings potential of the investee; and

 

(iii)          Whether weintend to sell the impaired equity method investment before it recovers to itscarrying amount.

 

In connection with the Sale, we received 37.9 million, or 49%, ofBoise Inc.’s shares. On September 30, 2008, we evaluated items (i) through(iii) above and concluded that our investment in Boise Inc. was otherthan temporarily impaired. We made this determination primarily based on thelength of time and extent to which the fair value of our investment had beentrading below its carrying value. The Boise Inc. stock trading pricedeclined from $8.56 on February 21, 2008, to $1.56 on September 30,2008. Accordingly, we recorded a $208.1 million charge in “Impairment ofinvestment in equity affiliate” in our Consolidated Statement of Loss in 2008.This charge reflects the decrease in the fair value of the investment below itscarrying value. The fair value of our investment in Boise Inc. wascalculated based on our 37.9 million Boise Inc. shares and Boise Inc.’sstock price on September 30, 2008, of $1.56.

 

We closely monitor Boise Inc.’s common stock shareprice and publicly reported financial performance. At December 31, 2008,Boise Inc.’s stock closed at $0.43, and the fair value of the 37.9 millionshares we hold in Boise Inc. was, based on such trading price,$16.3 million, compared with the $21.0 million, or $0.55 pershare, carrying value recorded on our December 31, 2008, ConsolidatedBalance Sheet. At December 31, 2008, we evaluated whether the investmentwas other than temporarily impaired and concluded that it was not.

 

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We will continue to monitor the value ofBoise Inc.’s stock and our carrying value. Should market conditions and/orBoise Inc.’s financial performance deteriorate or should we decide to sell ourequity method investment before it recovers to its carrying value, it ispossible that we will be required to record another noncash impairment chargethat could have a material impact on our Consolidated Statements of Income(Loss). As additional information becomes known, we may change our estimates.

 

***Pensions***

 

We account for pension expense in accordance with SFAS No. 87,*Employers’ Accountingfor Pensions.* This statement requires us to calculatepension expense and liabilities using actuarial assumptions, including discountrates, expected return on plan assets, expected rate of compensation increases,retirement rates, mortality rates, expected contributions, and other factors.We based the assumptions used to calculate pension expense on the followingfactors:

 

*Discount Rate Assumption.*  The discount rate assumption was determinedusing a spot rate yield curve constructed to replicate Aa-graded corporatebonds. The plan’s projected cash flows were duration-matched to this yieldcurve to develop an appropriate discount rate.

 

*Asset Return Assumption*.  We based our expected rate of return on planassets on the average rate of earnings expected on invested funds. The 2008expected rate of return on plan assets was 7.25%, which was based on a targetallocation of approximately 52% U.S. equity securities (which were expected toearn approximately 8% in the long term), 15% international equity securities(which were expected to earn approximately 8% in the long term), and 33%fixed-income securities (which were expected to earn approximately 6% in thelong term).

 

*Rate of Compensation Increases. *This assumption reflects ourlong-term actual experience, the near-term outlook, and assumed inflation.

 

*Retirement andMortality Rates*.  These rates are developed to reflect actualand projected plan experience.

 

*Expected Contributions.*  Plan obligations and expenses are based onexisting retirement plan provisions. No assumption is made for future changesto benefit provisions beyond those to which we are presently committed, forexample, changes we might commit to in future labor contracts. In 2008, we made$21.0 million in contributions to our pension plans. We are required tocontribute $4.4 million to our pension plans in 2009. In March 2009,we made $25.0 million of discretionary contributions to improve the fundedstatus of our plans.

 

In accordance with SFAS No. 158, *Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans — An Amendment of Financial Accounting StandardsBoard (FASB) Statements No. 87, 88, 106, and 132(R),*werecognize the funded status of our pension and other postretirement benefit planson our Consolidated Balance Sheet and recognize the actuarial and experiencegains and losses and the prior service costs and credits as a component ofother comprehensive income, net of tax, in our Consolidated Statement ofCapital. Actual results that differ from assumptions are accumulated andamortized over future periods and, therefore, generally affect recognizedexpense in future periods. At December 31, 2008, we recorded$19.5 million of actuarial losses as an increase in liabilities and a decreasein capital on our Consolidated Balance Sheet. The actuarial losses related to achange to a new mortality table with lower overall mortality rates and adecrease in the discount rate from 6.40% at December 31, 2007, to 6.10% atDecember 31, 2008. 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 the accounting estimate related topensions is a critical accounting estimate for all of our segments because itis highly susceptible to change from period to period. As discussed above, thefuture effects of pension plans on our financial position and results ofoperations will depend on economic conditions, employee demographics, mortalityrates, retirement rates, investment performance, the pension regulatoryenvironment, benefit plan design, and funding decisions, among other factors.The following table presents selected assumptions used and expected to be usedin the measurement of pension expense in the following periods:

 

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| ** **                              | ** ** | **Year Ending**                                  | ** ** | ** **                                | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------|------------|------------|------------|
| ** **                              | ** ** | **December 31,**                                 | ** ** | **Year Ended December 31** | ** ** |
| ** **                              | ** ** | **2009**                                              | ** ** | **2008**                                  | ** ** | **2007**   | ** ** |
| ** **                              | ** ** | **(millions, except for percentages)** | ** ** |
|                                    |       |                                                  |       |                                      |       |       |       |
| Pension expense                         |       | $                                                     | 14.8       |                                      | $          | 17.1       |       | $ | 25.1 |   |
| Discount rate                           |       | 6.10                                                  | %          | 6.40                                      | %          | 5.90       | %          |
| Expected rate of  return on plan assets |       | 7.25                                                  | %          | 7.25                                      | %          | 7.25       | %          |
| Rate of  compensation increases         |       | 4.25                                                  | %          | 4.25                                      | %          | 4.25       | %          |
|                                         |            |                                                       |            |                                           |            |            |            |  |  |  |

 

Achange of 0.25% in either direction to the discount rate, the expected rate ofreturn on plan assets, or the rate of compensation increases would have had thefollowing effect on 2009 and 2008 pension expense. These sensitivities arespecific to 2009 and 2008. The sensitivities may not be additive, so the impactof changing multiple factors simultaneously cannot be calculated by combiningthe individual sensitivities shown.

 
| ** **                              | ** ** | ** **        | ** ** | **Increase (Decrease)  in Pension Expense** | ** ** |
|-----------------------------------------|------------|-------------------|------------|------------------------------------------------------------|------------|
| ** **                              | ** ** | **Base  Expense** | ** ** | **0.25 %  Increase**                                  | ** ** | **0.25%  Decrease** | ** ** |
| ** **                              | ** ** | **(millions)**    | ** ** |
| **2009  Expense**                       |       |              |       |                                                       |       |   |   |
| Discount rate                           |       | $                 | 14.8       |                                                       | $          | (0.3 | ) | $ | 0.3 |   |
| Expected rate of  return on plan assets |       | 14.8              |       | (0.6                                                       | )          | 0.6 |   |
| Rate of  compensation increases         |       | 14.8              |       | 0.2                                                        |       | (0.2 | ) |
|                                    |       |              |       |                                                       |       |   |   |
| **2008  Expense**                       |       |              |       |                                                       |       |   |   |
| Discount rate                           |       | $                 | 17.1       |                                                       | $          | (1.9 | ) | $ | 1.0 |   |
| Expected rate of  return on plan assets |       | 17.1              |       | (0.7                                                       | )          | 0.7 |   |
| Rate of  compensation increases         |       | 17.1              |       | 0.2                                                        |       | (0.4 | ) |

 

***Long-Lived Asset Impairment***

 

We account for the impairment of long-lived assets inall of our segments in accordance with SFAS No. 144, *Accountingfor the Impairment or Disposal of Long-Lived Assets*. An impairmentof a long-lived asset exists when the carrying value of an asset exceeds itsfair value 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 asset impairment is a critical accountingestimate, as it is susceptible to change from period to period. To estimatewhether the carrying value of an asset or asset group is impaired, we estimatethe undiscounted cash flows that could be generated under a range of possibleoutcomes. To measure future cash flows, we are required to make assumptionsabout future production volumes, future product pricing, and future expenses tobe incurred. In addition, estimates of future cash flows may change based onthe availability of logs and fiber, environmental requirements, capitalspending, and other strategic management decisions. We estimate the fair valueof an asset or asset group based on quoted market prices (the amount for whichthe asset(s) could be bought or sold in a current transaction with a thirdparty) when available. When quoted market prices are not available, we use adiscounted cash flow model to estimate fair value.

 

As discussed in “Recent Trends and Operational Outlook” in thisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations, 2008 results for our business segments were weak, compared withthose achieved in the period of 2004 through the first half of 2007, whensingle-family housing starts were more robust. During 2008, we took rollingcurtailments at a number of our wood products operations to maintainappropriate inventory levels. In addition, we permanently closed our WhiteCity, Oregon, lumber operations and St. Helens, Oregon, veneer operation. In December 2008,we committed to closing our plywood operation in White City, Oregon. Inconnection with these closures we recorded $5.9 million of expense for theimpairment of long-lived assets. Although we expect market conditions during2009 to remain difficult, we currently believe we have adequate supportfor the carrying value of all of our assets based on anticipated undiscountedcash flows that will result from our estimates

 

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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 andshould other cash flow assumptions change, it is possible that we will berequired to record noncash impairment charges in the near term that could havea material impact on our results of operations. We willcontinue to evaluate the long-term viability and value to our business strategyof our remaining operating facilities and may conclude that additionalfacilities should be closed or sold in response to market conditions. Thesedecisions may result in our recording an impairment of our long-lived assets. Dueto the numerous variables associated with our judgments and assumptionsrelating to the valuation of assets and the effects of changes on thesevaluations, both the precision and reliability of our estimates are subject touncertainty. As additional information becomes known, we may change ourestimates.

 

***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, 2008 and 2007, we had $1.8 millionand $1.7 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 uncertainoutlook for new residential construction in the U.S., as well as disruptions inthe capital markets and the impact that is having on the ability of ourcustomers and our customers’ customers to fund their operations, makes it moredifficult to estimate future credit losses. Our actual future losses fromuncollectible accounts may differ 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.

 

***Valuation of Redeemable Equity Units***

 

*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. We account for awards granted under the EquityPlan in our consolidated financial statements in accordance with SFAS No. 123(R),*Share-Based Payment*.

 

The valuation of the equity units is a critical accounting estimate becausejudgment is required for purposes of estimating the fair value of the awards.We considered the following when measuring the fair value of the equity unitsas of the grant date or award modification date.

 

*Series BEquity Units*

 

We used a form of income approach known as discountedcash flow analysis and a market approach that used an event analysis and atrend analysis to estimate the grant-date fair value of the Series Bequity units.

 

The outcomes of the discounted cash flow analysis, theevent analysis, and the trend analysis were given equal consideration. Theanalyses demonstrated that the fair value of the units issued by FPH was equalto or less than the amount each employee was required to pay. As a result, wedid not recognize compensation expense on the dates the Series B equityunits were granted.

 

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*Series CEquity Units*

 

The fair value of the Series C equity units as of the grant dateand/or award modification date was estimated by analyzing our possible futureevents, the paths to liquidity for the holders of the Series C equityunits, and how these paths may affect the valuation of the Series C equityunits. These possible future events included a sale of the company, an initialpublic offering, and remaining a private company. We estimated probabilities ofthese events occurring based on our strategies at each of the grant and/oraward modification dates. A decision tree analysis that incorporated theseevent outcomes and the likelihood of their occurrences was created. Payoffs tothe holders of the Series C equity units were constructed at each eventoutcome on the decision tree. Based on this framework, a simulation analysiswas run to arrive at the fair values of the Series C equity units.

 

SFAS No. 123(R) requires different valuation calculations forequity grants that have a service condition and equity grants that have amarket condition. Series C equity units that vest over time are servicecondition awards. Under the requirements of SFAS No. 123(R), the fairvalue of these awards is measured assuming that all conditions have been met oras if they were fully vested on the grant date. Compensation expense isrecognized over the vesting period and adjusted if the service condition is notmet.

 

The Series C equity units that vest based on internal rates of returnare market condition grants under the requirements of SFAS No. 123(R). The standard requires that thevaluation of market condition awards considers the likelihood that the marketcondition will be satisfied rather than assuming that the award is vested onthe award date. Because the internal rate of return represents a more difficultthreshold to meet before payout, with greater uncertainty that the marketcondition will be satisfied, these awards have a lower fair value than thosethat vest based solely on the passage of time. However, compensation expense isrequired to be recognized under SFAS No. 123(R) for an awardregardless of when, if ever, the market condition is satisfied.

 

The determination of the fair value of the equity units is complex andrequires the use of numerous estimates. These estimates include, but are notlimited to, assumptions we made regarding our cost of capital, futureperformance, and the probability of remaining a private company. Had we useddifferent assumptions in our analysis, it could have had a significant impacton our consolidated financial statements.

 

***Goodwill and Intangible Asset Impairment***

 

At December 31, 2008, we had $12.2 millionof goodwill recorded on our Consolidated Balance Sheet, of which$5.6 million was recorded in our Building Materials Distribution segmentand $6.6 million was recorded in our Wood Products segment. At December 31,2008, the net carrying amount of intangible assets with indefinite lives, whichrepresent our trade names and trademarks, was $8.9 million, and the netcarrying amount of finite-lived purchased intangible assets, consisting ofcustomer relationships, was $0.3 million.

 

We maintain two reportingunits for purposes of our goodwill and intangible asset impairment testing,Building Materials Distribution and Wood Products, which are the same as ouroperating segments discussed in “Our Segments” in this Management’s Discussionand Analysis of Financial Condition and Results of Operations. We test thegoodwill and indefinite-lived intangible assets in each of our reporting unitsfor impairment in accordance with Statement of Financial Accounting Standards No. 142,*Goodwill and Other Intangible Assets*,annually and/or when factors indicating impairment are present. In conductingour impairment analysis, we utilize the discounted cash flow approach thatestimates the projected future cash flows to be generated by our reportingunits,**discounted to presentvalue using a discount rate reflecting our estimated cost of funds. Differencesin assumptions used in projecting future operating cash flows and cost of fundscould have a significant impact on the determination of the fair value of ourreporting units. In estimating future cash flows for our reporting units, weuse our internal forecasts. Our forecasts are driven by consensus estimates ofkey economic indicators that affect our operating results, most notably newresidential construction, repair-and-remodel activity, and nonresidentialconstruction. These economic indicators are then used to estimate futureproduction volumes, selling prices, and key input costs for our manufacturedproducts. Our forecasts also take into consideration recent sales data forexisting products, planned timing of capital projects, and anticipatedconversion and distribution expenses. Our pricing assumptions are estimatedbased upon an assessment of industry supply and demand dynamics for our majorproducts.

 

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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 we have adequate support for thecarrying value of our goodwill and intangible assets based on anticipated cashflows that will result from our estimates of future demand, pricing, andproduction costs, assuming certain levels of capital expenditures. However, valuation analysis requiressignificant judgments and estimates to be made by management. We cannot predictthe occurrence of certain future events that might adversely affect thereported value of goodwill. Should the markets for building productsdeteriorate further, should we make strategic decisions in response tocontinued difficult economic and competitive conditions, should we decide toinvest capital differently and should other cash flow assumptions change it isreasonably possible that our determination that goodwill is not impaired couldchange in the near term. We willcontinue to perform a goodwill and intangible asset impairment test on anannual basis and on an interim basis if indicators of impairment exist. Asadditional information becomes known, we may change our estimates.

 

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

 

In December 2008, the FASB issued FASB StaffPosition (FSP) FAS 132(R)-1, *Employer’sDisclosures About Postretirement Benefit Plan Assets.* This FSPamends SFAS No. 132 (Revised 2003), *Employers’Disclosures About Pensions and Other Postretirement Benefits,*toprovide guidance on an employer’s disclosures about plan assets of a definedbenefit pension or other postretirement plan. The FSP is effective for fiscalyears ending after December 15, 2009. The adoption will affect ourdisclosures only and will have no impact on our financial position or resultsof operations.

 

In November 2008, the Emerging Issues Task Force(EITF) reached a consensus on EITF 08-6, *EquityMethod Investment Accounting Considerations*. This consensus addresses a number of matters associated withthe impact that SFAS No. 141(R) and SFAS No. 160 might have on the accounting forequity method investments, including how an equity method investment shouldinitially be measured, how it should be tested for impairment, and how changesin classification from equity method to cost method should be treated, amongothers. We adopted EITF 08-6 in January 2009, and it did not have amaterial impact on our financial position or results of operations.

 

In May 2008, the FASB issued SFAS No. 162, *The Hierarchy of Generally Accepted AccountingPrinciples.* The standard is intended to improve financial reportingby identifying a consistent framework, or hierarchy, for selecting accountingprinciples to be used in preparing financial statements that are presented inconformity with U.S. generally accepted accounting principles. We adopted SFAS No. 162on November 15, 2008, and it did not have a material impact on ourfinancial position or results of operations.

 

In March 2008, the FASB issued SFAS No. 161, *Disclosures About Derivative Instruments and HedgingActivities*. SFAS No. 161 requires enhanced disclosures aboutderivative instruments and hedging activities to enable investors to betterunderstand their effects on financial position, financial performance, and cashflows. These requirements include the disclosure of the fair values ofderivative instruments and their gains and losses in a tabular format. Weadopted SFAS No. 161 in January 2009, and it had no impact on our financialposition or results of operations.

 

In January 2008, we adopted SFAS No. 157,*Fair Value Measurements*. The statementestablished a framework for measuring fair value, and it enhanced thedisclosures for fair value measurements. The statement applies when otheraccounting pronouncements require or permit fair value measurements, but itdoes not require new fair value measurements. In accordance with the provisionsof FSP No. 157-2, *Effective Date of FASBStatement No. 157*, we deferred until January 1, 2009, theadoption of SFAS No. 157 as it relates to nonfinancial assets andnonfinancial liabilities that were recognized and disclosed at fair value inthe financial statements on a nonrecurring basis. The adoption did not have amaterial impact on our financial position or results of operations.

 

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In December 2007, the FASB issued SFAS No. 141(R), *Business Combinations,*and SFAS No. 160,*Accounting and Reporting of NoncontrollingInterests in Consolidated Financial Statements, an Amendment of AccountingResearch Bulletin No. 51.* These new standards willsignificantly change the accounting for and reporting of business combinationtransactions and noncontrolling (minority) interests in consolidated financialstatements. SFAS No. 141(R) will also impact our assessment ofGoodwill for impairment. We adopted SFAS Nos. 141(R) and 160 on January 1,2009. The impact of adopting these standards will be limited to businesscombinations and our assessments of Goodwill for impairment occurring on orafter January 1, 2009.

 

***Non-GAAP Financial Measures***

 

EBITDA represents income (loss) before interest(interest expense, interest income, and change in fair value of interest rateswaps), income taxes, and depreciation, amortization, and depletion. EBITDA isthe primary measure used by our chief operating decision makers to evaluatesegment operating performance and to decide how to allocate resources tosegments. We believe EBITDA is useful to investors because it provides a meansto evaluate the operating performance of our segments and our company on anongoing basis using criteria that are used by our internal decision makers andbecause it is frequently used by investors and other interested parties in theevaluation of companies. We believe EBITDA is a meaningful measure because itpresents a transparent view of our recurring operating performance and allowsmanagement to readily view operating trends, perform analytical comparisons,and identify strategies to improve operating performance. For example, webelieve that the inclusion of items such as taxes, interest expense, andinterest income distorts management’s ability to assess and view the coreoperating trends in our segments. EBITDA, however, is not a measure of ourliquidity or financial performance under generally accepted accountingprinciples (GAAP) and should not be considered as an alternative to net income(loss), income (loss) from operations, or any other performance measure derivedin accordance with GAAP or as an alternative to cash flow from operatingactivities as a measure of our liquidity. The use of EBITDA instead of netincome (loss) or segment income (loss) has limitations as an analytical tool,including the inability to determine profitability; the exclusion of interestexpense, interest income, change in the fair value of interest rate swaps, andassociated significant cash requirements; and the exclusion of depreciation,amortization, and depletion. Management compensates for these limitations byrelying on our GAAP results. Our measures of EBITDA are not necessarilycomparable to other similarly titled captions of other companies due topotential inconsistencies in the methods of calculation.

 

For areconciliation of net income (loss) to EBITDA, see “Item 6. SelectedFinancial Data” of this Form 10-K. The following is a reconciliation ofhistorical income (loss) from operations to EBITDA and the effects of itemsincluded in EBITDA for the years ended December 31, 2008, 2007, and 2006:

 

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| ** **                                        | ** ** | **December 31, 2008**       | ** ** |
|---------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                        | ** ** | **Building  Materials  Distribution** | ** ** | **Wood  Products** | ** ** | **Paper (a)** | ** ** | **Packaging &  Newsprint (a)** | ** ** | **Corporate  and  Other** | ** ** | **Total** | ** ** |
|                                              | ** ** | **(millions)**                        | ** ** |
| Income (loss)  from operations                    |       | $                                     | 19.5       |   | $ | (55.1 | ) | $ | 20.7 |   | $ | 5.7 |   | $ | (23.7 | ) | $ | (32.9 | ) |
| Foreign exchange  loss                            |       | —                                |       | — |   | — |   | — |   | (1.8 | ) | (1.8 | ) |
| Segment income  (loss)                            |       | 19.5                                  |       | (55.1 | ) | 20.7 |   | 5.7 |   | (25.5 | ) | (34.7 | ) |
| Equity in net  loss of affiliate (b)              |       | —                                |       | — |   | — |   | — |   | — |   | (11.3 | ) |
| Impairment of  investment in equity affiliate (c) |       | —                                |       | — |   | — |   | — |   | — |   | (208.1 | ) |
| Change in fair  value of contingent value rights  |       | —                                |       | — |   | — |   | — |   | — |   | (0.5 | ) |
| Depreciation,  amortization, and depletion        |       | 7.7                                   |       | 27.7 |   | 0.3 |   | 0.1 |   | 0.5 |   | 36.3 |   |
| EBITDA                                            | ** ** | **$**                                 | **27.2**   | ** ** | **$** | **(27.4** | **)** | **$** | **21.1** | ** ** | **$** | **5.7** | ** ** | **$** | **(25.0** | **)** | **$** | **(218.3** | **)** |

 
| EBITDA for the  year ended December 31, 2008, includes the effects of the following  items: |       |
|--------------------------------------------------------------------------------------------------|------------|
|                                                                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                                                                       | ** ** | **(millions)** | ** ** |
|                                                                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Facility  closures (d)                                                                           |       | $ | — |   | $ | (11.3 | ) | $ | — |   | $ | — |   | $ | — |   | $ | (11.3 | ) |
| Sales of assets  (e)                                                                             |       | — |   | 5.7 |   | — |   | — |   | 2.9 |   | 8.6 |   |
| Loss on sale of  note receivable from related party (f)                                          |       | — |   | — |   | — |   | — |   | (8.4 | ) | (8.4 | ) |
| ** **                                                                                       | ** ** | **$** | **—** | ** ** | **$** | **(5.6** | **)** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **(5.5** | **)** | **$** | **(11.1** | **)** |

 
| ** **                                     | ** ** | ** **                 | ** ** | ** **   | ** ** | ** ** | ** ** | ** **               | ** ** | ** **    | ** ** | ** ** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|--------------|------------|------------|------------|--------------------------|------------|---------------|------------|------------|------------|
| ** **                                     | ** ** | **December 31, 2007** | ** ** |
| ** **                                     | ** ** | **Building**               | ** ** | ** **   | ** ** | ** ** | ** ** | ** **               | ** ** | **Corporate** | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | **Materials**              | ** ** | **Wood**     | ** ** | ** ** | ** ** | **Packaging &** | ** ** | **and**       | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | **Distribution**           | ** ** | **Products** | ** ** | **Paper**  | ** ** | **Newsprint**            | ** ** | **Other**     | ** ** | **Total**  | ** ** |
|                                           | ** ** | **(millions)**             | ** ** |
|                                           |       |                       |       |         |       |       |       |                     |       |          |       |       |       |
| Income (loss)  from operations                 |       | $                          | 51.8       |         | $          | 23.6       |       | $                        | 132.3      |          | $          | 40.1       |       | $ | (27.5 | ) | $ | 220.3 |   |
| Foreign exchange  gain                         |       | —                     |       | —       |       | —     |       | —                   |       | 4.4           |       | 4.4        |       |
| Segment income  (loss)                         |       | 51.8                       |       | 23.6         |       | 132.3      |       | 40.1                     |       | (23.1         | )          | 224.7      |       |
| Depreciation,  amortization, and depletion (g) |       | 7.4                        |       | 30.0         |       | 45.0       |       | 37.7                     |       | 3.8           |       | 123.9      |       |
| EBITDA                                         | ** ** | **$**                      | **59.2**   | ** **   | **$**      | **53.7**   | ** ** | **$**                    | **177.3**  | ** **    | **$**      | **77.8**   | ** ** | **$** | **(19.4** | **)** | **$** | **348.6** | ** ** |

 
| EBITDA for the  year ended December 31, 2007, includes the effects of the following  items: |
|--------------------------------------------------------------------------------------------------|
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                                                                       | ** ** | **(millions)** | ** ** |
| Gain on changes  in retiree healthcare programs (h)                                              |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 4.4 |   | $ | 4.4 |   |
| ** **                                                                                       | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **4.4** | ** ** | **$** | **4.4** | ** ** |

 
| ** **                                 | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| ** **                                 | ** ** | **Building**               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Corporate** | ** ** | ** ** | ** ** |
| ** **                                 | ** ** | **Materials**              | ** ** | **Wood** | ** ** | ** ** | ** ** | **Packaging &** | ** ** | **and** | ** ** | ** ** | ** ** |
| ** **                                 | ** ** | **Distribution**           | ** ** | **Products** | ** ** | **Paper** | ** ** | **Newsprint** | ** ** | **Other** | ** ** | **Total** | ** ** |
|                                       |       | **(millions)**             |       |
| Income (loss)  from operations             |       | $                          | 75.3       |   | $ | 37.2 |   | $ | 63.1 |   | $ | 45.3 |   | $ | (37.5 | ) | $ | 183.4 |   |
| Foreign exchange  gain                     |       | —                     |       | — |   | — |   | — |   | 0.4 |   | 0.4 |   |
| Segment income  (loss)                     |       | 75.3                       |       | 37.2 |   | 63.1 |   | 45.3 |   | (37.1 | ) | 183.8 |   |
| Depreciation,  amortization, and depletion |       | 9.2                        |       | 27.6 |   | 62.3 |   | 50.8 |   | 5.4 |   | 155.3 |   |
| EBITDA                                     | ** ** | **$**                      | **84.6**   | ** ** | **$** | **64.9** | ** ** | **$** | **125.4** | ** ** | **$** | **96.1** | ** ** | **$** | **(31.9** | **)** | **$** | **339.1** | ** ** |

 
| EBITDA for the  year ended December 31, 2006, includes the effects of the following  items: |       |
|--------------------------------------------------------------------------------------------------|------------|
|                                                                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                                                                       | ** ** | **(millions)** | ** ** |
| Project costs  (i)                                                                               |       | $ | — |   | $ | (1.5 | ) | $ | — |   | $ | — |   | $ | (3.0 | ) | $ | (4.5 | ) |
| Gain on changes  in retiree healthcare programs (h)                                              |       | — |   | — |   | — |   | — |   | 3.7 |   | 3.7 |   |
| ** **                                                                                       | ** ** | **$** | **—** | ** ** | **$** | **(1.5** | **)** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **0.7** | ** ** | **$** | **(0.8** | **)** |

 

----

(a)                                  The year ended December 31, 2008, included the results of the Paperand Packaging & Newsprint segments through February 21, 2008. SeeNote 3, Sale of Our Paper and Packaging & Newsprint Assets, ofthe Notes to Consolidated Financial Statements in “Item 8. Financial Statementsand Supplementary Data” of this Form 10-K.

 

(b)                                 In connection with the Sale, we received 37.9 million, or 49%, ofBoise Inc.’s shares. We account for our investment under the equity method ofaccounting. For the year ended December 31, 2008, we recorded$11.3 million of expense related to our investment in Boise Inc. SeeNote 4, Investment in Equity Affiliate, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and SupplementaryData” of this Form 10-K.

 

(c)                                  In 2008, we concluded that our investment in Boise Inc. met the definitionof other than temporarily impaired as defined in APB Opinion No. 18.Accordingly, we recorded a $208.1 million write-down of our investment.See Note 4, Investment in Equity Affiliate, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and Supplementary Data”of this Form 10-K.

 

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(d)                                 Included $3.8 million of expense relatedto the closure of our veneer operations in St. Helens, Oregon, in 2008.

 

Included $7.5 million ofexpense recognized in December 2008, when we committed to closing theplywood manufacturing facility in White City, Oregon, which is scheduled tooccur in March 2009.

 

(e)                                  Included $5.7 million of net gain relatedto the sale of our wholly owned subsidiary in Brazil and $2.9 million ofnet gain on the sale of our Paper and Packaging & Newsprint assets.

 

(f)                                    Included an $8.4 million loss on the sale of the note receivable fromBoise Inc. See Note 5, Transactions With Related Parties, of the Notes toConsolidated Financial Statements in “Item 8. Financial Statements andSupplementary Data” of this Form 10-K.

 

(g)                                 Included approximately $21.7 million,$19.1 million, and $1.0 million of lower depreciation andamortization expense in our Paper, Packaging & Newsprint, andCorporate and Other segments as a result of discontinuing depreciation andamortization on the assets recorded as held for sale.

 

(h)                                 2007 and 2006 include gains of$4.4 million and $3.7 million, respectively, for changes in ourretiree healthcare programs. For more information, see Note 13, Retirementand Benefit Plans, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of this Form 10-K.

 

(i)                                     Represents expenses for the write-off ofspecial project costs.

 

***ITEM 7A.******                                       ******QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK***

 

Informationconcerning quantitative and qualitative disclosures about market risk isincluded under the caption “Disclosures of Financial Market Risks” in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Form 10-K.

 

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***ITEM 8.******                                                ******FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA***

 

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

**Consolidated Statements of Income(Loss)**

** **
| ** **                                                           | ** ** | **Year Ended December 31** | ** **   |
|----------------------------------------------------------------------|------------|-------------------------------------------|--------------|
| ** **                                                           | ** ** | **2008**                                  | ** **   | **2007** | ** ** | **2006** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                           | ** **   |
| ** **                                                           | ** ** | ** **                                | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Sales**                                                            | ** ** | ** **                                | ** **   | ** ** | ** ** | ** ** | ** ** |
| Trade                                                                |       | $                                         | 2,831,283    |   | $ | 4,797,795 |   | $ | 5,203,952 |   |
| Related parties                                                      |       | 146,215                                   |         | 615,661 |   | 575,913 |   |
|                                                                 |       | 2,977,498                                 |         | 5,413,456 |   | 5,779,865 |   |
|                                                                 |       |                                      |         |   |   |   |   |
| **Costs  and expenses**                                              | ** ** | ** **                                | ** **   | ** ** | ** ** | ** ** | ** ** |
| Materials,  labor, and other operating expenses                      |       | 2,620,113                                 |         | 4,705,325 |   | 5,063,041 |   |
| Materials,  labor, and other operating expenses from related parties |       | 70,026                                    |         | — |   | — |   |
| Depreciation,  amortization, and depletion                           |       | 36,258                                    |         | 123,909 |   | 155,311 |   |
| Selling and  distribution expenses                                   |       | 231,545                                   |         | 285,633 |   | 283,636 |   |
| General and  administrative expenses                                 |       | 36,556                                    |         | 84,062 |   | 88,364 |   |
| General and  administrative expenses from related party              |       | 8,143                                     |         | — |   | — |   |
| Gain on sale of  Paper and Packaging & Newsprint assets     |       | (2,915                                    | )            | — |   | — |   |
| Other (income)  expense, net                                         |       | 10,634                                    |         | (5,693 | ) | 6,089 |   |
|                                                                 |       | 3,010,360                                 |         | 5,193,236 |   | 5,596,441 |   |
| ** **                                                           | ** ** | ** **                                | ** **   | ** ** | ** ** | ** ** | ** ** |
| **Income  (loss) from operations**                                   |       | (32,862                                   | )            | 220,220 |   | 183,424 |   |
|                                                                 |       |                                      |         |   |   |   |   |
| Equity in net  loss of affiliate                                     |       | (11,328                                   | )            | — |   | — |   |
| Impairment of  investment in equity affiliate                        |       | (208,074                                  | )            | — |   | — |   |
| Foreign exchange  gain (loss)                                        |       | (1,831                                    | )            | 4,451 |   | 401 |   |
| Change in fair  value of contingent value rights                     |       | (507                                      | )            | — |   | — |   |
| Change in fair value  of interest rate swaps                         |       | (6,284                                    | )            | 3,733 |   | — |   |
| Interest expense                                                     |       | (34,313                                   | )            | (96,802 | ) | (112,404 | ) |
| Interest income                                                      |       | 7,691                                     |         | 4,083 |   | 3,781 |   |
|                                                                 |       | (254,646                                  | )            | (84,535 | ) | (108,222 | ) |
|                                                                 |       |                                      |         |   |   |   |   |
| **Income  (loss) before income taxes**                               |       | (287,508                                  | )            | 135,685 |   | 75,202 |   |
| Income tax  provision                                                |       | (470                                      | )            | (7,988 | ) | (3,631 | ) |
| **Net  income (loss)**                                               | ** ** | **$**                                     | **(287,978** | **)** | **$** | **127,697** | ** ** | **$** | **71,571** | ** ** |

 

See accompanying notes to consolidated financial statements.

 

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

**Consolidated Balance Sheets**

** **
| ** **                                        | ** ** | **December 31** | ** **    |
|---------------------------------------------------|------------|----------------------|---------------|
| ** **                                        | ** ** | **2008**             | ** **    | **2007** | ** ** |
| ** **                                        | ** ** | **(thousands)**      | ** **    |
| ** **                                        |       |                 |          |   |   |
| **ASSETS**                                        |       |                 |          |   |   |
|                                              |       |                 |          |   |   |
| **Current**                                       |       |                 |          |   |   |
| Cash and cash  equivalents                        |       | $                    | 275,803       |   | $ | 57,623 |   |
| Receivables                                       |       |                 |          |   |   |
| Trade, less  allowances of $1,843 and $1,664 |       | 78,393               |          | 115,209 |   |
| Related parties                                   |       | 3,112                |          | 9 |   |
| Other                                             |       | 5,907                |          | 7,458 |   |
| Inventories                                       |       | 279,023              |          | 342,015 |   |
| Assets held for  sale                             |       | —               |          | 1,853,039 |   |
| Prepaid expenses  and other                       |       | 1,296                |          | 5,426 |   |
|                                              |       | 643,534              |          | 2,380,779 |   |
|                                              |       |                 |          |   |   |
| **Property**                                      |       |                 |          |   |   |
| Property and  equipment, net                      |       | 291,999              |          | 313,117 |   |
| Fiber farms and  deposits                         |       | 8,632                |          | 24,010 |   |
|                                              |       | 300,631              |          | 337,127 |   |
|                                              |       |                 |          |   |   |
| **Investment  in equity affiliate**               |       | 20,985               |          | — |   |
| **Deferred  financing costs**                     |       | 7,862                |          | 23,074 |   |
| **Goodwill**                                      |       | 12,170               |          | 12,170 |   |
| **Intangible  assets, net**                       |       | 9,248                |          | 9,668 |   |
| **Other  assets**                                 |       | 6,009                |          | 11,374 |   |
| **Total  assets**                                 | ** ** | **$**                | **1,000,439** | ** ** | **$** | **2,774,192** | ** ** |

 

See accompanying notes to consolidatedfinancial statements.

 

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

**Consolidated Balance Sheets(continued)**

 
| ** **                                                                                                                               | ** ** | **December 31** | ** **    |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|---------------|
| ** **                                                                                                                               | ** ** | **2008**             | ** **    | **2007** | ** ** |
| ** **                                                                                                                               | ** ** | **(thousands)**      | ** **    |
| ** **                                                                                                                               |       |                 |          |   |   |
| **LIABILITIES  AND CAPITAL**                                                                                                             |       |                 |          |   |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Current**                                                                                                                              |       |                 |          |   |   |
| Short-term  borrowings                                                                                                                   |       | $                    | —        |   | $ | 10,500 |   |
| Current portion  of long-term debt                                                                                                       |       | —               |          | 47,250 |   |
| Accounts payable                                                                                                                         |       |                 |          |   |   |
| Trade                                                                                                                                    |       | 69,478               |          | 141,459 |   |
| Related parties                                                                                                                          |       | 2,195                |          | 43 |   |
| Accrued  liabilities                                                                                                                     |       |                 |          |   |   |
| Compensation and  benefits                                                                                                               |       | 38,228               |          | 36,909 |   |
| Interest payable                                                                                                                         |       | 3,930                |          | 7,140 |   |
| Other                                                                                                                                    |       | 30,893               |          | 29,959 |   |
| Liabilities  related to assets held for sale                                                                                             |       | —               |          | 331,636 |   |
|                                                                                                                                     |       | 144,724              | ** **    | 604,896 | ** ** |
|                                                                                                                                     |       |                 |          |   |   |
| **Debt**                                                                                                                                 |       |                 |          |   |   |
| Long-term debt,  less current portion                                                                                                    |       | 315,000              |          | 1,113,313 |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Other**                                                                                                                                |       |                 |          |   |   |
| Compensation and  benefits                                                                                                               |       | 172,275              |          | 46,981 |   |
| Other long-term  liabilities                                                                                                             |       | 12,125               |          | 17,097 |   |
|                                                                                                                                     |       | 184,400              |          | 64,078 |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Redeemable  equity units**                                                                                                             |       |                 |          |   |   |
| Series B  equity units — 2,920,574 and 16,622,421 units outstanding                                                       |       | 2,920                |          | 16,992 |   |
| Series C  equity units — 11,016,668 and 39,069,411 units outstanding                                                      |       | 3,037                |          | 9,489 |   |
|                                                                                                                                     |       | 5,957                |          | 26,481 |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Commitments  and contingent liabilities**                                                                                              |       |                 |          |   |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Capital**                                                                                                                              |       |                 |          |   |   |
| Series A  equity units — no par value; 66,000,000 units authorized and outstanding                                        |       | 81,967               |          | 78,463 |   |
| Series B  equity units — no par value; 550,000,000 units authorized; 532,414,853  units and 530,356,601 units outstanding |       | 268,391              |          | 876,693 |   |
| Series C  equity units — no par value; 44,000,000 units authorized; 11,183,000 units  and zero units outstanding               |       | —               |          | 10,268 |   |
| **Total  capital**                                                                                                                       |       | 350,358              |          | 965,424 |   |
|                                                                                                                                     |       |                 |          |   |   |
| **Total  liabilities and capital**                                                                                                       | ** ** | **$**                | **1,000,439** | ** ** | **$** | **2,774,192** | ** ** |

 

See accompanying notes to consolidatedfinancial statements.

 

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

**Consolidated Statements of CashFlows**

** **
| ** **                                                                       | ** ** | **Year Ended December 31** | ** **  |
|----------------------------------------------------------------------------------|------------|-------------------------------------------|-------------|
| ** **                                                                       | ** ** | **2008**                                  | ** **  | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                       | ** ** | **(thousands)**                           | ** **  |
| ** **                                                                       | ** ** | ** **                                | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Cash  provided by (used for) operations**                                      |       |                                      |        |   |   |   |   |
| Net income  (loss)                                                               |       | $                                         | (287,978    | ) | $ | 127,697 |   | $ | 71,571 |   |
| Items in net  income (loss) not using (providing) cash                           |       |                                      |        | — |   | — |   |
| Equity in net  loss of affiliate                                                 |       | 11,328                                    |        | — |   | — |   |
| Impairment of  investment in equity affiliate                                    |       | 208,074                                   |        | — |   | — |   |
| Depreciation,  depletion, and amortization of deferred financing costs and other |       | 37,783                                    |        | 129,289 |   | 157,312 |   |
| Related-party  interest (income) expense                                         |       | (2,760                                    | )           | — |   | 14,070 |   |
| Deferred income  taxes                                                           |       | (142                                      | )           | 4,195 |   | 968 |   |
| Pension and  other postretirement benefit expense                                |       | 17,078                                    |        | 25,366 |   | 27,447 |   |
| Gain on changes  in retiree healthcare programs                                  |       | —                                    |        | (4,367 | ) | (3,741 | ) |
| Change in fair  value of contingent value rights                                 |       | 507                                       |        | — |   | — |   |
| Change in fair  value of interest rate swaps                                     |       | 6,284                                     |        | (3,733 | ) | — |   |
| Management  equity units expense, net of expense related to the Sale             |       | 1,542                                     |        | 3,110 |   | 3,514 |   |
| (Gain) loss on  sales of assets, net                                             |       | (10,903                                   | )           | (2,354 | ) | 3,311 |   |
| Loss on sale of  note receivable from related party                              |       | 8,357                                     |        | — |   | — |   |
| Facility closure  costs                                                          |       | 10,796                                    |        | — |   | 3,925 |   |
| Other                                                                            |       | 1,797                                     |        | (3,819 | ) | (935 | ) |
| Decrease  (increase) in working capital, net of acquisitions and dispositions    |       |                                      |        |   |   |   |   |
| Receivables                                                                      |       | 6,226                                     |        | 34,156 |   | 23,558 |   |
| Inventories                                                                      |       | 62,994                                    |        | (29,397 | ) | (4,813 | ) |
| Prepaid expenses  and other                                                      |       | 5,501                                     |        | 679 |   | (1,650 | ) |
| Accounts payable  and accrued liabilities                                        |       | (79,312                                   | )           | (31,804 | ) | (25,103 | ) |
| Pension and  other postretirement benefit payments                               |       | (20,959                                   | )           | (1,117 | ) | (20,736 | ) |
| Current and  deferred income taxes                                               |       | (1,871                                    | )           | 1,077 |   | 4,385 |   |
| Other                                                                            |       | 1,223                                     |        | 1,113 |   | 595 |   |
| Cash provided by  (used for) operations                                          |       | (24,435                                   | )           | 250,091 |   | 253,678 |   |
|                                                                             |       |                                      |        |   |   |   |   |
| **Cash  provided by (used for) investment**                                      |       |                                      |        |   |   |   |   |
|                                                                             |       |                                      |        |   |   |   |   |
| Proceeds from  sale of assets, net of cash contributed                           |       | 1,270,976                                 |        | 27,797 |   | 43,487 |   |
| Proceeds from  sale of note receivable from related party, net              |       | 52,737                                    |        | — |   | — |   |
| Expenditures for  property and equipment                                    |       | (51,867                                   | )           | (187,972 | ) | (153,524 | ) |
| Increase in  restricted cash                                                     |       | (183,290                                  | )           | (200,000 | ) | — |   |
| Decrease in  restricted cash                                                     |       | 183,290                                   |        | 200,000 |   | — |   |
| Acquisitions of  businesses and facilities                                       |       | —                                    |        | — |   | (42,609 | ) |
| Additional  Consideration Agreement payment                                      |       | —                                    |        | (32,542 | ) | — |   |
| Other                                                                            |       | (402                                      | )           | 6,065 |   | 1,908 |   |
| Cash provided by  (used for) investment                                          |       | 1,271,444                                 |        | (186,652 | ) | (150,738 | ) |
|                                                                             |       |                                      |        |   |   |   |   |
| **Cash  provided by (used for) financing**                                       |       |                                      |        |   |   |   |   |
| Issuances of  long-term debt                                                     |       | 240,000                                   |        | 1,085,000 |   | 373,300 |   |
| Payments of  long-term debt                                                      |       | (1,085,563                                | )           | (1,138,337 | ) | (525,200 | ) |
| Short-term  borrowings                                                           |       | (10,500                                   | )           | 7,300 |   | 3,200 |   |
| Tax  distributions to members                                                    |       | (128,058                                  | )           | (2,753 | ) | (19,269 | ) |
| Repurchase of  management equity units                                           |       | (28,634                                   | )           | (993 | ) | (89 | ) |
| Cash paid for  termination of interest rate swaps                                |       | (11,918                                   | )           | — |   | — |   |
| Proceeds from  changes to interest rate swaps                                    |       | —                                    |        | 2,848 |   | 25,620 |   |
| Note payable to  related party, net                                              |       | —                                    |        | — |   | (283,847 | ) |
| Capital  contributions from members                                              |       | —                                    |        | — |   | 280,366 |   |
| Other                                                                            |       | (4,156                                    | )           | (4,050 | ) | (23 | ) |
| Cash used for  financing                                                         |       | (1,028,829                                | )           | (50,985 | ) | (145,942 | ) |
|                                                                             |       |                                      |        |   |   |   |   |
| **Increase  (decrease) in cash and cash equivalents**                            |       | 218,180                                   |        | 12,454 |   | (43,002 | ) |
|                                                                             |       |                                      |        |   |   |   |   |
| **Balance  at beginning of the period**                                          |       | 57,623                                    |        | 45,169 |   | 88,171 |   |
| **Balance  at end of the period**                                                | ** ** | **$**                                     | **275,803** | ** ** | **$** | **57,623** | ** ** | **$** | **45,169** | ** ** |

 

See accompanying notes to consolidated financial statements.

 

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

**Consolidated Statements ofCapital**

 
|                                                                |       | **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, 2005                                  |       | 66,000                               |       | $                                    | 39,885     |                                 | 530,357     |       | $          | 417,601 |   | — |   | $ | 7,535 |   | $ | 465,021 |   |
|                                                                |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Net income (a)                                                      |       | —                               |       | —                               |       | —                               |        | 71,571     |       | — |   | — |   | 71,571 |   |
| Other comprehensive  income (loss), net of tax (a) (b)         |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Cash flow hedges                                                    |       | —                               |       | —                               |       | —                               |        | (10,327    | )          | — |   | — |   | (10,327 | ) |
| Minimum pension  liability adjustment                               |       | —                               |       | —                               |       | —                               |        | 58         |       | — |   | — |   | 58 |   |
| Unfunded  accumulated benefit obligation                            |       | —                               |       | —                               |       | —                               |        | 37,263     |       | — |   | — |   | 37,263 |   |
| Capital  contributions from members                                 |       | —                               |       | 34,773                               |       | —                               |        | 237,709    |       | — |   | — |   | 272,482 |   |
| Paid-in-kind  dividend                                              |       | —                               |       | 3,632                                |       | —                               |        | (3,632     | )          | — |   | — |   | — |   |
| Tax  distributions to members                                       |       | —                               |       | —                               |       | —                               |        | (22,022    | )          | — |   | — |   | (22,022 | ) |
| Allocation of  profit interest to Series C equity units        |       | —                               |       | —                               |       | —                               |        | (4,120     | )          | — |   | 4,120 |   | — |   |
| Other                                                               |       | —                               |       | —                               |       | —                               |        | 887        |       | — |   | — |   | 887 |   |
| Balance at  December 31, 2006 (c)                         |       | 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 (c)                         |       | 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** | ** ** |

 

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(a)                                  Total comprehensive income (loss) for the years ended December 31,2008, 2007, and 2006, was $(481.9) million, $158.3 million, and$98.6 million, respectively.

 

(b)                                 Total other comprehensive income (loss) for the years ended December 31,2008, 2007, and 2006, was $(193.9) million, $30.6 million, and$27.0 million, respectively.

 

(c)                                  Accumulated other comprehensive income (loss) at December 31, 2008 and2007, was $(122.8) million and $71.1 million, respectively.

 

See accompanying notes to consolidatedfinancial statements.

 

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***Notes to Consolidated FinancialStatements***

 

***1.******                                      Natureof Operations and Basis of Presentation***

 

We are a building products company headquartered inBoise, Idaho. We manufacture engineered wood products, plywood, lumber, andparticleboard and distribute a broad line of building materials, including woodproducts we manufacture. Our operations began on October 29, 2004(inception), when we acquired the forest products and paper assets of OfficeMax(the Forest Products Acquisition). Before the Forest Products Acquisition,OfficeMax was known as Boise Cascade Corporation. We acquired the name “BoiseCascade” as part of the Forest Products Acquisition. As used in theseconsolidated financial statements, the terms “BC Holdings” and “we” refer toBoise Cascade Holdings, L.L.C., and its consolidated subsidiaries.

 

On February 22, 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. (formerlyAldabra 2 Acquisition Corp.) for cash and securities equal to$1.6 billion, plus working capital adjustments. Immediately following theSale, Boise Cascade, L.L.C., distributed the securities received in thetransaction to us. As a result, we became a 49% owner of Boise Inc. and continueto have a significant indirect financial interest in the results of the soldbusinesses. The equity interest we own in Boise Inc. represents asignificant continuing involvement as defined in Statement of FinancialAccounting Standards (SFAS) No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets.*As a result, wecontinue to show the results of the Paper and Packaging & Newsprintsegments through February 21, 2008, and we did not define the sold assetsas discontinued operations. The consolidated financial statements present thefinancial results of BC Holdings for the years ended December 31,2008, 2007, and 2006.

 

After the Sale, we operate our business in the following threereportable segments: Building Materials Distribution, Wood Products, andCorporate and Other. See Note 16, Segment Information, for additionalinformation about our reportable segments.

 

The following sets forth our corporate structure and equity ownership at December 31,2008 (based on voting power):

 

 

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***2.******                                      Summaryof Significant Accounting Policies***

 

*Consolidation and Use of Estimates*

 

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 estimatesinclude the evaluation of our investment in Boise Inc. forother-than-temporary impairment; the valuation of accounts receivable,inventories, goodwill, intangible assets, and other long-lived assets; legalcontingencies; guarantee obligations; indemnifications; assumptions used inretirement and other postemployment benefits; and customer incentives, amongothers. These estimates and assumptions are based on management’s bestestimates and judgment. Management evaluates its estimates and assumptions onan ongoing basis using historical experience and other factors, including thecurrent economic environment, which management believes to be reasonable underthe circumstances. We adjust such estimates and assumptions when facts andcircumstances dictate. Illiquid credit markets; volatile equity, foreigncurrency, and energy markets; and declines in consumer spending have combinedto increase the uncertainty inherent in such estimates and assumptions. Asfuture events and their effects cannot be determined with precision, actualresults could differ significantly from these estimates. Changes in theseestimates resulting from continuing changes in the economic environment will bereflected in the consolidated financial statements in future 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 and 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.”

 

*Equity Compensation*

 

We account for our Management Equity Agreement (EquityPlan) under SFAS No. 123(R), *Share-Based Payment*.Awards under our Equity Plan vest over periods up to six years. In 2008,2007, and 2006, we recognized $6.6 million, $3.1 million, and $3.5 millionof compensation expense. See Note 14, Redeemable Equity Units, fora discussion of the Equity Plan and the method we use to calculate compensationexpense.

 

# *Advertising Costs*

# * *

We expense the cost of advertising as incurred. Forthe years ended December 31, 2008, 2007, and 2006, advertising expenseswere $6.1 million, $9.4 million, and $10.7 million,respectively. These expenses are generally recorded in “Selling anddistribution expenses.”

 

# *Foreign CurrencyTranslation*

# * *

The functional currency for our operations outside theUnited States is the U.S. dollar. Nonmonetary assets and liabilities andrelated depreciation and amortization for these foreign operations areremeasured into U.S. dollars using historical exchange rates. Monetary assetsand liabilities are remeasured into U.S. dollars using the exchange rates as ofthe Consolidated Balance Sheet date. Revenue and expense items are remeasuredinto U.S. dollars using an average exchange rate prevailing during the year.The foreign exchange gains (losses) reported in the Consolidated Statements ofIncome (Loss) resulted from the remeasurements into the U.S. dollar.

 

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*Cash and Cash Equivalents*

 

Cash equivalents consist of short-term investments thathave a maturity of three months or less at the date of purchase. Cashequivalents totaled $244.6 million and $0.1 million at December 31,2008 and 2007, respectively. Our cash equivalents are high-quality, short-terminvestments. At December 31, 2008, the securities in which we wereinvesting included money market funds that invest solely in U.S. Treasurysecurities, commercial paper issued by leading financial institutions rated atleast upper medium grade (A-1) or prime (P-1), commercial paper issued byasset-backed conduits where the backup liquidity facility is provided by aleading financial institution and the program is rated at least A-1 or P-1, andsimilar instruments where we believe the risk of default or illiquidity isminimal.

 

*Trade AccountsReceivables and Allowance for Doubtful Accounts*

 

Trade accounts receivable are stated at the amount we expect to collect.Trade accounts receivable do not bear interest. We make ongoingestimates 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, 2008and 2007, we had $1.8 million and $1.7 million recorded as allowancesfor doubtful accounts. In determining the amount of the reserve, we considerour historical level of credit losses, customer concentrations, currenteconomic trends, and changes in customer payment tendencies. We also makejudgments about the creditworthiness of significant customers based on ongoingcredit evaluations. Adjustments to the valuation allowance are charged toincome. Trade accounts receivable balances that remain outstanding after wehave used reasonable collection efforts are written off through a charge to thevaluation allowance and a credit to accounts receivable. We may at times insureor arrange for guarantees on our receivables.

 

The uncertain outlook for new residential constructionin the U.S., as well as disruptions in the capital markets and the impact thatis having on the ability of our customers and our customers’ customers to fundtheir operations, makes it more difficult 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 instruments are cash and cashequivalents, accounts receivable, accounts payable, and long-term debt. Therecorded values of cash and cash equivalents, accounts receivable, and accountspayable approximate fair values based on their short-term nature. After theSale, our debt is predominately fixed-rate.

 

We are exposed to risks such as changes in interestrates, energy prices, and foreign currency exchange rates. We employ a varietyof practices to manage these risks, including operating and financingactivities and, where deemed appropriate, the use of derivative instruments.Derivative instruments are used only for risk management purposes and not forspeculation or trading. Derivatives are such that a specific debt instrument,contract, or anticipated purchase determines the amount, maturity, and otherspecifics of the hedge. If a derivative contract is entered into, we eitherdetermine that it is an economic hedge or we designate the derivative as a cashflow or fair value hedge. We formally document all relationships betweenhedging instruments and the hedged items, as well as our risk managementobjectives and strategies for undertaking various hedged transactions. Forthose derivatives designated as cash flow or fair value hedges, we formallyassess, both at the derivatives’ inception and on an ongoing basis, whether thederivatives that are used in hedging transactions are highly effective inoffsetting changes in the hedged items. The ineffective portion of hedgingtransactions is recognized in income (loss).

 

# *Vendor andCustomer Rebates and Allowances*

# * *

We receive rebates and allowances from our vendorsunder a number of different programs, including vendor marketing programs. At December 31,2008 and 2007, we had $3.0 million and $2.2 million, respectively, ofvendor rebates and allowances recorded in “Receivables, Other” on theConsolidated Balance Sheets. These rebates and allowances are accounted for inaccordance with Emerging Issues Task Force (EITF) 02-16, *Accounting by a Customer (Including a Reseller) for Certain*

 

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*ConsiderationReceived From a Vendor*. Rebates and allowances received fromour vendors are recognized as a reduction of “Materials, labor, and otheroperating expenses” when the product is sold, unless the rebates and allowancesare linked 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 provided to our customers are accounted for inaccordance with EITF 01-09, *Accounting forConsideration Given by a Vendor to a Customer*. The rebates arerecorded as a decrease in sales. At December 31, 2008 and 2007, we had$11.4 million and $12.7 million, respectively, of rebates payable toour customers recorded in “Accrued liabilities, Other” on our ConsolidatedBalance Sheets.

* *

*Inventory Valuation*

 

Inventories are valued at the lower of cost or market.Cost is based on the average or first-in, first-out (FIFO) method of inventoryvaluation. Manufactured inventories include costs for materials, labor, andfactory overhead. Log inventories include the costs of harvesting the timber.

 

Inventories include the following:

 
| ** **                          | ** ** | **December 31** | ** **  |
|-------------------------------------|------------|----------------------|-------------|
| ** **                          | ** ** | **2008**             | ** **  | **2007** | ** ** |
| ** **                          | ** ** | **(thousands)**      | ** **  |
|                                |       |                 |        |   |   |
| Finished goods  and work in process |       | $                    | 211,051     |   | $ | 266,033 |   |
| Logs                                |       | 50,930               |        | 56,490 |   |
| Other raw  materials and supplies   |       | 17,042               |        | 19,492 |   |
| ** **                          | ** ** | **$**                | **279,023** |   | **$** | **342,015** |   |

 

*Property and Equipment*

 

Property and equipment are recorded at cost. Costincludes expenditures for major improvements and replacements and the amount ofinterest cost associated with significant capital additions. For the yearsended December 31, 2008, 2007, and 2006, we recognized $0.1 million,$1.7 million, and $0.5 million of capitalized interest. Effective January 1,2007, we began expensing all repair and maintenance costs as incurred in accordancewith Financial Accounting Standards Board (FASB) Staff Position (FSP) No. AUGAIR-1, *Accounting for Planned MajorMaintenance Activities.* When property and equipment areretired, sold, or otherwise disposed of, the asset’s carrying amount and relatedaccumulated depreciation are removed from the accounts and any gain or loss isincluded in income (loss). In all periods presented, we used the straight-linemethod of depreciation.

 

Property and equipment consisted of the followingasset classes and the following general range of estimated useful lives:

 
| ** **                     | ** ** | ** **                                | ** **  | ** **                | ** ** | **General Range of** | ** ** |
|--------------------------------|------------|-------------------------------------------|-------------|---------------------------|------------|--------------------------------|------------|
| ** **                     | ** ** | **Year Ended December 31** | ** **  | **Estimated Useful** | ** ** |
| ** **                     | ** ** | **2008**                                  | ** **  | **2007**                  | ** ** | **Lives in Years**   | ** ** |
| ** **                     | ** ** | **(thousands)**                           | ** **  | ** **                | ** ** |
|                           |       |                                      |        |                      |       |                           |       |
| Land and land  improvements    |       | $                                         | 36,089      |                      | $          | 37,330                         |       | 10-20 |   |
| Buildings and  improvements    |       | 106,966                                   |        | 105,835                   |       | 10-40                          |       |
| Machinery and  equipment       |       | 252,952                                   |        | 258,333                   |       | 3-20                           |       |
| Construction in  progress      |       | 20,954                                    |        | 15,382                    |       | N/A                            |       |
|                           |       | 416,961                                   |        | 416,880                   |       |                           |       |
| Less accumulated  depreciation |       | (124,962                                  | )           | (103,763                  | )          | N/A                            |       |
| ** **                     | ** ** | **$**                                     | **291,999** |                      | **$**      | **313,117**                    |       |   |   |

 

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*Fiber Farms and Deposits*

 

In 2008, we sold our fiber farms pursuant to the Saleand the sale of our Brazilian subsidiary. Prior to the sale of our fiber farms,costs for activities related to the establishment of a new crop of trees,including planting, thinning, fertilization, pest control, herbicideapplication, irrigation, and land lease costs, were capitalized, while costsfor administration, insurance, and property taxes were expensed. Thecapitalized costs were accumulated by specifically identifiable farms orirrigation blocks. We charged capitalized costs, excluding land, to “Depreciation, amortization, and depletion”at the time the fiber was harvested based on actual accumulated costsassociated with fiber cut.

 

We are a party to a number of long-term log and fibersupply agreements. At December 31, 2008, our total obligation for log andfiber purchases under contracts with third parties was approximately$415.0 million based on contract terms or first quarter 2009 pricing.Future purchase prices under most of these agreements will be set quarterly orsemiannually based on regional market prices. Our log and fiber obligations aresubject to change based on, among other things, the effect of governmental lawsand 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*

 

We account for the impairment of long-lived assets inaccordance with SFAS No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets*. An impairment oflong-lived assets 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.

 

During 2008, we took rolling curtailments at a number of our wood productsoperations to maintain appropriate inventory levels. In addition, wepermanently closed our White City, Oregon, lumber operation and St. Helens,Oregon, veneer operation. In December 2008, we committed to closing ourplywood operation in White City, Oregon. In connection with these closures werecorded $5.9 million of expense for the impairment of long-lived assets.Although we expect market conditions during 2009 to remain difficult, wecurrently believe we have adequate support for the carrying value of all of ourassets based 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 andshould other cash flow assumptions change, it is possible that we will berequired to record noncash impairment charges in the near term that could havea material impact on our results of operations. We will continue to evaluate the long-termviability and value to our business strategy of our remaining operatingfacilities and may conclude that additional facilities should be closed or soldin response to market conditions. These decisions may result in our recordingan impairment of our long-lived assets. As additional informationbecomes known, we may change our estimates.

 

*Goodwill*

 

We maintain two reportingunits for purposes of our goodwill impairment testing, Building MaterialsDistribution and Wood Products, which are the same as our operating segments inNote 16, Segment Information. We test the goodwill in each of ourreporting units for impairment in accordance with SFAS No. 142, *Goodwill and Other Intangible Assets*,annually and/or when factors indicating impairment are present. In conductingour impairment analysis, we utilize the discounted cash flow approach thatestimates the projected future cash flows to be generated by our reportingunits, discounted to present value using a discount rate reflecting ourestimated cost of funds. Differences in assumptions used in projectingfuture operating cash flows and cost of funds could have a significant impacton the determination of the fair value of our reporting units. We completed ourannual assessment in accordance with SFAS No. 142 in fourth quarter 2008and 2007 and determined that there was no impairment.

 

We currently believe we have adequate support for thecarrying value of our goodwill based on anticipated cash flows that will resultfrom our estimates of future demand, pricing, and production costs, assumingcertain levels of capital expenditures. However,the analysis requires significant judgments and

 

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estimates to be made by management. Wecannot predict the occurrence of certain future events that might adverselyaffect the reported value of goodwill. Should the markets for buildingproducts deteriorate further, should we make strategic decisions in response tocontinued difficult economic and competitive conditions, should we decide toinvest capital differently and should other cash flow assumptions change it isreasonably possible that our determination that goodwill is not impaired couldchange in the near term. We willcontinue to perform a goodwill impairment test on an annual basis and on aninterim basis if indicators of impairment exist. As additionalinformation becomes known, we may change our estimates.

 

# *Asset RetirementObligations*

# * *

We account for asset retirement obligations in accordance with SFAS No. 143,*Accounting for Asset Retirement Obligations,*andFinancial Accounting Standards Board (FASB) Interpretation (FIN) No. 47*, Accounting for Conditional Asset Retirement Obligations — anInterpretation of FASB Statement No. 143*. This standardprimarily affects the way we account for landfill closure and closed-sitemonitoring costs. We accrue for asset retirement obligations in the period inwhich they are incurred if sufficient information is available to reasonablyestimate the fair value of the obligation. When we record the liability, wecapitalize the cost by increasing the carrying amount of the related long-livedasset. Over time, the liability is accreted to its settlement value, and thecapitalized cost is depreciated over the useful life of the related asset. Uponsettlement of the liability, we will recognize a gain or loss for anydifference between the settlement amount and the liability recorded. SeeNote 10, Asset Retirement Obligations, for additional information.

 

*Pension and Other Postretirement Benefits*

 

We sponsor noncontributory defined benefit pensionplans. After the Sale, only those employees, terminated vested participants,and retirees whose employment was with our Wood Products, Building MaterialsDistribution, and some corporate and discontinued operations continue to becovered under the plans remaining with us. We also have postretirementhealthcare benefit plans.

 

We recognize the funded status of our defined benefitpension and other postretirement benefit plans in the Consolidated BalanceSheets, with changes in the funded status recognized through accumulated othercomprehensive income (loss), net of tax, in the year in which the changesoccur. Actuarially-determined liabilities related to pension and postretirementbenefits are recorded based on estimates and assumptions. Key factors used indeveloping estimates of these liabilities include assumptions related todiscount rates, rates of return on investments, future compensation costs,healthcare cost trends, benefit payment patterns, and other factors. Actualresults that differ from assumptions are accumulated and amortized over futureperiods, and, therefore, generally affect recognized expense in future periods.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.

 

*Deferred Software Costs*

 

We defer internal-use software costs that benefitfuture years. 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 $2.7 million and$2.8 million of deferred software costs at December 31, 2008 and2007, respectively. For the years ended December 31, 2008, 2007, and 2006,amortization of deferred software costs totaled $0.5 million,$1.2 million, and $1.8 million, respectively.

 

*Taxes Collected*

 

We account for taxes collected from customers and remitted to governmentalauthorities in accordance with EITF 06-3, *HowTaxes Collected From Customers and Remitted to Governmental Authorities ShouldBe Presented in the Income Statement (That Is, Gross Versus Net Presentation)*.We present taxes on a net basis in our Consolidated Statements of Income(Loss).

 

*Labor Concentration*

 

As of December 31, 2008, we had approximately4,700 employees. Approximately 1,720, or 37%, of these employees workpursuant to collective bargaining agreements. Labor contracts coveringapproximately 700 employees with the Carpenters Industrial Council expireon July 15, 2009, at our

 

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Florien andOakdale, Louisiana, plywood plants. We do not anticipate that we will startbargaining these contracts until late in the second quarter of 2009. We do notexpect material work interruptions or increases in our costs during the courseof the negotiations with our collective bargaining units. Nevertheless, if ourexpectations are not accurate, we could experience a material labor disruptionor significantly increased labor costs at one or more of our facilities, any ofwhich could prevent us from meeting customer demand or reduce our sales andprofitability.

 

*New and Recently Adopted Accounting Standards*

 

In December 2008, the FASB issued FASB StaffPosition (FSP) FAS 132(R)-1, *Employer’sDisclosures About Postretirement Benefit Plan Assets.* This FSPamends SFAS No. 132 (Revised 2003), *Employers’Disclosures About Pensions and Other Postretirement Benefits,*toprovide guidance on an employer’s disclosures about plan assets of a definedbenefit pension or other postretirement plan. The FSP is effective for fiscalyears ending after December 15, 2009. The adoption will affect ourdisclosures only and will have no impact on our financial position or resultsof operations.

 

In November 2008, the EITF reached a consensus onEITF 08-6, *EquityMethod Investment Accounting Considerations*. This consensus addresses a number of matters associated withthe impact that SFAS No. 141(R) and SFAS No. 160 might have on the accounting forequity method investments, including how an equity method investment shouldinitially be measured, how it should be tested for impairment, and how changesin classification from equity method to cost method should be treated, amongothers. We adopted EITF 08-6 in January 2009, and it did not have amaterial impact on our financial position or results of operations.

 

In May 2008, the FASB issued SFAS No. 162, *The Hierarchy of Generally Accepted AccountingPrinciples.* The standard is intended to improve financial reportingby identifying a consistent framework, or hierarchy, for selecting accountingprinciples to be used in preparing financial statements that are presented inconformity with U.S. generally accepted accounting principles. We adopted SFAS No. 162on November 15, 2008, and it did not have a material impact on ourfinancial position or results of operations.

 

In March 2008, the FASB issued SFAS No. 161, *Disclosures About Derivative Instruments and HedgingActivities*. SFAS No. 161 requires enhanced disclosures aboutderivative instruments and hedging activities to enable investors to betterunderstand their effects on financial position, financial performance, and cashflows. These requirements include the disclosure of the fair values ofderivative instruments and their gains and losses in a tabular format. Weadopted SFAS No. 161 in January 2009, and it had no impact on ourfinancial position or results of operations.

 

In January 2008, we adopted SFAS No. 157,*Fair Value Measurements*. The statementestablished a framework for measuring fair value, and it enhanced thedisclosures for fair value measurements. The statement applies when other accountingpronouncements require or permit fair value measurements, but it does notrequire new fair value measurements. In accordance with the provisions of FSP No. 157-2,*Effective Date of FASB Statement No. 157*,we deferred until January 1, 2009, the adoption of SFAS No. 157 as itrelates to nonfinancial assets and nonfinancial liabilities that wererecognized and disclosed at fair value in the financial statements on anonrecurring basis. The adoption did not have a material impact on ourfinancial position or results of operations.

 

In December 2007, the FASB issued SFAS No. 141(R), *Business Combinations,*and SFAS No. 160,*Accounting and Reporting of NoncontrollingInterests in Consolidated Financial Statements, an Amendment of AccountingResearch Bulletin No. 51.* These new standards willsignificantly change the accounting for and reporting of business combinationtransactions and noncontrolling (minority) interests in consolidated financialstatements. SFAS No. 141(R) will also impact our assessment ofGoodwill for impairment. We adopted SFAS Nos. 141(R) and 160 on January 1,2009. The impact of adopting these standards will be limited to businesscombinations and our assessments of Goodwill for impairment occurring on orafter January 1, 2009.

 

*Reclassifications*

 

Certain amounts in prior years’ consolidated financialstatements have been reclassified to conform with the current year’spresentation.

 

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***3.******                                      Saleof Our Paper and Packaging & Newsprint Assets***

 

On February 22, 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. (formerlyAldabra 2 Acquisition Corp.) for $1,277.2 million of cashconsideration, $285.2 million of net stock consideration, and a$41.0 million paid-in-kind promissory note receivable. In connection withthe Sale, we recorded a $5.7 million gain, of which we recognized$2.9 million in our 2008 Consolidated Statement of Loss. We deferred$2.8 million of the gain as a reduction of our investment inBoise Inc., in accordance with EITF No. 01-02, *Interpretationsof Accounting Principles Board (APB) Opinion No. 29*.

 

Immediately following the Sale, Boise Cascade, L.L.C., distributed thestock and paid-in-kind note receivable to us. Subsequent to the distribution tous, the note receivable from Boise Inc. increased $17.3 million forworking capital adjustments, and in June 2008, we sold the note receivablefor $52.7 million after selling expenses. For more information, seeNote 5, Transactions With Related Parties. As a result, we became a 49%owner of Boise Inc. and continue to have a significant indirect financialinterest in the results of the sold businesses. We account for ourinterest in Boise Inc. using the equity method of accounting. SeeNote 4, Investment in Equity Affiliate, for more information related toour investment in Boise Inc.

 

*Use of Sale Proceeds*

 

With the proceeds from the Sale and an initial borrowing under ourfive-year $350 million senior secured asset-based revolving creditfacility (the Revolving Credit 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 tax distributions to our equity holders to permit theequity holders to pay a portion of the income taxes related to the gain on theSale. In connection with the Sale, we accrued $200 million for thesedistributions; however, the taxable gain on the Sale was partially offset by2008 taxable losses. At December 31, 2008, we recorded $11.0 million in“Accrued liabilities, Other” on our Consolidated Balance Sheet for our finalexpected tax distribution related to the gain on the Sale;

 

·                  Paid$18.3 million to repurchase equity units from management investors thatterminated employment with us in connection with the Sale; and

 

·                  InJanuary 2009, we paid $2.5 million of the $4.4 million accruedunder the deferred compensation agreements for employees terminated inconnection with the Sale.

 

The disposition of the net proceeds from the sale ofthe note receivable from Boise Inc. and any future disposition by us ofBoise Inc. shares must comply with the terms of our senior subordinatednotes indenture, which generally requires us to use the net proceeds (asdefined in the indenture) from asset sales within one year to repay seniorindebtedness, acquire additional assets, or make a tender offer at par for aportion of the senior subordinated notes.

 

*Pro Forma*

 

The following pro forma financial information wasderived from the consolidated financial statements of BC Holdings. The proforma financial information gives effect to the Sale as if it were consummatedon January 1, 2008. The pro forma financial information is intended forinformational purposes only and is not necessarily indicative of the results ofoperations that may have actually occurred if the Sale had been consummated on January 1,2008, or the operating results that may be obtained in the future.

 

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| ** **         | ** ** | **Year Ended  December 31,  2008** | ** ** |
|--------------------|------------|----------------------------------------------|------------|
| ** **         | ** ** | **(thousands)**                              | ** ** |
|               |       |                                         |       |
| Sales              |       | $                                            | 2,635,143  |   |
|               |       |                                         |       |
| Net income  (loss) |       | $                                            | (304,752   | )(a) |

 

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(a)                                  The pro forma net loss for the year ended December 31,2008, included pro forma expense of $16.2 million related to our equityinterest in Boise Inc.; included a $208.1 million write-down of ourinvestment in Boise Inc.; included $6.3 million of expense related tochanges in the fair value of our interest rate swaps, which we terminated in February 2008;included $4.1 million of related-party interest income from the note receivablefrom Boise Inc., which was sold in June 2008; and excluded $2.9 millionof gain on the Sale.

 

*Assetsand Liabilities Held for Sale*

 

In September 2007,in anticipation of the Sale, we reclassified the assets and liabilities of ourPaper and Packaging & Newsprint segments, as well as some of the assetsand liabilities included in our Corporate and Other segment, to “Assets heldfor sale” and “Liabilities related to assets held for sale” on our ConsolidatedBalance Sheet and stopped depreciating and amortizing those assets. Asdiscussed above, we sold these assets to Boise Inc. on February 22,2008. The year ended December 31, 2007, included approximately$84.6 million of depreciation and amortization expense related to the soldPaper, Packaging & Newsprint, and Corporate and Other segments thatwas not included in the year ended December 31, 2008, as a result of theSale. Of the $84.6 million of depreciation and amortization expenserecorded during the year ended December 31, 2007, $45.0 millionrelated to our Paper segment, $37.7 million related to our Packaging &Newsprint segment, and $1.9 million related to our Corporate and Othersegment.

 

The carrying amounts of the major classes of assets and liabilitiesclassified as “Assets held for sale” and “Liabilities related to assets heldfor sale” on our December 31, 2007, Consolidated Balance Sheet were asfollows:

 
| ** **                                   | ** ** | **December 31,** | ** **    |
|----------------------------------------------|------------|-----------------------|---------------|
| ** **                                   | ** ** | **2007**              | ** **    |
| ** **                                   | ** ** | **(thousands)**       | ** **    |
| Assets                                       |       |                  |          |
| Accounts  receivable, net                    |       | $                     | 227,291       |   |
| Inventories                                  |       | 324,679               |          |
| Property and  equipment, net                 |       | 1,199,618             |          |
| Fiber farms and  deposits                    |       | 17,843                |          |
| Goodwill                                     |       | 42,218                |          |
| Intangible  assets, net                      |       | 23,967                |          |
| Other                                        |       | 17,423                |          |
| Assets held for  sale                        | ** ** | **$**                 | **1,853,039** | ** ** |
|                                         |       |                  |          |
| Liabilities                                  |       |                  |          |
| Accounts payable                             |       | $                     | 178,733       |   |
| Accrued  compensation and benefits           |       | 105,583               |          |
| Other accrued  liabilities                   |       | 47,320                |          |
| Liabilities  related to assets held for sale | ** ** | **$**                 | **331,636**   | ** ** |

 

***4.******                                     ******Investmentin Equity Affiliate***

 

In connection with the Sale, we received37.9 million, or 49%, of Boise Inc.’s shares. We recorded our investmentin “Investment in equity affiliate” on our Consolidated Balance Sheet. Thisownership interest provides us with the ability to exercise significantinfluence. Accordingly, we account for our investment under the equity methodof accounting. We adjust the amount of our investment monthly for ourproportionate share of Boise Inc.’s net income or loss and our share of othercomprehensive income or loss based on the most recently available financialstatements. Our ownership interest and consequently our proportionate share ofBoise Inc.’s net income or loss, changes when we or

 

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Boise Inc. engagein transactions of Boise Inc. common stock with third parties. Changes inownership interest may also result in our recording an ownership interestdilution gain or loss.

 

In 2008, we recorded $219.4 million of expenserelated to our investment in Boise Inc. in our Consolidated Statement ofLoss. Of the $219.4 million of expense, we recorded $208.1 million ofexpense in “Impairment of investment in equity affiliate” and$11.3 million of expense in “Equity in net loss of affiliate” in ourConsolidated Statement of Loss as follows (in thousands):

 
| Impairment of  investment in equity affiliate (a)            |       | $       | (208,074     | )     |
|--------------------------------------------------------------|------------|---------|--------------|-------|
|                                                         |       |    |         |
| Equity in Boise  Inc.’s net loss                        |       | (22,836 | )            |
| Adjustment for  impairment recognized by Boise Inc. (b) |       | 6,180   |         |
| Amortization of  basis differential (c)                      |       | 5,328   |         |
| Equity in net  loss of affiliate                             |       | (11,328 | )            |
|                                                         |       |    |         |
| Total                                                        | ** ** | **$**   | **(219,402** | **)** |

 

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(a)                                  On September 30, 2008, we concluded thatour investment in Boise Inc. met the definition of other than temporarilyimpaired as defined in APB Opinion No. 18, *The EquityMethod of Accounting for Investments in Common Stock*. We made thisdetermination based primarily on the length of time and extent to which thefair value of our investment had been trading below its carrying value. TheBoise Inc. stock trading price declined from $8.56 on February 21,2008, to $1.56 on September 30, 2008. Accordingly, we recorded a$208.1 million charge in “Impairment of investment in equity affiliate” inour Consolidated Statement of Loss in 2008. This charge reflects the decreasein the fair value of the investment below its carrying value. The fair value ofour investment in Boise Inc. was calculated based on our 37.9 million ofBoise Inc. shares and Boise Inc.’s stock price on September 30,2008, of $1.56.

 

(b)                                 In accordance with APB No. 18, 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 we recordedour proportionate share of Boise Inc.’s net loss. Based on our allocationof the $208.1 million charge to Boise Inc.’s long-lived assets, weconcluded we had already expensed $6.2 million of the $19.8 millioncharge Boise Inc. recorded for long-lived asset impairment. Accordingly,we adjusted our equity in net loss of Boise Inc. for the $6.2 millionwe had already expensed.

 

(c)                                  At December 31, 2008, the carrying valueof our investment in Boise Inc. was approximately $199.2 million less thanour share of Boise Inc.’s underlying equity in net assets. The differenceis due to the write-down of our investment in Boise Inc. In accordancewith APB Opinion No. 18, we are amortizing the difference to income on astraight-line basis over 10.4 years, which represents the remaining weighted-averageuseful life of Boise Inc.’s assets. In 2008, the amortization of the basisdifferential resulted in our recognizing $5.3 million of income in “Equityin net loss of affiliate” and will result in our recognizing approximately$19.2 million of income per year for the next 10.4 years, which willbe increased or decreased by our proportionate share of Boise Inc.’s netincome or loss.

 

In accordance with SEC Regulation S-X Rule 3-09,*Separate Financial Statements ofSubsidiaries not Consolidated and 50 Percent or Less Owned Persons,*wefiled Boise Inc.’s 2008 audited consolidated financial statements as Exhibit 99to this Form 10-K.

 

We closely monitor Boise Inc.’s common stock share price and publiclyreported financial performance. At December 31, 2008, Boise Inc.’s stockclosed at $0.43, and the fair value of the 37.9 million shares we hold inBoise Inc. was, based on such trading price, $16.3 million, comparedwith the $21.0 million, or $0.55 per share, carrying value recordedon our December 31, 2008, Consolidated Balance Sheet. At December 31,2008, we evaluated whether the investment was other than temporarily impairedand concluded that it was not.

 

We will continue to monitor the value ofBoise Inc.’s stock and our carrying value. Should market conditions and/orBoise Inc.’s financial performance deteriorate or should we decide to sell ourequity method investment before it recovers to its carrying value, it ispossible that we will be required to record another noncash impairment chargethat could have a material impact on our Consolidated Statements of Income(Loss). As additional information becomes known, we may change our estimates.

 

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***5.******                                      TransactionsWith Related Parties***

 

*Sales*

 

Prior to the Sale, we sold paper and paper products toOfficeMax at sales prices that were designed to approximate market prices. Forthe years ended December 31, 2008, 2007, and 2006, sales to OfficeMax were$90.1 million, $615.7 million, and $575.9 million. These salesare included in “Sales, Related parties” in the Consolidated Statements ofIncome (Loss).

 

During the year ended December 31, 2008, we sold $45.3 million offiber to Boise Inc. and $10.8 million of fiber to Louisiana TimberProcurement Company, L.L.C., an unconsolidated entity that is 50% owned byBoise Cascade, L.L.C., and 50% owned by Boise Inc., at prices designed toapproximate market. Most of these sales relate to pulpwood and chip sales fromour Wood Products segment. These sales are included in “Sales, Related parties”in the Consolidated Statement of Loss.

 

*Costs and Expenses*

 

During the year ended December 31, 2008, we purchased$64.9 million of fiber from Louisiana Timber ProcurementCompany, L.L.C, and $3.4 million of transportation services fromBoise Inc. We purchased the fiber and transportation services at pricesthat approximated market prices. In 2008, these costs are recorded in “Materials,labor, and other operating expenses from related parties” in our ConsolidatedStatement of Loss.

 

In connection with the Sale, we entered into anOutsourcing Services Agreement under which Boise Inc. provides a number ofcorporate staff services to us at cost. These services include informationtechnology, accounting, and human resource services. The initial term of theagreement is for three years. It will automatically renew for one-year termsunless either party provides notice of termination to the other party at least12 months in advance of the applicable term. 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 absorption fee of $5.0 million isallocated among the services provided under the contract and declines to zeroin total and on an allocable basis over the initial three-year term of theagreement. In 2008, we recognized $12.1 million of costs related to thisagreement, of which we recorded $1.7 million in “Materials, labor, andother operating expenses from related parties,” $2.3 million in “Sellingand distribution expenses,” and $8.1 million in “General andadministrative expenses from related party” in our Consolidated Statement ofLoss.

 

*Note Receivable*

 

In connection with the Sale, we received a 15.75%, $41.0 millionpaid-in-kind promissory note receivable from Boise Inc. that compoundedquarterly and was scheduled to mature in August 2015. 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 millionafter selling expenses and recorded an $8.4 million loss on the sale in “Other(income) expense, net” in our Consolidated Statement of Loss. We are obligatedunder the indenture for our 7.125% senior subordinated notes due in 2014 to usethe net proceeds (as defined in the indenture) of the sale of the notereceivable within one year to repay senior indebtedness, acquire additionalassets, or make a tender offer at par for a portion of the senior subordinatednotes. We expect to use the remaining cash from the sale of the note receivableto either repay indebtedness under the Revolving Credit Facility or to makecapital expenditures. At December 31, 2008, the remaining net cashproceeds received are invested in high-quality, short-term investments, whichwe record in “Cash and cash equivalents.”

 

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*Tax Distributions*

 

We are a limited liability company and the majority ofour businesses and assets are held and operated by limited liability companies,which are not subject to entity-level federal or state income taxation. We makecash distributions to permit the members of BC Holdings and affiliates topay income taxes. During the year ended December 31, 2008, we made$128.1 million of cash tax distributions, of which $120.7 millionrelated to the net taxable gain on the Sale. During the years ended December 31,2008, 2007, and 2006, we paid Forest Products Holdings, L.L.C. (FPH)$105.1 million, zero, and $16.1 million. For the years ended December 31,2008 and 2006, FPH in turn paid $94.3 million and $14.2 million toMadison Dearborn Partners (MDP), our equity sponsor; $10.4 million and$1.9 million to management investors; and $0.4 million and zero tononmanagement affiliates. During the years ended December 31, 2008, 2007,and 2006, we also paid $23.0 million, $2.8 million, and$3.2 million to OfficeMax. These payments represented cash paid to fundtheir tax obligations related to their investments in us.

 

*OfficeMax Indemnifications*

 

The asset purchase agreement entered into inconnection with the purchase of OfficeMax’s forest products and paper assetscontains customary representations, warranties, and covenants, including anobligation for OfficeMax to indemnify us for breaches relating to employee andenvironmental law matters, which survives until October 29, 2009. We arealso indemnified with respect to certain pre-Forest Products Acquisitionliabilities, including environmental, asbestos, tax, benefits, and other legacyliabilities.

 

***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** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                              | ** ** | **2008**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                              | ** ** | ** **                                | ** ** | **(thousands)** | ** ** | ** ** | ** ** |
|                                                    |       |                                      |       |   |   |   |   |
| Facility  closures (a)                                  |       | $                                         | 9,927      |   | $ | — |   | $ | — |   |
| Loss on sale of  note receivable from related party (b) |       | 8,357                                     |       | — |   | — |   |
| Sales of assets,  net (c)                               |       | (7,906                                    | )          | (2,257 | ) | 3,639 |   |
| Changes in  retiree healthcare programs                 |       | —                                    |       | (4,367 | ) | (3,741 | ) |
| Other, net                                              |       | 256                                       |       | 931 |   | 6,191 |   |
| ** **                                              | ** ** | **$**                                     | **10,634** | ** ** | **$** | **(5,693** | **)** | **$** | **6,089** | ** ** |

 

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(a)                                  In 2008, we permanently closed our veneeroperation in St. Helens, Oregon, and recorded $1.8 million of expenserelated to the closure 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.

 

In December 2008, wecommitted to closing the plywood manufacturing facility in White City, Oregon,and we recorded $7.5 million of expense related to the planned closure.The facility is scheduled to close in March 2009.

 

(b)                                 In 2008, we sold the note receivable fromBoise Inc. for $52.7 million after selling expenses, and we recordedan $8.4 million loss on the sale.

 

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

 

***7.******                                      Leases***

 

We lease a portion of our distribution centers as wellas other property and equipment under operating leases. For purposes ofdetermining straight-line rent expense, the lease term is calculated from thedate we first take possession of the facility, including any periods of freerent and any option

 

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periods we are reasonably assured of exercising. Straight-line rentexpense is also adjusted to reflect any allowances or reimbursements providedby the lessor. Rental expense for operating leases was $15.3 million,$25.9 million, and $23.3 million for the years ended December 31,2008, 2007, and 2006. Sublease rental income was not material in any of theperiods presented.

 

For noncancelable operating leases with remainingterms of more than one year, the minimum lease payment requirements are$11.7 million in 2009, $10.9 million in 2010, $9.6 million in2011, $8.5 million in 2012, and $7.3 million in 2013, with totalpayments thereafter of $38.6 million. These future minimum lease paymentrequirements have not been reduced by sublease rentals due in the future undernoncancelable subleases. Minimum sublease income received in the future is notexpected to be material.

 

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.

 

*Sale/Lease-Back Transactions*

 

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.

 

In 2006, we sold our Lakeville, Minnesota, and Rochelle, Illinois, buildingmaterials distribution facilities and our headquarters building in Boise,Idaho. In connection with the sales, we leased back 100% of our distributionfacilities, and after the Sale, we now lease approximately 18% of the soldheadquarters building. We collected $11.0 million and $27.2 millionof net proceeds from the sale of the two distribution centers and theheadquarters building, respectively, which we used to make debt repayments. Inconnection with the sale of the distribution centers, we recorded a$1.5 million deferred gain in “Other long-term liabilities” on ourConsolidated Balance Sheet, which we are recognizing as a reduction of leaseexpense over the life of the lease. We recognized a $1.7 million loss onthe sale of the headquarters building, which we recorded in “Other (income)expense, net” in our Consolidated Statement of Income. The leases are accountedfor as operating leases, and the minimum lease payment requirements related tothe transactions are included in the minimum lease payments disclosed above.

 

***8.******                                      IncomeTaxes***

 

*Tax Distributions*

 

We are a limited liability company and the majority ofour businesses and assets are held and operated by limited liability companies,which are not subject to entity-level federal or state income taxation. Theincome taxes with respect to these operations are payable by our equity holdersin accordance with their respective ownership percentages. We make cashdistributions to permit the members of BC Holdings and affiliates to paythese taxes. For the years ended December 31, 2008, 2007, and 2006, wemade $128.1 million, $2.8 million, and $19.3 million of cashdistributions, respectively, to permit our equity holders to pay these taxes.Relative to 2007 and 2006, the increase in 2008 distributions related to thenet taxable gain on the Sale. Both our senior credit facilities and theindenture governing our notes permit these distributions.

 

*IncomeTax (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 31,2008, income tax expense was $0.5 million,compared with $8.0 million in 2007 and $3.6 million in 2006. Relativeto 2007, the decrease in income tax expense is primarily related to no incometax expense related to cash flow hedges in 2008. During the years ended December 31,2008, 2007, and 2006, our effective tax rates

 

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for our separate subsidiaries thatare taxed as corporations were 43.9%, 40.3%, and 37.3%. The primary reason forthe difference in tax rates is the effect of state income taxes and the mix ofdomestic and foreign sources of income. At December 31, 2008 and2007, we had a $0.2 million deferred tax asset and a $0.6 milliondeferred tax liability related to our taxable subsidiaries recorded on ourConsolidated Balance Sheets.

 

At December 31, 2008 and 2007, our tax basis was $154.1 millionhigher and $359.9 million lower than the reported amount of net assetsrecorded on our Consolidated Balance Sheets. In 2008, the differencerelated primarily to the fact that we were not able to write down the value ofour investment in Boise Inc. for tax purposes. In 2007, the difference relatedprimarily to accelerated depreciation recorded for tax purposes.

 

Boise Building Solutions Manufacturing Holdings Corp., a wholly owned,fully consolidated operating entity, has an investment in foreign subsidiaries.At December 31, 2008 and 2007, the foreign subsidiaries had$15.2 million and $26.8 million, respectively, of deferred taxassets. The deferred tax assets resulted primarily from net operating lossesand were fully offset by a valuation allowance. In addition, BoiseBuilding Solutions Manufacturing Holdings Corp. had $16.0 million and zeroof deferred tax assets related to the capital loss carry forward from the saleof our subsidiaries in Brazil and the United Kingdom. The capital loss carryforward was fully offset by a valuation allowance, because it is more likelythan not that we will not be able to utilize the capital loss carry forwardbefore it expires in 2013.

 

In 2008, 2007, and2006, we paid $0.8 million, $3.3 million, and $4.4 million oftaxes, net of other refunds received.

 

*FIN No. 48*

 

In January 2007, we adopted the provisions of FINNo. 48, *Accounting for Uncertainty in Income Taxes —an Interpretation of FASB Statement No. 109,*and it did nothave a significant impact on our financial position or results of operations.On January 1, 2007, we had an insignificant amount of unrecognized taxbenefits, none of which would affect our effective tax rate if recognized. Werecognize interest and penalties on unrecognized tax benefits in**“Income tax provision” in the Consolidated Statements ofIncome (Loss). For the years ended December 31, 2008, 2007, and 2006, werecognized an insignificant amount of interest and penalties. In connectionwith the Sale in February 2008, all of our FIN No. 48 liabilitieswere transferred to Boise Inc., and we have no FIN No. 48 liabilitiesat December 31, 2008.

 

BC Holdings, or one of our subsidiaries, filesfederal income tax returns in the U.S. and Canada and various state and foreignincome tax returns in the major state jurisdictions of Alabama, Idaho,Louisiana, Oregon, Minnesota, Texas, and Washington. We are subject to taxexaminations from October 29, 2004 (our inception) to present. In 2008,the United States Internal Revenue Service completed an audit ofBC Holdings’ 2005 and 2006 tax years and issued a notice of a proposedadjustment. We have responded with a request to appeal the adjustment. If we donot prevail in appeals, any incremental tax owed from the adjustment would bepayable by our equity holders in accordance with their respective ownershippercentages. We do not expect any cash distributions to members ofBC Holdings and affiliates resulting from the adjustment, if any, to besignificant. Additionally, in third quarter 2007, the Canadian Revenue Agencybegan an audit of Boise AllJoist for tax years 2005 and 2006.

 

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***9.******                                      Goodwilland Intangible Assets***

 

Goodwill represents the excess of purchase price andrelated costs over the value assigned to the net tangible and intangible assetsof businesses acquired. We account for goodwill in accordance with theprovisions of SFAS No. 142, *Goodwill and OtherIntangible Assets*, which requires us to assess our acquired goodwilland intangible assets with indefinite lives for impairment at least annually inthe absence of an indicator of possible impairment and immediately upon anindicator of possible impairment. We assess goodwill and intangible assets withindefinite lives in the fourth quarter of each year using a fair-value-basedapproach. We also evaluate the remaining useful lives of our finite-livedpurchased intangible assets to determine whether any adjustments to the usefullives are necessary. We completed our annual assessment in accordance with SFASNo. 142 in fourth quarter 2008 and 2007 and determined that there was noimpairment.

 

Weaccount for acquisitions using the purchase method of accounting. As a result,we allocate the purchase price to the tangible and intangible assets acquiredand liabilities assumed based on their respective fair values as of the date ofacquisition. In accordance with SFAS No. 141, *BusinessCombinations*, we had one year from the purchase date to finalize orreceive information to determine changes in estimates of the fair value ofassets acquired and liabilities assumed.

 

Changesin the carrying amount of our goodwill by segment are as follows:

 
| ** **                                                     | ** ** | **Building  Materials  Distribution** | ** ** | **Wood  Products** | ** ** | **Paper** | ** ** | **Packaging**** &****Newsprint** | ** ** | **Corporate  and  Other** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------|------------|---------------------------------------|------------|--------------------|------------|-----------|------------|-------------------------------------------|------------|---------------------------|------------|------------|------------|
| ** **                                                     | ** ** | **(thousands)**                       | ** ** |
|                                                           |       |                                  |       |               |       |      |       |                                      |       |                      |       |       |       |
| Balance at  December 31, 2006                             |       | $                                     | 5,593      |               | $          | 6,577     |       | $                                         | 1,341      |                      | $          | 8,335      |       | $ | — |   | $ | 21,846 |   |
|                                                           |       |                                  |       |               |       |      |       |                                      |       |                      |       |       |       |
| Purchase price  adjustments during 2007 (a)                    |       | —                                |       | —             |       | 32,542    |       | —                                    |       | —                    |       | 32,542     |       |
| Goodwill  reclassified to “Assets held for sale” (b) |       | —                                |       | —             |       | (33,883   | )          | (8,335                                    | )          | —                    |       | (42,218    | )          |
| Balance at  December 31, 2007, and December 31, 2008 | ** ** | **$**                                 | **5,593**  | ** **         | **$**      | **6,577** | ** ** | **$**                                     | **—** | ** **                | **$**      | **—** | ** ** | **$** | **—** | ** ** | **$** | **12,170** | ** ** |

 

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(a)                                  As part of the Forest Products Acquisition, we entered into an AdditionalConsideration Agreement with OfficeMax, pursuant to which we agreed to adjustthe purchase price based on changes in paper prices over the six-year periodfollowing the Forest Products Acquisition. Based on paper prices during the thirdanniversary period ended October 29, 2007, we paid OfficeMax$32.5 million. This payment increased goodwill in our Paper segment, whichwe recorded in “Assets held for sale” on our December 31, 2007,Consolidated Balance Sheet. This agreement terminated in February 2008with the sale of our Paper and Packaging & Newsprint assets.

 

(b)                                 See Note 3, Sale of our Paper and Packaging & NewsprintAssets, for more information.

 

At December 31, 2008 and 2007, intangible assets represent the valuesassigned to trade names and trademarks and customer relationships. The tradenames and trademark assets have an indefinite life and are not amortized.Customer relationships are amortized over five years.

 

Intangible assets consisted of the following:

 
| ** **                  | ** ** | **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** |   |

 

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| ** **                  | ** ** | **December 31, 2007** | ** ** |
|-----------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Amount** | ** ** |
| ** **                  | ** ** | **(thousands)**                 | ** ** |
|                        |       |                            |       |   |   |   |   |
| Trade names and  trademarks |       | $                               | 8,900      |   | $ | — |   | $ | 8,900 |   |
| Customer  relationships     |       | 2,100                           |       | (1,332 | ) | 768 |   |
| ** **                  | ** ** | **$**                           | **11,000** | ** ** | **$** | **(1,332** | **)** | **$** | **9,668** |   |

 

Intangible asset amortization expense was$0.4 million in 2008, $3.9 million in 2007, and $4.0 million in2006. The estimated amortization expense for 2009 is $0.3 million. Weestimate no amortization expense after 2009.

 

***10.******                               AssetRetirement Obligations***

 

We account for asset retirement obligations in accordance with SFAS No. 143,*Accounting for Asset Retirement Obligations*,and FIN No. 47, *Accounting for ConditionalAsset Retirement Obligations — an Interpretation of FASB Statement No. 143*.We accrue for asset retirement obligations in the period in which they areincurred if sufficient information is available to reasonably estimate the fairvalue of the obligation. When we record the liability, we capitalize the costby increasing the carrying amount of the related long-lived asset. Over time,the liability is accreted to its settlement value, and the capitalized cost isdepreciated over the useful life of the related asset. Upon settlement of theliability, we will recognize a gain or loss for any difference between thesettlement amount and the liability recorded.

 

At December 31, 2008 and 2007, we had $0.6 million and$0.8 million of asset retirement obligations recorded in “Other, Otherlong-term liabilities,” on our Consolidated Balance Sheets. At December 31,2008, these liabilities related primarily to landfill closure costs. Theliabilities are based on the best estimate of current costs and are updatedperiodically to reflect current technology, laws and regulations, inflation,and other economic factors. We do not have any assets legally restricted forpurposes of settling asset retirement obligations. The table below describeschanges to our asset retirement obligations for the years ended December 31,2008 and 2007:

 
| ** **                                                                                           | ** ** | **December 31** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                           | ** ** | **2008**             | ** ** | **2007** | ** ** |
| ** **                                                                                           | ** ** | **(thousands)**      | ** ** |
|                                                                                                 |       |                 |       |   |   |
| Asset retirement  obligation at beginning of year                                                    |       | $                    | 782        |   | $ | 11,544 |   |
| Liabilities  incurred                                                                                |       | —               |       | — |   |
| Accretion  expense                                                                                   |       | 197                  |       | 926 |   |
| Payments                                                                                             |       | —               |       | (37 | ) |
| Revisions in  estimated cash flows                                                                   |       | —               |       | 1,652 |   |
| Asset retirement  obligation reclassified to “Liabilities related to assets held for sale” |       | (380                 | )          | (13,303 | ) |
| Asset retirement  obligation at end of year                                                          | ** ** | **$**                | **599**    | ** ** | **$** | **782** | ** ** |

 

We have additional asset retirement obligations with indeterminatesettlement dates. The fair value of these asset retirement obligations cannotbe estimated due to the lack of sufficient information to estimate thesettlement dates of the obligations. These asset retirement obligationsinclude, for example, (i) removal and disposal of potentially hazardousmaterials on equipment and/or an operating facility if the equipment and/orfacility were to undergo major maintenance, renovation, or demolition; (ii) wastewatertreatment ponds that may be required to be drained and/or cleaned if therelated operating facility is closed; and (iii) storage sites or ownedfacilities for which removal and/or disposal of chemicals and other relatedmaterials are required if the operating facility is closed. We will recognize aliability in the period in which sufficient information becomes available toreasonably estimate the fair value of these obligations.

 

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***11.******                               Debt***

 

At December 31, 2008 and 2007, our short- andlong-term debt were as follows:

 
| ** **                                       | ** ** | **December 31** | ** **  |
|--------------------------------------------------|------------|----------------------|-------------|
| ** **                                       | ** ** | **2008**             | ** **  | **2007** | ** ** |
| ** **                                       | ** ** | **(thousands)**      | ** **  |
|                                             |       |                 |        |   |   |
| Asset-based  revolving credit facility, due 2013 |       | $                    | 75,000      |   | $ | — |   |
| Tranche E  term loan, due 2014              |       | —               |        | 521,063 |   |
| 7.125% senior  subordinated notes, due 2014      |       | 240,000              |        | 400,000 |   |
| Delayed-draw  term loan, due 2014                |       | —               |        | 199,500 |   |
| Borrowings  secured by receivables               |       | —               |        | 40,000 |   |
| Current portion  of long-term debt               |       | —               |        | (47,250 | ) |
| Long-term debt,  less current portion            |       | 315,000              |        | 1,113,313 |   |
| Short-term  borrowings                           |       | —               |        | 10,500 |   |
| Current portion  of long-term debt               |       | —               |        | 47,250 |   |
| Total debt                                       | ** ** | **$**                | **315,000** | ** ** | **$** | **1,171,063** | ** ** |

 

As discussed in Note 3, Sale of Our Paper and Packaging &Newsprint Assets, with the proceeds from the Sale and an initial borrowingunder the Revolving Credit Facility, we repaid $1,085.6 million oflong-term debt, including all of the borrowings under the previous revolvingcredit facility, Tranche E term loan, delayed-draw term loan, borrowingssecured by our receivables, and $160.0 million of our 7.125% seniorsubordinated notes.

 

*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 the Revolving Credit Facility with Bank of America. Aspart of the syndication process, the Revolving Credit Facility was amended in April 2008to revise the pricing and incorporate additional covenants. At December 31,2008, we had $75.0 million of borrowings outstanding under the RevolvingCredit Facility. Borrowings under the Revolving Credit Facility are based oneither the prime rate or the London Interbank Offered Rate (LIBOR). Pricing issubject to quarterly adjustment based on the average availability under theRevolving 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 periodof February 22, 2008, through December 31, 2008, the average interestrate for our borrowings under the Revolving Credit Facility was 5.0%. Lettersof credit are subject to a 0.125% fronting fee payable to the issuing bank anda fee 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 minimum and maximum borrowings under the Revolving Credit Facilitywere $64.1 million and $75.0 million between February 22, 2008,and December 31, 2008. The weighted average amount of borrowingsoutstanding under the Revolving Credit Facility during the period from February 22,2008, through December 31, 2008, was $72.7 million. The RevolvingCredit Facility 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 ourdomestic subsidiaries (other than the three borrowers noted above) and issecured by a first-priority security interest in the stock of our foreignsubsidiaries and substantially all of our domestic assets, except for property,plant, and equipment. At December 31, 2008, we had$75.0 million of outstanding loans under the Revolving Credit Facility.Borrowings under the Revolving Credit Facility are constrained by a borrowingbase formula dependent upon levels of eligible inventory and receivablesreduced by outstanding letters of credit and, when our fixed-charge coverageratio is below 1:1, as it was on December 31, 2008, by a furtherrequirement that we maintain a combination of unrestricted cash and borrowingbase less outstanding loans at or in excess of the greater of $45 millionor 15% of the borrowing base determined under the Revolving Credit Facility.Thus, at December 31, 2008, our aggregate liquidity from unrestricted cashand cash equivalents and unused borrowing capacity under the Revolving CreditFacility totaled $333.9 million calculated as follows:

 

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| Net availability  under Revolving Credit Facility |   | $     | 103.1  |   |
|---------------------------------------------------|--------|-------|--------|--------|
| Cash                                              |   | 275.8 |   |
| Availability  threshold                           |   | (45.0 | )      |
|                                              |   | $     | 333.9  |   |

 

In addition, the Revolving Credit Facility contains a restriction oncapital investments that is applicable when a minimum availability threshold isnot met. That covenant was not applicable on December 31, 2008. TheRevolving Credit Facility also contains customary nonfinancial covenants,including a negative pledge covenant and restrictions on distributions toequity holders, acquisitions, and divestitures. These covenants will becomemore restrictive if a minimum availability threshold is not maintained.

 

*Letters of Credit*

 

At December 31, 2008, we had $14.2 millionof letters of credit outstanding. 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 subordinated notes due in 2014. Netproceeds from the notes were used to fund a portion of the purchase price forthe 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. Inconnection with the Sale, we repurchased $160.0 million of the notes atpar on April 15, 2008. In first quarter 2009, we repurchased$8.0 million of senior subordinated notes for $4.1 million, plusaccrued interest.

 

*Other*

 

At December 31, 2008 and 2007, we had $7.9 million and$23.1 million of costs recorded in “Deferred financing costs” on ourConsolidated Balance Sheets. With the proceeds from the Sale, we repaid asignificant portion of our debt. In connection with repaying the debt, weexpensed approximately $17.6 million of deferred financing costs in 2008.We recorded the charges in “Gain on sale of Paper and Packaging &Newsprint assets” in our Consolidated Statement of Loss. In addition, weincurred approximately $4.5** **millionof financing costs related to the Revolving Credit Facility, which is included,net of amortization, in “Deferred financing costs” on our December 31,2008, Consolidated Balance Sheet.

 

For the years ended December 31, 2008, 2007, and 2006, cash paymentsfor interest, net of interest capitalized, were $36.0 million,$96.1 million, and $95.1 million, respectively.

 

At December 31, 2008, the estimated currentmarket value of our fixed-rate debt, based on then-current interest rates forsimilar obligations with like maturities, was approximately $99.5 millionless than the amount reported on our Consolidated Balance Sheet.

 

***12.******                               FinancialInstruments***

 

We are exposed to risks such as changes in interestrates, energy prices, and foreign currency exchange rates. In accordance withSFAS No. 133, *Accounting for DerivativeInstruments and Hedging Activities*, as amended, we record allderivative instruments as assets or liabilities on our Consolidated BalanceSheets at fair value. Changes in the fair value of derivatives are recorded ineither “Net income (loss)” or “Other comprehensive income (loss),” asappropriate. The gain or loss on derivatives designated as cash flow hedges isincluded in “Other comprehensive income (loss)” in the period in which changesin fair value occur and is reclassified to income (loss) in the period in whichthe hedged item affects income (loss), and any ineffectiveness is recognizedcurrently in our Consolidated Statements of Income (Loss). The gain or loss onderivatives designated as fair value hedges and the offsetting gain or loss onthe hedged item attributable to the hedged risk are included in income (loss)in the period in which changes in fair value occur. The gain or loss on derivativesthat have not been designated as hedging instruments is included in income(loss) in the period in which changes in fair value occur.

 

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*Interest Rate Risk*

 

With the proceeds from the Sale, we significantly decreased ourvariable-rate debt. As a result, we terminated all of our interest rate swapagreements for approximately $11.9 million in February 2008. Theinterest rate swaps were considered economic hedges. During2008, we recorded the fair value of the interest rate swaps, or$6.3 million of expense, in “Change in fair value of interest rate swaps”in our Consolidated Statement of Loss.

 

At December 31, 2007,we had four interest rate swapsto hedge our exposure to interest rate fluctuations associated with a portionof our variable-rate debt. At December 31, 2007, these interest rate swapswere considered economic hedges, and accordingly, we recognized $4.6 millionof expense in 2007 related to changes in the fair value of these instruments in“Change in fair value of interest rate swaps” in our Consolidated Statement ofIncome. During 2007, in connection with the repayment of some of ourvariable-rate debt, these swaps were de-designated as cash flow hedges, andapproximately $8.4 million of income related to the change in the fairvalue of the interest rate swaps was reclassified out of “Accumulated othercomprehensive income” in our Consolidated Statement of Capital.

 

*ForeignCurrency Risk*

 

At December 31, 2008, we had no foreign currencyhedges.

 

*Energy Risk*

 

Occasionally,we enter into natural gas swaps, options, or a combination of these instrumentsto hedge the variable cash flow risk of natural gas purchases at index prices.As of December 31, 2008, we had no material derivative instruments relatedto our forecasted natural gas purchases.

 

*Contingent Value Rights*

 

As part of the Sale, Terrapin Partners VenturePartnership and Boise Cascade, L.L.C., issued 21.2 million contingentvalue rights (CVRs) to holders of Boise Inc.’s stock. In February 2009, wesettled our obligation related to the CVRs using 0.8 million Boise Inc.shares.

 

***13.******                               Retirementand Benefit Plans***

 

*Retirement and Benefit Plans*

 

Our retirement plans consist of noncontributorydefined benefit pension plans, contributory defined contribution savings plans,deferred compensation plans, and postretirement healthcare benefit plans.

 

Effective January 1, 2008, we spun off the portion of each benefitplan attributable to employees or retirees of the Paper and Packaging &Newsprint businesses. Effective February 22, 2008, under the terms of theSale, we transferred sponsorship of the spunoff plans to Boise PaperHoldings, L.L.C., a subsidiary of Boise Inc., and only thoseemployees, terminated vested participants, and retirees whose employment waswith our Wood Products, Building Materials Distribution, and some corporate anddiscontinued operations continue to be covered under the plans remaining withus.

 

Some of our employees are covered by noncontributorydefined benefit pension plans. The salaried defined benefit pension plan isavailable only to employees who were formerly employed by OfficeMax before November 2003.The pension benefit for salaried employees is based primarily on the employees’years of service and highest five-year average compensation. The benefit forhourly employees is generally based on a fixed amount per year of service. Weuse a December 31 measurement date for our pension plans.

 

We also sponsor contributory defined contributionsavings plans for most of our salaried and hourly employees. Employees that arenot eligible to participate in our defined benefit pension plans are eligiblefor additional discretionary company matching contributions based on apercentage approved by the company each plan year. Expenses related to companymatching contributions to our defined

 

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contribution savings plans for the years ended December 31, 2008,2007, and 2006, were $9.0 million, $16.4 million, and $15.3 million.

 

We sponsor a deferred compensation plan, through whichour key managers and nonaffiliated directors may irrevocably elect to defer aportion of their base salary and bonus or director’s fees until termination ofemployment or beyond. A participant’s account is credited with imputed interestat a rate equal to 130% of Moody’s composite average of yields on corporatebonds. In addition, participants other than directors may elect to receivetheir company matching contributions in our deferred compensation plan in lieuof any matching contribution in our savings plan. The deferred compensationplan is unfunded; therefore, benefits are paid from our general assets. Thetotal participant deferrals were $2.3 million, $2.9 million, and$3.1 million for the years ended December 31, 2008, 2007, and 2006.For the years ended December 31, 2008, 2007, and 2006, we recognized$0.9 million, $0.6 million, and $0.3 million of interest expenserelated to the plan. At December 31, 2008 and 2007, we had$12.9 million and $9.8 million of liabilities related to the plansrecorded on our Consolidated Balance Sheets.

 

We also have postretirement healthcare benefit plans. The type of retireehealthcare benefits and the extent of coverage vary based on employeeclassification, date of retirement, location, and other factors. All of ourpostretirement healthcare plans are unfunded. In 2007 and 2006, we communicatedto our employees changes to our retiree healthcare programs. We discontinuedhealthcare coverage for most of our post-65 retirees. In addition, we eliminatedthe company subsidy for some of our pre-65 hourly retirees. This change shiftedretiree medical costs to the plan participants. As a result of this change, werecorded a $4.4 million and $3.7 million gain in our ConsolidatedStatements of Income for the years ended December 31, 2007 and 2006. Weuse a December 31 measurement date for our postretirement benefit plans.

 

*Obligations and Funded Status*

 

The following table, which includes only company-sponsored plans,reconciles the beginning and ending balances of our benefit obligation. It alsoshows the fair value of plan assets and aggregate funded status of our plans.The funded status changes from year to year based on the investment return fromplan assets, contributions, benefit payments, and the discount rate used tomeasure the liability.

 
| ** **                                             | ** ** | **Pension Benefits** | ** **   | **Other Benefits** | ** ** |
|--------------------------------------------------------|------------|---------------------------|--------------|-------------------------|------------|
| ** **                                             | ** ** | **2008**                  | ** **   | **2007**                | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                             | ** ** | **(thousands)**           | ** **   |
| ** **                                             | ** ** | ** **                | ** **   |
| Change in  benefit obligation                          |       |                      |         |                    |       |   |   |   |   |
| Benefit  obligation at beginning of year               |       | $                         | 672,133      |                    | $          | 651,181 |   | $ | 2,810 |   | $ | 7,647 |   |
| Service cost                                           |       | 12,574                    |         | 23,179                  |       | 1 |   | 76 |   |
| Interest cost                                          |       | 21,914                    |         | 38,294                  |       | 26 |   | 239 |   |
| Amendments                                             |       | 163                       |         | 7,472                   |       | — |   | — |   |
| Actuarial (gain)  loss                                 |       | 19,535                    |         | (35,745                 | )          | 45 |   | (582 | ) |
| Special  termination benefits                          |       | 2,685                     |         | —                  |       | — |   | — |   |
| Closure and  curtailments                              |       | 1,582                     |         | (181                    | )          | — |   | (4,300 | ) |
| Plan sponsorship  transferred in Sale                  |       | (378,347                  | )            | —                  |       | (2,723 | ) | — |   |
| Benefits paid                                          |       | (8,287                    | )            | (12,067                 | )          | — |   | (270 | ) |
| Benefit  obligation at end of year                     |       | 343,952                   |         | 672,133                 |       | 159 |   | 2,810 |   |
| ** **                                             | ** ** | ** **                | ** **   | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Change in plan  assets                                 |       |                      |         |                    |       |   |   |   |   |
| Fair value of  plan assets at beginning of year   |       | 585,213                   |         | 555,396                 |       | — |   | — |   |
| Actual return  (loss) on plan assets                   |       | (92,275                   | )            | 41,629                  |       | — |   | — |   |
| Employer  contributions                                |       | 20,301                    |         | 255                     |       | — |   | — |   |
| Plan sponsorship  transferred in Sale                  |       | (323,641                  | )            | —                  |       | — |   | — |   |
| Benefits paid                                          |       | (8,287                    | )            | (12,067                 | )          | — |   | — |   |
| Fair value of  plan assets at end of year              |       | 181,311                   |         | 585,213                 |       | — |   | — |   |
| Over (under)  funded status                            | ** ** | **$**                     | **(162,641** | **)**                   | **$**      | **(86,920** | **)** | **$** | **(159** | **)** | **$** | **(2,810** | **)** |
| ** **                                             | ** ** | ** **                | ** **   | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Amounts  recognized on our Consolidated Balance Sheets | ** ** | ** **                | ** **   | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Liabilities  related to assets held for sale (a)       |       | $                         | —       |                    | $          | (45,981 | ) | $ | — |   | $ | (2,644 | ) |
| Current  liabilities                                   |       | (590                      | )            | (110                    | )          | (18 | ) | (15 | ) |
| Noncurrent  liabilities                                |       | (162,051                  | )            | (40,829                 | )          | (141 | ) | (151 | ) |
| Net amount  recognized                                 | ** ** | **$**                     | **(162,641** | **)**                   | **$**      | **(86,920** | **)** | **$** | **(159** | **)** | **$** | **(2,810** | **)** |

 

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(a)                                  Pension and other postretirementbenefit amounts related to the sale of our Paper and Packaging &Newsprint segments and most of our Corporate and Other segment are recorded in “Liabilitiesrelated to assets held for sale” on our Consolidated Balance Sheet in 2007. SeeNote 3, Sale of Our Paper and Packaging & Newsprint Assets, formore information.

 

Amounts recognized in accumulated other comprehensiveloss consist of:

 
| ** **             | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **             | ** ** | **2008**                  | ** ** | **2007**                | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **             | ** ** | **(thousands)**           | ** ** |
| ** **             | ** ** | ** **                | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net (gain) loss        |       | $                         | 79,569     |                    | $          | (83,457 | ) | $ | (26 | ) | $ | (421 | ) |
| Prior service  cost    |       | 1,261                     |       | 12,910                  |       | — |   | — |   |
| Net amount  recognized | ** ** | **$**                     | **80,830** | ** **              | **$**      | **(70,547** | **)** | **$** | **(26** | **)** | **$** | **(421** | **)** |

 

The accumulated benefit obligation for all definedbenefit pension plans was $313.9 million and $607.0 million at December 31,2008 and 2007.

 

The projected benefit obligation, accumulatedbenefit obligation, and fair value of plan assets for the pension plans withaccumulated benefit obligations in excess of plan assets were$344.0 million, $313.9 million, and $181.3 million,respectively, as of December 31, 2008, compared with $529.5 million,$466.0 million, and $438.0 million, respectively, as of December 31,2007.

 

*Net Periodic Benefit Cost and Other Comprehensive(Income) Loss*

 

The components of net periodic benefit cost and othercomprehensive (income) loss are as follows:

 
| ** **                                                                                            | ** ** | **Pension Benefits** | ** **  | **Other Benefits** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|---------------------------|-------------|-------------------------|------------|
| ** **                                                                                            | ** ** | **2008**                  | ** **  | **2007**                | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                                            | ** ** | **(thousands)**           | ** **  |
|                                                                                                  |       |                      |        |                    |       |   |   |   |   |   |   |   |   |
| Service cost                                                                                          |       | $                         | 12,574      |                    | $          | 23,179 |   | $ | 24,931 |   | $ | 1 |   | $ | 76 |   | $ | 213 |   |
| Interest cost                                                                                         |       | 21,914                    |        | 38,294                  |       | 33,866 |   | 26 |   | 239 |   | 378 |   |
| Expected return  on plan assets                                                                       |       | (21,619                   | )           | (38,386                 | )          | (34,221 | ) | — |   | — |   | — |   |
| Amortization of  actuarial (gain) loss                                                                |       | (308                      | )           | 520                     |       | 277 |   | (12 | ) | (34 | ) | — |   |
| Amortization of  prior service costs and other                                                        |       | 319                       |        | 1,190                   |       | 597 |   | — |   | — |   | — |   |
| Plan  settlement/curtailment (gain) expense                                                           |       | 4,068                     |        | (181                    | )          | 904 |   | — |   | — |   | — |   |
| Company-sponsored  plans                                                                              |       | 16,948                    |        | 24,616                  |       | 26,354 |   | 15 |   | 281 |   | 591 |   |
| Multiemployer  pension plans                                                                          |       | 115                       |        | 469                     |       | 502 |   | — |   | — |   | — |   |
| Net periodic  benefit cost                                                                            |       | 17,063                    |        | 25,085                  |       | 26,856 |   | 15 |   | 281 |   | 591 |   |
| ** **                                                                                            | ** ** | ** **                | ** **  | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net periodic  benefit recognized in connection with the Sale                                          |       | (17,555                   | )           | —                  |       | — |   | (338 | ) | — |   | — |   |
|                                                                                                  |       |                      |        |                    |       |   |   |   |   |   |   |   |   |
| Changes in plan  assets and benefit obligations recognized in other comprehensive  (income) loss |       |                      |        |                    |       |   |   |   |   |   |   |   |   |
| Net (gain) loss                                                                                       |       | 162,718                   |        | (38,988                 | )          | (43,949 | ) | 383 |   | (514 | ) | 59 |   |
| Prior service  (credit) cost                                                                          |       | (11,330                   | )           | 7,473                   |       | 6,627 |   | — |   | — |   | — |   |
| Amortization of  actuarial gain (loss)                                                                |       | 308                       |        | (520                    | )          | — |   | 12 |   | 34 |   | — |   |
| Amortization of  prior service cost and other                                                         |       | (319                      | )           | (1,190                  | )          | — |   | — |   | — |   | — |   |
| Total recognized  in other comprehensive (income) loss                                                |       | 151,377                   |        | (33,225                 | )          | (37,322 | ) | 395 |   | (480 | ) | 59 |   |
| ** **                                                                                            | ** ** | ** **                | ** **  | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total recognized  in net periodic cost (benefit) and other comprehensive (income) loss                | ** ** | **$**                     | **150,885** | ** **              | **$**      | **(8,140** | **)** | **$** | **(10,466** | **)** | **$** | **72** | ** ** | **$** | **(199** | **)** | **$** | **650** | ** ** |

 

In 2009, we estimate net periodic pension expense willbe $14.8 million. The 2009 net periodic pension expense will include$0.2 million of net loss and $0.2 million of prior service cost thatwill be amortized from accumulated other comprehensive loss.

 

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# *Assumptions*

# * *

The assumptions used in accounting for our plans areestimates of factors that will determine, among other things, the amount andtiming of future benefit payments. The following table presents the assumptionsused in the measurement of our benefit obligations:

 
| ** **                                           | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **                                           | ** ** | **2008**                  | ** ** | **2007**                | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                           | ** ** | ** **                | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  assumptions as of December 31 |       |                      |       |                    |       |   |   |   |   |
| Discount rate                                        |       | 6.10                      | %          | 6.40                    | %          | 5.50 | % | 5.50 | % |
| Rate of  compensation increase                       |       | 4.25                      | %          | 4.25                    | %          | — |   | — |   |

 

The following table presents the assumptions used inthe measurement of net periodic benefit cost:

* *
| ** **                                                               | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **                                                               | ** ** | **2008**                  | ** ** | **2007**                | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Weighted average  assumptions as of the last day in the presented period |       |                      |       |                    |       |   |   |   |   |   |   |   |   |
| Discount rate                                                            |       | 6.40                      | %          | 5.90                    | %          | 5.60 | % | 5.50 | % | 5.75 | % | 5.40 | % |
| Expected  long-term rate of return on plan assets                        |       | 7.25                      | %          | 7.25                    | %          | 7.25 | % | — |   | — |   | — |   |
| Rate of  compensation increases                                          |       | 4.25                      | %          | 4.25                    | %          | 4.25 | % | — |   | — |   | — |   |

 

*Discount Rate Assumption*.  In all years presented, the discount rateassumption was determined using a spot rate yield curve constructed toreplicate Aa-graded corporate bonds. The plan’s projected cash flows wereduration-matched to this yield curve to develop an appropriate discount rate.

 

*Asset Return Assumption*.  We base our expected long-term rate of returnon plan assets on a weighted average of our expected returns for the majorasset classes in which we invest. Expected returns for the asset classes arebased on long-term historical returns, inflation expectations, forecasted grossdomestic product, earnings growth, and other economic factors. The weights weassign each asset class are based on our investment strategy. The weightedaverage expected return on plan assets we will use in our calculation of 2009net periodic benefit cost is 7.25%.

 

*Rate of Compensation Increases. *This assumption reflectsour long-term actual experience, the near-term outlook, and assumed inflation.

 

The following table presents our assumed healthcarecost trend rates at December 31, 2008 and 2007.

 
| ** **                                                                         | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  assumptions as of December 31                               |       |       |       |       |       |
| Healthcare cost  trend rate assumed for next year                                  |       | 9.00       | %          | 9.50       | %          |
| Rate to which  the cost trend rate is assumed to decline (the ultimate trend rate) |       | 5.00       | %          | 5.00       | %          |
| Year that the  rate reaches the ultimate trend rate                                |       | 2017       |       | 2017       |       |

 

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Assumedhealthcare cost trend rates have an effect on the amounts reported for thehealthcare plans. At December 31, 2008, a one-percentage-point change inour assumed healthcare cost trend rates would not significantly affect ourtotal service or interest costs or our postretirement benefit obligation.

 

*Plan Assets*

 

Our pension plan asset allocations by asset categoryat December 31, 2008 and 2007, are as follows:

 
| ** **                       | ** ** | **Plan Assets at  December 31** | ** ** |
|----------------------------------|------------|------------------------------------------------|------------|
| **Asset Category**          | ** ** | **2008**                                       | ** ** | **2007** | ** ** |
|                             |       |                                           |       |   |   |
| U.S. equity  securities          |       | 52                                             | %          | 52 | % |
| International  equity securities |       | 15                                             | %          | 16 | % |
| Fixed-income  securities         |       | 33                                             | %          | 32 | % |
| ** **                       | ** ** | **100**                                        | **%**      | **100** | % |

 

Our Retirement Funds Investment Committee isresponsible for establishing and overseeing the implementation of ourinvestment policy. The investment policy is structured to optimize growth ofthe pension plan trust assets, while minimizing the risk of significant losses,in order to enable the plans to satisfy their benefit payment obligations overtime. We have retained Russell Investments (Russell) to oversee the managementof our pension investments through its manager of managers program in order toachieve broad diversification in a cost-effective manner. As of December 31,2008, our investment policy governing our relationship will Russell allocated44% to large-capitalization U.S. equity securities (ten managers utilized inthe Russell large-capitalization U.S. equity fund as of December 31,2008), 33% to long-duration fixed-income securities (three managers), 15% tointernational equity securities (nine managers), and 8% to small- andmid-capitalization U.S. equity securities (ten managers). Our arrangement withRussell calls for monthly rebalancing to the policy targets noted above.

 

*Cash Flows*

 

In 2008, the significant decline in global equitymarkets and turmoil in the credit markets caused our pension investment portfolioto suffer significant losses. As a result of investment losses, new benefitsearned, and actuarial assumption changes, our funding shortfall increased from$86.9 million at December 31, 2007, to $162.6 million at December 31,2008, measured on a projected benefit obligation basis. While the Worker,Retiree, and Employee Recovery Act of 2008 provides some relief as to thetiming of our required future cash contributions, we expect to make materialcontributions to our pension plans for the next several years barring adramatic recovery in equity and debt market security valuations or a sizableincrease in the discount rate used to measure our liabilities. For the yearsended December 31, 2008, 2007, and 2006, we made cash contributions andcertain benefit payments to our pension and other postretirement benefit planstotaling $21.0 million, $1.1 million, and $20.7 million. We arerequired to contribute $4.4 million to our pension plans in 2009. In March 2009,we made $25.0 million of discretionary contributions to improve the fundedstatus of our plans. There can be no assurances our investment portfolio willnot suffer further losses or interest rates will not decline in the future andexacerbate our current funding shortfall.

 

The following benefit payments, which reflect expectedfuture service, as appropriate, are expected to be paid to plan participants.Qualified pension benefit payments are paid from plan assets, whilenonqualified pension and other benefit payments are paid by the company. The postretirementbenefit plan is not subject to minimum regulatory funding requirements. Sincethe postretirement benefit plans are unfunded, the expected contributionsrepresent the estimated health claims to be paid for plan participants, net ofretiree contributions.

 

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| ** **      | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|-----------------|------------|---------------------------|------------|-------------------------|------------|
| ** **      | ** ** | **(thousands)**           | ** ** |
|            |       |                      |       |                    |       |
| 2009            |       | $                         | 9,796      |                    | $          | 18 |   |
| 2010            |       | 11,816                    |       | 29                      |       |
| 2011            |       | 13,700                    |       | 29                      |       |
| 2012            |       | 15,809                    |       | 29                      |       |
| 2013            |       | 17,595                    |       | 35                      |       |
| Years 2014-2018 |       | 112,231                   |       | 34                      |       |
|                 |            |                           |            |                         |            |  |  |

 

***14.******                               RedeemableEquity Units***

 

*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. We account for awards granted under the EquityPlan in our consolidated financial statements in accordance with SFAS No. 123(R),*Share-Based Payment*.

 

*Repurchaseand Amendment*

 

In May 2008, FPH entered into aRepurchase Agreement and Amendment No. 1 to our Management EquityAgreement (the 2008 Amendment Agreements) with each management investor. Underthe redemption provisions of the 2008 Amendment Agreements, FPH repurchased48.5% of each management investor’s Series B units for an amount equal tosuch manager’s original investment in FPH, totaling $9.7 million of cash.The repurchase was at the election of the individual participant and wasoffered for a short period of time. Accordingly, we accounted for therepurchase as a “short-term inducement” under SFAS No. 123(R), using theequity method of accounting. 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 units. In accordance with SFAS No. 123(R),we measured the value of the award before and after the modification, and as aresult, we will recognize an incremental $2.0 million of compensationexpense related to the modification. Of the $2.0 million of incrementalcompensation expense, we recognized approximately $0.6 million in 2008,and we will recognize the remaining $1.4 million prospectively over theremaining vesting period.

 

*Vesting*

 

Under the original Equity Plan, the FPH Series B equity units and 50%of the Series C equity units (service condition vesting units) were tovest on a pro rata basis between December 31, 2004, and December 31,2009. The other 50% of the Series C equity units (market condition vestingunits) were to vest at the end of 2009 if specific criteria tied to internalrates of return were met. Accelerated vesting, in whole, or in part wasprovided for in specific circumstances.

 

The 2008 Amendment Agreements, revised the Equity Plan such that:  (i) 62.9% of the market conditionSeries C equity units 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 remainsubject to the Equity Plan’s internal rate-of-return formula, but the vestingperiod was extended one year to December 2010; and (iii) the vestingperiod for the service condition vesting Series C equity units not vestedas of February 22, 2008, was reset to provide ratable daily vesting from February 22,2008, through December 31, 2010.

 

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Upon either the sale of the company, as defined in the Equity Plan, or aninitial public offering, vesting is fully accelerated for all managementinvestors (subject to satisfaction of applicable market-based vestingconditions for units subject to market conditions).

 

For management investors whose employment is terminated as the result ofthe sale of a division, such management investors’ Series B equity unitswill vest on a daily pro rata basis through the date of termination calculatedon the 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, will vest on adaily pro rata basis calculated through the date of termination on the basis ofan aggregate vesting period running from February 22, 2008, through December 31,2010. In addition, in such circumstance their market condition vesting Series Cequity units will 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 for specifically affected managementinvestors, but none of these events are within the control of the investor. Thevesting schedules are shortened for those investors who were at least60 years old as of the grant date, so that the units fully vest by December 31of the year in which the investor reaches age 65 and at least two vestingperiods have been met. Vesting does not trigger a right or obligation on thepart of FPH or us to repurchase equity units held by management investors.

 

*Compensation Expense*

 

We did not recognize compensation expense on the date of grant for the Series Bequity units, because the fair value of the units issued by FPH was equal to orless than the amount each employee was required to pay. The Series Cequity units are accounted for as restricted stock. We recognize compensationexpense for the Series C equity units based on the fair value on the dateof the grant and/or the award modification date. Compensation expense isrecognized ratably over the vesting period for the Series C equity unitsthat vest over time and ratably over the award period for the units that vestbased on internal rates of return. During the years ended December 31,2008, 2007, and 2006, we recognized $6.6 million, $3.1 million, and$3.5 million of compensation expense. Of the $6.6 million ofcompensation expense recognized in 2008, we recorded $5.1 million in “Gainon sale of Paper and Packaging & Newsprint Assets,” and most of theother costs were recorded in “General and administrative expenses” in our ConsolidatedStatements of Loss. In 2007 and 2006, most of the compensation costs wererecorded in “General and administrative expenses.”

 

*Fair Value Measurement — Series CEquity Units*

 

The fair value of the Series C equity units as of the grant dateand/or award modification date was estimated by analyzing our possible futureevents, the paths to liquidity for the holders of the Series C equityunits, and how these paths may affect the valuation of the Series C equityunits. These possible future events included a sale of the company, an initialpublic offering, and remaining a private company. We estimated probabilities ofthese events occurring based on our strategies at each of the grant and/or awardmodification dates. A decision tree analysis that incorporated these eventoutcomes and the likelihood of their occurrences was created. Payoffs to theholders of the Series C equity units were constructed at each eventoutcome on the decision tree. Based on this framework, a simulation analysiswas run to arrive at the fair values of the Series C equity units.

 

SFAS No. 123(R) requires different valuation calculations forequity grants that have a service condition and equity grants that have a marketcondition. Series C equity units that vest over time are service conditionawards. Under the requirements of SFAS No. 123(R), the fair value of theseawards is measured assuming that all conditions have been met or as if theywere fully vested on the grant date. Compensation expense is recognized overthe 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 under the requirements of SFAS No. 123(R). The standard requires that thevaluation of market condition awards considers the likelihood that the marketcondition will be satisfied rather than assuming that the award is vested onthe award date. Because the internal rate of return represents a more difficultthreshold to meet before payout, with greater uncertainty that the marketcondition will be satisfied, these awards have a lower fair value than thosethat vest based solely on the passage of time. However,

 

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compensation expense is required to berecognized under SFAS No. 123(R) for an award regardless of when, ifever, the market condition is satisfied.

 

*Redemption Provisions*

 

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 limit the amount ofequity unit redemptions to $5 million in any year, subject to a two-yearcarry forward and carry back provision that provides an aggregate limit in anyone year of $15 million. Redemptions made pursuant to the Sale and the2008 Amendment Agreements (described above) were permitted by other provisionsof such agreements and did not affect the ongoing availability for additionalredemptions.

 

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 acquire the forest products and paper assets ofOfficeMax. Repurchases under the Equity Plan have been funded by mirror-imageredemptions of B units and C units held by FPH in its subsidiaries.Because the redemption of the FPH Series B and Series C equity unitsand the expected parallel redemptions of our Series B and Series Cequity units are a contingent event outside the employee’s control, we accountfor the units using equity plan accounting in accordance with FSP No. FAS 123(R)-4,*Classification of Options and Similar InstrumentsIssued as Employee Compensation That Allow for Cash Settlement Upon theOccurrence of a Contingent Event*. However, because FPH units aresubject to mandatory redemption in an event that is outside our control (deathor disability), we are required to classify these units outside of permanentequity on our Consolidated Balance Sheets at fair value as of the grant dateand/or award modification date. Accordingly, at December 31, 2008 and2007, we had $6.0 million and $26.5 million recorded in “Redeemableequity units” on our Consolidated Balance Sheet. Relative to December 31,2007, the decrease in “Redeemable equity units” resulted from the combinationof (i) the repurchase of units from management investors that terminatedemployment with us in connection with the Sale; (ii) the repurchase of48.5% of each management investor’s Series B equity units in May 2008,per the provisions of the 2008 Amendment Agreements (discussed above); and (iii) thereclassification of a retired officer’s equity units into the capital sectionof the balance sheet, because the provisions of his retirement agreement causeshis units to no longer be subject to mandatory redemption in an event that isoutside our control.

 

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 2008, 2007, and 2006, 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 11.6 million redeemable Series Bequity units during 2008 and redeemed 0.5 million in both 2007 and 2006.In 2008, 2007, and 2006, FPH redeemed 10.3 million, 0.1 million, and 37,000redeemable Series C equity units. The total cash paid by FPH subsidiariesduring 2008, 2007, and 2006 for parallel redemptions of redeemable Series Band Series C shares was $28.6 million, $1.0 million, and$0.7 million.

 

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*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.

 

*Activityof Redeemable Equity Units*

 

The following summarizes the activity of our outstanding service and marketcondition equity units awarded under the Equity Plan as of December 31,2008, 2007, and 2006, and changes during the years ended December 31, 2008and 2007:

 
| ** **                                                         | ** ** | **Service Condition**                       | ** ** | **Market Condition**                          | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                         | ** ** | **Series B  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, 2006 (a)               |       | 17,108                                           |       | $                                                  | 1.02       |   | 19,788 |   | $ | 0.39 |   | 19,788 |   | $ | 0.21 |   |
|                                                               |       |                                             |       |                                               |       |   |   |   |   |   |   |   |   |
| Granted                                                            |       | —                                           |       | —                                             |       | — |   | — |   | — |   | — |   |
| Repurchased                                                        |       | (486                                             | )          | 1.00                                               |       | (118 | ) | 0.46 |   | — |   | — |   |
| Forfeited                                                          |       | —                                           |       | —                                             |       | (123 | ) | 0.46 |   | (266 | ) | 0.15 |   |
| Outstanding at  December 31, 2007 (a)               | ** ** | **16,622**                                       | ** ** | **1.02**                                           | ** ** | **19,547** | ** ** | **0.39** | ** ** | **19,522** | ** ** | **0.21** | ** ** |
|                                                               |       |                                             |       |                                               |       |   |   |   |   |   |   |   |   |
| Granted (b)                                                        |       | —                                           |       | —                                             |       | — |   | — |   | — |   | — |   |
| Repurchased (c)                                                    |       | (11,644                                          | )          | 1.03                                               |       | (5,216 | ) | 0.34 |   | (5,077 | ) | 0.13 |   |
| Forfeited (d)                                                      |       | —                                           |       | —                                             |       | (3,365 | ) | 0.33 |   | (3,212 | ) | 0.13 |   |
| Market condition  awards converted to service condition awards (e) |       | —                                           |       | —                                             |       | 3,354 |   | 0.74 |   | (3,354 | ) | 0.14 |   |
| Allocation of  redeemable equity units to Capital (f)              |       | (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** | ** ** |
|                                                                    |            |                                                  |            |                                                    |            |  |  |  |  |  |  |  |  |  |  |  |

 

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(a)                                  Outstanding units include both vested and nonvested units, as unitsoutstanding are reduced only through repurchase of units by us or throughforfeiture of units by employees.

 

(b)                                 We did not sell or grant any Series B orC units under the Equity Plan. In February 2009, FPH granted approximately9 million Series C equity units.

 

(c)                                  In 2008, FPH repurchased 6.6 million Series Band 10.2 million Series C equity units from management investors thatterminated employment with us in connection with the Sale. In addition, underthe provisions of the 2008 Amendment Agreements, FPH repurchased4.7 million Series B equity units.

 

(d)                                 In 2008, management investors forfeited5.9 million Series C units when they terminated employment with us inconnection with the Sale.

 

(e)                                  Under the provisions of the 2008 AmendmentAgreements, 62.9%, or 3.4 million of the market condition Series Cequity units were converted to service condition vesting units. The tableincludes the increase in fair value of the equity units after the planmodification.

 

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(f)                                    In 2008, we reclassified approximately2.1 million Series B and 11.2 million Series C equity unitsinto “Capital” on our Consolidated Balance Sheet. The reclassification resultedfrom a retired officer’s retirement agreement causing his equity units to nolonger be subject to mandatory redemption in an event that is outside of ourcontrol.

 

The following summarizes the activity of our nonvested service and marketcondition equity units awarded under the Equity Plan as of December 31,2008, 2007, and 2006, and changes during the years ended December 31, 2008and 2007:

 
| ** **                                                         | ** ** | **Service Condition**                       | ** ** | **Market Condition**                          | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                         | ** ** | **Series B  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, 2006                          |       | 9,134                                            |       | $                                                  | 1.02       |   | 10,229 |   | $ | 0.38 |   | 19,732 |   | $ | 0.21 |   |
|                                                               |       |                                             |       |                                               |       |   |   |   |   |   |   |   |   |
| Granted                                                            |       | —                                           |       | —                                             |       | — |   | — |   | — |   | — |   |
| Repurchased                                                        |       | (486                                             | )          | 1.00                                               |       | (118 | ) | 0.46 |   | — |   | — |   |
| Vested                                                             |       | (3,670                                           | )          | 1.02                                               |       | (4,615 | ) | 0.40 |   | (5,991 | ) | 0.39 |   |
| Forfeited                                                          |       | —                                           |       | —                                             |       | (123 | ) | 0.46 |   | (266 | ) | 0.15 |   |
| 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 (c)                 | ** ** | **1,120**                                        | ** ** | **1.00**                                           | ** ** | **3,456** | ** ** | **0.63** | ** ** | **1,832** | ** ** | **0.14** | ** ** |
|                                                                    |            |                                                  |            |                                                    |            |  |  |  |  |  |  |  |  |  |  |  |

 

----

(a)                                  In 2008, management investors forfeited5.9 million Series C equity units when they terminated employmentwith us in connection with the Sale.

 

(b)                                 Under the provisions of the 2008 AmendmentAgreements, 62.9%, or 3.4 million of the market condition Series Cequity units were converted to service condition vesting units. The tableincludes the increase in fair value of the equity units after the planmodification.

 

(c)                                  The weighted average remaining vesting period is approximately1.9 years.

 

At December 31, 2008, we had approximately $2.1 million of totalunrecognized compensation cost related to the nonvested Series Credeemable equity units granted under the Equity Plan. The cost is expected tobe recognized generally over a weighted average period of 2.0 years. In2008, we recognized $6.6 million of compensation expense, of which$5.1 million related to the Sale, $0.4 million related to therepurchase of Series B equity units in connection with the 2008 AmendmentAgreements, $0.9 million related to service condition awards vestedthrough 2008 and $0.1 million related to the market condition awards thatgenerally vest on December 31, 2010. In addition, per SFAS No. 123(R),we recognized approximately $0.1 million of compensation expense relatedto nonrefundable tax distributions paid to management investors in connectionwith their investments in us that we estimate will not vest.

 

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***15.******                              ******Capital***

 

Excluding the Series B and Series Credeemable equity units included in “Redeemable equity units” on ourConsolidated Balance Sheets at December 31, 2008 and 2007, BC Holdings wascapitalized with $350.4 million and $965.4 million of equity capitalallocated among three series of equity units as follows:

 
| ** **            | ** ** | **Units Outstanding** | ** ** | **Amount** | ** ** |
|-----------------------|------------|----------------------------|------------|------------|------------|
| **Equity Units** | ** ** | **2008**                   | ** ** | **2007**   | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **            | ** ** | **(thousands)**            | ** ** |
| ** **            | ** ** | ** **                 | ** ** |
| Series A         |       |                       |       |       |       |   |   |   |   |
| OfficeMax             |       | 66,000                     |       | 66,000     |       | $ | 81,967 |   | $ | 78,463 |   |
|                  |       |                       |       |       |       |   |   |   |   |
| Series B         |       |                       |       |       |       |   |   |   |   |
| FPH (a)               |       | 423,415                    |       | 421,357    |       | 213,444 |   | 696,513 |   |
| OfficeMax             |       | 109,000                    |       | 109,000    |       | 54,947 |   | 180,180 |   |
|                  |       |                       |       |       |       |   |   |   |   |
| Series C         |       |                       |       |       |       |   |   |   |   |
| FPH (a)               |       | 11,183                     |       | —     |       | — |   | 10,268 |   |
| ** **            | ** ** | ** **                 | ** ** | ** ** | ** ** | **$** | **350,358** | ** ** | **$** | **965,424** | ** ** |

 

----

(a)                                  In 2008, we reclassified approximately2.1 million Series B and 11.2 million Series C equity unitsfrom “Redeemable Equity Units” to “Capital” on our Consolidated Balance Sheet.The reclassification resulted from a retired officer’s retirement agreementcausing his equity units to no longer be subject to mandatory redemption in anevent that is outside of our control. All other Series C equity units issuedand outstanding are disclosed under Redeemable Equity Units on our ConsolidatedBalance Sheet. For more information, see Note 14, Redeemable Equity Units.

 

Total capital decreased $615.1 million to$350.4 million at December 31, 2008, compared with $965.4 millionin 2007. Of the $615.1 million decrease, $261.4 million related to lossesfor our investment in Boise Inc., $151.8 million related to theimpact of changes in the unfunded accumulated benefit obligation of our pensionplans, $131.7 million related to tax distributions to our equity holders,and the remaining difference related primarily to lower operating income in ourBuilding Materials Distribution and Wood Products segments.

 

*Descriptionof Equity Units*

 

*Series A Equity Units. *The Series A equityunits have no voting rights. They accrue dividends daily at a rate of 8% perannum, compounded semiannually, on the holder’s capital contributions andaccumulated dividends (net of any distributions previously received by suchholder). Accrued and unpaid dividends accumulate on the Series A equityunits on June 30 and December 31 of each year. At December 31,2008 and 2007, $19.2 million and $12.9 million, respectively, ofdividends were accrued on our Consolidated Balance Sheets as an increase in thevalue of the Series A equity units. Series A equity units participatein distributions as described below. Other than through accrual and receipt ofdividends, the Series A equity units do not participate in the earnings ofthe company.

 

*Series B Equity Units. *The Series B equity units entitle each holder to one voteon matters to be voted on by the members of BC Holdings. The Series Bequity units participate in distributions as described below.

 

*Series C Equity Units*.  The Series C equity units have no votingrights. Series C equity units were issued to FPH in 2004 (the 2004 Series Cunits) and 2006 (the 2006 Series C units) without capital contributions.The 2004 Series C units have no right to participate in earnings of thecompany until distributions to the holders of the Series A equity unitsequal the original capital invested in such units plus accumulated and accrueddividends and distributions to the holders of Series B equity units equalthe amount originally invested in them. The 2006 Series C units have noright to participate in the earnings of the company until the total amountdistributed to Series B units is equal to or greater than $2.00 perunit. When the relevant threshold for distributions to Series C units hasbeen met, they participate as outlined below. At December 31, 2008 and2007, we had zero and $10.3 million of accrued Series C profitinterests recorded on our Consolidated Balance Sheets.

 

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*Equity Distributions*

 

As discussed in Note 14, Redeemable Equity Units,in February 2009, we issued 9.0 million Series C equity units.These equity units have a threshold equity value of $1.30 per unit. Includingthe 2009 grant, equity distributions (liquidating and otherwise) among thethree series of equity units are made as follows under the provisions of ourOperating Agreement:

 

·                  Firstto Series A equity unit and Series B equity unit holders ratably,based on the number of units outstanding, until each has received distributionsin an amount equal to his or her capital contributions (plus, in the case of Series Aequity unit holders, accumulated dividends and accrued and unpaid dividends);

 

·                  Then to Series Bequity unit and 2004 Series C equity unit holders ratably, based on thenumber of units of each series outstanding (exclusive of 2006 Series Cunits), until total distributions to the Series B equity unit holders havereached $1.30 per unit outstanding;

 

·                  Then to Series Bequity unit and 2004 and 2009 Series C equity unit holders until totaldistributions to the Series B equity unit holders have reached $2.00 perunit; and

 

·                  Thereafter,ratably to all Series B equity unit and Series C equity unit holdersin proportion to their respective holdings 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 not considered in determining the allocation of otherdistributions.

 

*Accumulated Other Comprehensive Income (Loss)*

 

Accumulated other comprehensive income (loss) includesthe following:

* *
| ** **                                       | ** ** | ** **       | ** ** | **Equity**            | ** ** | ** **                            | ** ** | ** **              | ** **  | ** **                       | ** ** |
|--------------------------------------------------|------------|------------------|------------|-----------------------|------------|---------------------------------------|------------|-------------------------|-------------|----------------------------------|------------|
| ** **                                       | ** ** | ** **       | ** ** | **in Other**          | ** ** | ** **                            | ** ** | ** **              | ** **  | ** **                       | ** ** |
| ** **                                       | ** ** | ** **       | ** ** | **Comprehensive**     | ** ** | **Unfunded Accumulated**              | ** ** | **Accumulated**         | ** **  |
| ** **                                       | ** ** | **Cash**         | ** ** | **Loss of**           | ** ** | **Benefit Obligation**                | ** ** | **Other**               | ** **  |
| ** **                                       | ** ** | **Flow  Hedges** | ** ** | **Equity  Affiliate** | ** ** | **Actuarial     Gain** | ** ** | **Prior Service  Cost** | ** **  | **Comprehensive  Income (Loss)** | ** ** |
| ** **                                       | ** ** | ** **       | ** ** | ** **            | ** ** | **(thousands)**                       | ** ** | ** **              | ** **  | ** **                       | ** ** |
|                                             |       |             |       |                  |       |                                  |       |                    |        |                             |       |
| Balance at  December 31, 2006, net of taxes |       | $                | 3,203      |                  | $          | —                                |       | $                       | 43,890      |                             | $          | (6,627 | ) | $ | 40,466 |   |
|                                             |       |             |       |                  |       |                                  |       |                    |        |                             |       |
| Current-period  changes, before taxes            |       | 1,527            |       | —                |       | 39,503                                |       | (7,473                  | )           | 33,557                           |       |
| Reclassifications  to earnings, before taxes     |       | (8,511           | )          | —                |       | 485                                   |       | 1,190                   |        | (6,836                           | )          |
| Income taxes                                     |       | 3,914            |       | —                |       | —                                |       | —                  |        | 3,914                            |       |
| 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** | **)** |

 

*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

 

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“drag-along” rights, which entitleOfficeMax to require the other equity holders to participate in sales of all orsubstantially all of the equity interests in our company. If we propose toissue additional equity securities, we will generally be required to offerOfficeMax a pro rata portion of the securities issued in such a transaction.The agreement will terminate in a liquidation or dissolution of the company, inan initial public offering, or in a sale of all or substantially all of thecompany’s stock or assets.

 

*RegistrationRights Agreement with FPH and OfficeMax*

 

In connection with the Forest Products Acquisition, weentered into a Registration Rights Agreement with FPH and OfficeMax withrespect to the equity interests they own in us. Under the Registration RightsAgreement, (i) FPH has the right to demand that we effect an unlimitednumber of registrations of its equity interests, whether pursuant to along-form registration statement or a short-form registration, and pay allexpenses, other than underwriting discounts and commissions, related to suchregistrations and (ii) after the earlier of the fifth anniversary of thecompletion of the Forest Products Acquisition or completion of an initialpublic offering by us, 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. 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. FPHand OfficeMax have agreed not to effect any public sale or private placement ofany of 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.

 

***16.******                              ******Segment Information***

 

Prior to the Sale, weoperated our business using five reportable segments:  Building Materials Distribution, WoodProducts, Paper, Packaging & Newsprint, and Corporate and Other. Afterthe Sale, we operate our business using three reportable segments:  Building Materials Distribution, WoodProducts, and Corporate and Other. These segments represent distinct businessesthat are managed separately because of differing products and services. Each ofthese businesses requires distinct operating and marketing strategies.Management reviews the performance of the company based on these segments. Theequity interest we own in Boise Inc. after the Sale represents asignificant continuing involvement as defined in SFAS No. 144*.*As a result, we continue to show the results of the Paperand Packaging & Newsprint segments through February 21, 2008, andwe did not define the sold assets as discontinued operations.

 

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 resellbuilding materials to professional builders in the residential, lightcommercial construction, and repair-and-remodeling markets.

 

OurWood Products segment manufactures and sells EWP, consisting of laminatedveneer lumber (LVL), a high-strength engineered lumber often used in beams;I-joists, a structural support typically used in floors and roofs; andlaminated beams. We also produce plywood, particleboard, dimension lumber, andhigh-quality ponderosa pine lumber, a premium lumber grade sold primarily tomanufacturers of specialty wood windows, moldings, and doors. Our wood productsare used primarily in residential, light commercial construction, andrepair-and-remodeling markets. Most of these products are sold to wholesalers,major retailers, and industrial converters or through our own wholesalebuilding materials distribution outlets. During 2008, approximately 46% of thewood products we manufactured, including approximately 67% of our EWP, weresold to our Building Materials Distribution segment.

 

Our Corporate and Other segment primarily includescorporate support staff services, related assets and liabilities, and foreignexchange gains and losses. These support services include, but are not limitedto, finance, accounting, legal, information technology, and human resourcefunctions. Since the

 

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Sale, we have purchased many of these services from Boise Inc.under an Outsourcing Services Agreement, under which Boise Inc. provides anumber of corporate staff services to us at cost. See Note 5, TransactionsWith Related Parties, for more information. Prior to the Sale, this segmentalso included certain rail and truck transportation businesses and relatedassets. During the years ended December 31, 2008, 2007, and 2006, segmentsales related primarily to our rail and truck transportation businesses andwere $8.6 million, $58.9 million, and $60.7 million,respectively.

 

The segments’ profits and losses are measured onoperating profits before equity in net income (loss) of affiliate, impairmentof investment in equity affiliate, changes in fair value of interest rate swapsand contingent value rights, interest expense, and interest income. Specifiedexpenses are allocated to the segments. For many of these allocated expenses,the related assets and liabilities remain in the Corporate and Other segment.Our $21.0 million investment in Boise Inc. is held by BC Holdings andis not held by any of our reportable segments.

 

The segments follow theaccounting principles described in Note 2, Summary of Significant AccountingPolicies.

 

Sales to OfficeMax were$90.1 million, $615.7 million, and $575.9 million in 2008, 2007,and 2006, representing 3%, 11%, and 10% of total sales, respectively. Sales toOfficeMax were primarily recorded in our Paper segment. No other singlecustomer accounted for 10% or more of consolidated trade sales or of totalsales. Export sales to foreign unaffiliated customers were $83.7 million,$237.8 million, and $199.3 million for the years ended December 31,2008, 2007, and 2006, respectively.

 

At December 31,2008, 2007, and 2006, and for the years then ended, long-lived assets locatedin foreign countries, and net sales originating in foreign countries were notmaterial.

 

Segmentsales to external customers by product line are as follows:

 
| ** **                        | ** ** | **Year Ended December 31** | ** **  |
|-----------------------------------|------------|-------------------------------------------|-------------|
| ** **                        | ** ** | **2008**                                  | ** **  | **2007** | ** ** | **2006** | ** ** |
| ** **                        | ** ** | **(millions)**                            | ** **  |
| Building  Materials Distribution  |       |                                      |        |   |   |   |   |
| Structural  panels                |       | $                                         | 340.3       |   | $ | 375.9 |   | $ | 470.1 |   |
| Engineered wood  products         |       | 249.3                                     |        | 375.5 |   | 461.0 |   |
| Lumber                            |       | 515.7                                     |        | 612.1 |   | 726.4 |   |
| Particleboard                     |       | 23.2                                      |        | 20.6 |   | 26.1 |   |
| Building  supplies and other      |       | 980.0                                     |        | 1,179.5 |   | 1,266.5 |   |
|                              |       | 2,108.5                                   |        | 2,563.6 |   | 2,950.1 |   |
|                              |       |                                      |        |   |   |   |   |
| Wood Products                     |       |                                      |        |   |   |   |   |
| Plywood and  veneer               |       | 249.4                                     |        | 263.1 |   | 282.8 |   |
| Engineered wood  products         |       | 90.5                                      |        | 169.4 |   | 222.8 |   |
| Lumber                            |       | 71.9                                      |        | 101.2 |   | 111.8 |   |
| Particleboard                     |       | 37.6                                      |        | 48.9 |   | 51.4 |   |
| Other                             |       | 71.1                                      |        | 15.0 |   | 17.7 |   |
|                              |       | 520.5                                     |        | 597.6 |   | 686.5 |   |
|                              |       |                                      |        |   |   |   |   |
| Paper                             |       |                                      |        |   |   |   |   |
| Uncoated free  sheet              |       | 224.2                                     |        | 1,392.1 |   | 1,319.9 |   |
| Containerboard  (medium)          |       | 0.1                                       |        | 1.5 |   | 0.7 |   |
| Market pulp and  other            |       | 20.2                                      |        | 139.3 |   | 118.5 |   |
|                              |       | 244.5                                     |        | 1,532.9 |   | 1,439.1 |   |
|                              |       |                                      |        |   |   |   |   |
| Packaging &  Newsprint   |       |                                      |        |   |   |   |   |
| Containerboard  (linerboard)      |       | 16.5                                      |        | 104.3 |   | 107.4 |   |
| Newsprint                         |       | 29.8                                      |        | 217.1 |   | 230.4 |   |
| Corrugated  containers and sheets |       | 53.1                                      |        | 364.5 |   | 342.3 |   |
| Other                             |       | 2.8                                       |        | 19.2 |   | 9.4 |   |
|                              |       | 102.2                                     |        | 705.1 |   | 689.5 |   |
|                              |       |                                      |        |   |   |   |   |
| Corporate and  Other              |       | 1.8                                       |        | 14.3 |   | 14.7 |   |
| ** **                        | ** ** | **$**                                     | **2,977.5** | ** ** | **$** | **5,413.5** | ** ** | **$** | **5,779.9** | ** ** |

 

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An analysis of ouroperations by segment is as follows:

 
| ** **                                        | ** ** | **Sales**      | ** **  | **Income  (Loss)**   | ** ** | **Depreciation,  Amortization,** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **         | ** ** |
|---------------------------------------------------|------------|----------------|-------------|----------------------|------------|----------------------------------|------------|------------|------------|-------------------|------------|--------------------|------------|
| ** **                                        | ** ** | **Trade**      | ** **  | **Related  Parties** | ** ** | **Inter-  segment**              | ** ** | **Total**  | ** ** | **Before  Taxes** | ** ** | **and  Depletion** | ** ** | **EBITDA  (k)** | ** ** | **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  (a)                                |       | 464.4          |        | 56.1                 |       | 275.4                            |       | 795.9      |       | (55.1             | )          | 27.7               |       | (27.4 | ) | 34.6 |   | 381.2 |   |
| Paper (b)                                         |       | 154.4          |        | 90.1                 |       | 9.0                              |       | 253.5      |       | 20.7              |       | 0.3                |       | 21.1 |   | 5.0 |   | — |   |
| Packaging &  Newsprint (b)               |       | 102.2          |        | —               |       | 11.3                             |       | 113.5      |       | 5.7               |       | 0.1                |       | 5.7 |   | 5.2 |   | — |   |
| Corporate and  Other (c)                          |       | 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  income of affiliate                |       | —         |        | —               |       | —                           |       | —     |       | (11.3             | )          | —             |       | (11.3 | ) | — |   | — |   |
| Impairment of  investment in equity affiliate (d) |       | —         |        | —               |       | —                           |       | —     |       | (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** | ** ** |

 
| ** **                                            | ** ** | **Sales**      | ** **  | **Income  (Loss)**   | ** ** | **Depreciation,  Amortization,** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **         | ** ** |
|-------------------------------------------------------|------------|----------------|-------------|----------------------|------------|----------------------------------|------------|------------|------------|-------------------|------------|--------------------|------------|
| ** **                                            | ** ** | **Trade**      | ** **  | **Related  Parties** | ** ** | **Inter-  segment**              | ** ** | **Total**  | ** ** | **Before  Taxes** | ** ** | **and  Depletion** | ** ** | **EBITDA  (k)** | ** ** | **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 (e)                                             |       | 917.2          |        | 615.7                |       | 63.3                             |       | 1,596.2    |       | 132.3             |       | 45.0               |       | 177.3 |   | 103.4 |   | 1,269.8 |   |
| Packaging &  Newsprint (e)              |       | 705.1          |        | —               |       | 78.0                             |       | 783.1      |       | 40.1              |       | 37.7               |       | 77.8 |   | 38.2 |   | 579.0 |   |
| Corporate and  Other (e) (f)                     |       | 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 (g) |       | —         |        | —               |       | —                           |       | —     |       | 3.7               |       | —             |       | — |   | — |   | — |   |
| Interest  expense (h)                            |       | —         |        | —               |       | —                           |       | —     |       | (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** | ** ** |

 

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| ** **                             | ** ** | **Sales**      | ** **  | **Income  (Loss)**   | ** ** | **Depreciation,  Amortization,** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **         | ** ** |
|----------------------------------------|------------|----------------|-------------|----------------------|------------|----------------------------------|------------|------------|------------|-------------------|------------|--------------------|------------|
| ** **                             | ** ** | **Trade**      | ** **  | **Related  Parties** | ** ** | **Inter-  segment**              | ** ** | **Total**  | ** ** | **Before  Taxes** | ** ** | **and  Depletion** | ** ** | **EBITDA  (k)** | ** ** | **Capital  Expenditures** | ** ** | **Assets** | ** ** |
| ** **                             | ** ** | **(millions)** | ** **  |
| **Year  Ended December 31, 2006** | ** ** | ** **     | ** **  | ** **           | ** ** | ** **                       | ** ** | ** ** | ** ** | ** **        | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building  Materials Distribution       |       | $              | 2,950.1     |                 | $          | —                           |       | $          | 0.2        |              | $          | 2,950.3            |       | $ | 75.3 |   | $ | 9.2 |   | $ | 84.6 |   | $ | 10.5 |   | $ | 395.2 |   |
| Wood Products                          |       | 686.5          |        | —               |       | 469.4                            |       | 1,155.9    |       | 37.2              |       | 27.6               |       | 64.9 |   | 30.7 |   | 466.5 |   |
| Paper                                  |       | 863.7          |        | 575.4                |       | 55.6                             |       | 1,494.7    |       | 63.1              |       | 62.3               |       | 125.4 |   | 85.5 |   | 1,192.8 |   |
| Packaging &  Newsprint (i)    |       | 689.0          |        | 0.5                  |       | 77.0                             |       | 766.5      | (i)        | 45.3              |       | 50.8               |       | 96.1 |   | 66.1 |   | 578.9 |   |
| Corporate and  Other (j)               |       | 14.7           |        | —               |       | 46.0                             |       | 60.7       |       | (37.1             | )          | 5.4                |       | (31.9 | ) | 3.3 |   | 171.7 |   |
|                                   |       | 5,204.0        |        | 575.9                |       | 648.2                            |       | 6,428.1    |       | 183.8             |       | 155.3              |       | 339.1 |   | 196.1 |   | 2,805.1 |   |
| Intersegment  eliminations             |       | —         |        | —               |       | (648.2                           | )          | (648.2     | )          | —            |       | —             |       | — |   | — |   | (99.9 | ) |
| Interest expense                       |       | —         |        | —               |       | —                           |       | —     |       | (112.4            | )          | —             |       | — |   | — |   | — |   |
| Interest income                        |       | —         |        | —               |       | —                           |       | —     |       | 3.8               |       | —             |       | — |   | — |   | — |   |
| ** **                             | ** ** | **$**          | **5,204.0** | ** **           | **$**      | **575.9**                        | ** ** | **$**      | **—** | ** **        | **$**      | **5,779.9**        | ** ** | **$** | **75.2** | ** ** | **$** | **155.3** | ** ** | **$** | **339.1** | ** ** | **$** | **196.1** | ** ** | **$** | **2,705.2** | ** ** |

 

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| (a)    | Included  a $5.7 million net gain related to the sale of our wholly owned  subsidiary in Brazil.                                                                                                                                                                                                                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Included $3.8 million of  expense related to the closure of our veneer operations in St. Helens,  Oregon, in 2008.                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Included $7.5 million of  expense recognized in December 2008, when we committed to closing the  plywood manufacturing facility in White City, Oregon, which is scheduled to  occur in March 2009.                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (b)    | Included  the results of the Paper and Packaging & Newsprint segments through  February 21, 2008.                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (c)    | 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. See Note 3, Sale of Our Paper and  Packaging & Newsprint Assets, for more information.                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (d)    | In 2008, we concluded that  our investment in Boise Inc. met the definition of other than temporarily  impaired as defined in APB Opinion No. 18. Accordingly, we recorded a  $208.1 million charge in “Impairment of investment in equity affiliate”  in our Consolidated Statement of Loss.  See Note 4, Investment in Equity Affiliate, for more information.                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (e)    | We  had approximately $21.7 million, $19.1 million, and  $1.0 million of lower depreciation and amortization expense in our  Paper, Packaging & Newsprint, and Corporate and Other segments as a  result of discontinuing depreciation and amortization on the assets recorded  as held for sale.                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (f)    | Included a  $4.4 million gain for changes in our retiree healthcare programs.                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (g)    | Included approximately $8.4 million  of income related to the change in the fair value of interest rate swaps in  connection with the repayment of some of our variable-rate debt, partially  offset by $4.6 million of expense related to changes in the fair value  of our interest rate swaps that we accounted for as economic hedges. See Note 12,  Financial Instruments, for more information. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (h)    | Included $6.3 million of expense  related to the write-off of deferred financing costs in connection with the  repayment of debt.                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (i)    | Capital expenditures included $42.6 million of cash  paid for the purchase of Central Texas Corrugated’s assets in Waco, Texas.                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (j)    | Included  a $3.7 million gain for changes in our retiree healthcare programs.                                                                                                                                                                                                                                                                                                                                   |

 

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| (k) | EBITDA  represents income (loss) before interest (interest expense, interest income,  and change in fair value of interest rate swaps), income taxes, and depreciation,  amortization, and depletion. EBITDA is the primary measure used by our chief  operating decision makers to evaluate segment operating performance and to  decide how to allocate resources to segments. We believe EBITDA is useful to  investors because it provides a means to evaluate the operating performance  of our segments and our company on an ongoing basis using criteria that are  used by our internal decision makers and because it is frequently used by  investors and other interested parties in the evaluation of companies. We  believe EBITDA is a meaningful measure because it presents a transparent view  of our recurring operating performance and allows management to readily view  operating trends, perform analytical comparisons, and identify strategies to  improve operating performance. For example, we believe that the inclusion of  items such as taxes, interest expense, and interest income distorts  management’s ability to assess and view the core operating trends in our  segments. EBITDA, however, is not a measure of our liquidity or financial  performance under generally accepted accounting principles (GAAP) and should  not be considered as an alternative to net income (loss), income (loss) from  operations, or any other performance measure derived in accordance with GAAP  or as an alternative to cash flow from operating activities as a measure of  our liquidity. The use of EBITDA instead of net income (loss) or segment  income (loss) has limitations as an analytical tool, including the inability  to determine profitability; the exclusion of interest expense, interest  income, change in the fair value of interest rate swaps, and associated  significant cash requirements; 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 titled captions of other companies due to  potential inconsistencies in the methods of calculation. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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

 
| ** **                                   | ** ** | **Year Ended December 31** | ** ** |
|----------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                   | ** ** | **2008**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                   | ** ** | **(millions)**                            | ** ** |
|                                         |       |                                      |       |   |   |   |   |
| Net income  (loss)                           |       | $                                         | (288.0     | ) | $ | 127.7 |   | $ | 71.6 |   |
| Change in fair  value of interest rate swaps |       | 6.3                                       |       | (3.7 | ) | — |   |
| Interest expense                             |       | 34.3                                      |       | 96.8 |   | 112.4 |   |
| Interest income                              |       | (7.7                                      | )          | (4.1 | ) | (3.8 | ) |
| Income tax  provision                        |       | 0.5                                       |       | 8.0 |   | 3.6 |   |
| Depreciation,  amortization, and depletion   |       | 36.3                                      |       | 123.9 |   | 155.3 |   |
| EBITDA                                       | ** ** | **$**                                     | **(218.3** | **)** | **$** | **348.6** | ** ** | **$** | **339.1** | ** ** |

 

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***17.******                               Commitmentsand Guarantees***

 

*Commitments*

 

We have commitments for leases and long-term debt thatare discussed further in Note 7, Leases, and Note 11, 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, 2008, our total obligation for log andfiber purchases under contracts with third parties was approximately$415.0 million based on contract terms or first quarter 2009 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 31,2008, we had approximately $9.0 million of utility purchase commitments.These payment obligations were valued at prices in effect on December 31,2008, 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, which constitute guarantees as defined under FIN No. 45,*Guarantor’s Accounting and Disclosure Requirementsfor Guarantees, Including Indirect Guarantees of Indebtedness of Others*.

 

Our Revolving Credit Facility, described inNote 11, Debt, is guaranteed by each of our domestic subsidiaries (exceptthose that act as co-borrowers).

 

BC Holdings and its direct and indirect domesticsubsidiaries, excluding foreign subsidiaries, were parties to a CreditAgreement dated as of May 3, 2007, with JPMorgan Chase Bank, asAdministrative Agent, and certain lenders named therein and to a relatedGuarantee and Collateral Agreement of the same date (collectively the BankCredit Agreements). The proceeds of the initial borrowing under the RevolvingCredit Facility, along with proceeds from the Sale were used to repay the BankCredit Agreements. The Bank Credit Agreements were terminated, and allguarantees associated with them were likewise terminated and released.

 

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. Thesubordinated notes are guaranteed on a subordinated basis by each of our domesticsubsidiaries, other than Boise Cascade, L.L.C., and Boise Cascade FinanceCorporation. We redeemed $160 million of the notes at par on April 15,2008. This repurchase reduced, but did not eliminate, our domesticsubsidiaries’ exposure under the guarantees extended in respect of thesubordinated notes. See Note 11, Debt, for more information.

 

In connection with the sale of our Paper and Packaging &Newsprint businesses, we amended the lease of our headquarters facility toeliminate all but one floor of the building from the lease. The portion of thebuilding eliminated from the lease is the subject of a new lease entered intoby a subsidiary of Boise Inc. (Boise Paper Holdings, L.L.C.). As a condition tothe amendment, we extended to the landlord our guaranty of the obligations ofBoise Paper Holdings, L.L.C., under the new lease for the first two years ofits term. At December 31, 2008, our exposure under the guarantee was$3.9 million, and it decreases on a pro rata basis over the lease term asrent is paid.

 

Boise Cascade, L.L.C., issued guarantees to a limited number of tradecreditors of one or more of its principal operating subsidiaries, BoiseBuilding Solutions Distribution, L.L.C.; Boise Building Solutions

 

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Manufacturing, L.L.C.;Boise White Paper, L.L.C.; and Boise Packaging &Newsprint, L.L.C., for trade credit obligations arising in the ordinarycourse of the business of such operating subsidiaries. These includedguarantees of the obligations of both Boise White Paper, L.L.C., and BoiseBuilding Solutions Manufacturing, L.L.C., with respect to present andfuture timber sale agreements and several facility and rolling stock leasesentered into by such subsidiaries. Boise Cascade, L.L.C., also guarantees theperformance and payment obligations of Boise Building Solutions Distribution,L.L.C., with respect to several facility leases. Our exposure under these agreementsis limited to future timber purchases and the minimum lease paymentrequirements under the agreements. We also enter into guarantees of various rawmaterial or energy supply agreements arising in the ordinary course ofbusiness. Under the terms of the Purchase and Sale Agreement governing theSale, the purchaser is obligated to use reasonable best efforts to obtain arelease of our obligations under guarantees of obligations of the entities soldin such transaction or to indemnify us for all liability incurred as a resultof any such guarantee not so released.

 

All letters of credit and most surety bonds supporting obligations ofsubsidiaries sold or liabilities assumed by the purchaser in connection withthe Sale have been replaced by new letters of credit or surety bonds issuedwithout our credit support. The principal exception is letters of creditsupporting workers’ compensation obligations assumed by the purchaser, which asa matter of state law must remain in our name even though the underlyingliabilities and exposures have been assumed by the purchaser. Again, we areentitled to an indemnification from the purchaser for liabilities with respectto such letters of credit arising from workers’ compensation claims assumed bythe purchaser and for our costs of maintaining the purchaser’s share of anysuch letter of credit.

 

We enter into a wide range of indemnificationarrangements in the ordinary course of business. These include tortindemnifications, tax indemnifications, financing transactions,indemnifications against third-party claims arising out of arrangements toprovide services to us, and indemnifications in merger and acquisitionagreements. It is impossible to quantify the maximum potential liability underthese indemnifications. At December 31, 2008, we were not aware of anymaterial liabilities arising from these indemnifications.

 

***18.******                              ******Consolidating Guarantor and Nonguarantor Financial Information***

 

The following consolidating financial informationpresents the Statements of Income (Loss), Balance Sheets, and Cash Flowsrelated to our business. The senior subordinated notes are guaranteed on asenior subordinated basis jointly and severally by BC Holdings and each of itsexisting and future subsidiaries (other than: (i) the co-issuers, BoiseCascade and Boise Cascade Finance Corporation; (ii) our foreignsubsidiaries; and (iii) Birch Creek Investments L.L.C., which wasdissolved on March 31, 2008). Other than the consolidated financialstatements and footnotes for BC Holdings, financial statements and otherdisclosures concerning the guarantors have not been presented becausemanagement believes that such information is not material to investors.

 

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

**ConsolidatingStatements of Income (Loss)**

**For 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,  amortization, and depletion                                           |       | —                                          |         | 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        |       |
|                                                                                 |       |                                            |         |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (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** | **)** |

 

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

**ConsolidatingStatements of Income (Loss)**

**For 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** | ** ** |

 

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

**ConsolidatingStatements of Income (Loss)**

**For the Year Ended December 31, 2006**

 
| ** **                                                                           | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** ** | **Boise  Cascade,  L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                 | ** ** |
| **Sales**                                                                            |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                                |       | $                                               | —     |                        | $          | —                      |       | $                                 | 5,147,541   |             | $          | 56,411           |       | $ | — |   | $ | 5,203,952 |   |
| Intercompany                                                                         |       | —                                          |       | 4,278                       |       | 1,241                       |       | 81,267                            |        | (86,786          | )          | —           |       |
| Related parties                                                                      |       | —                                          |       | —                      |       | 575,913                     |       | —                            |        | —           |       | 575,913          |       |
|                                                                                 |       | —                                          |       | 4,278                       |       | 5,724,695                   |       | 137,678                           |        | (86,786          | )          | 5,779,865        |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| **Costs  and expenses**                                                              |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| Materials,  labor, and other operating expenses                                      |       | —                                          |       | 4,868                       |       | 5,003,512                   |       | 110,026                           |        | (55,365          | )          | 5,063,041        |       |
| Depreciation,  amortization, and depletion                                           |       | —                                          |       | 3,886                       |       | 147,171                     |       | 4,254                             |        | —           |       | 155,311          |       |
| Selling and  distribution expenses                                                   |       | —                                          |       | —                      |       | 281,366                     |       | 2,270                             |        | —           |       | 283,636          |       |
| General and  administrative expenses                                                 |       | —                                          |       | 35,071                      |       | 82,070                      |       | 2,644                             |        | (31,421          | )          | 88,364           |       |
| Other (income)  expense, net                                                         |       | —                                          |       | 1,467                       |       | 1,816                       |       | 2,806                             |        | —           |       | 6,089            |       |
|                                                                                 |       | —                                          |       | 45,292                      |       | 5,515,935                   |       | 122,000                           |        | (86,786          | )          | 5,596,441        |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| **Income  (loss) from operations**                                                   |       | —                                          |       | (41,014                     | )          | 208,760                     |       | 15,678                            |        | —           |       | 183,424          |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| Foreign exchange  gain (loss)                                                        |       | —                                          |       | (2,120                      | )          | (210                        | )          | 2,731                             |        | —           |       | 401              |       |
| Interest expense                                                                     |       | —                                          |       | (102,418                    | )          | —                      |       | (9,986                            | )           | —           |       | (112,404         | )          |
| Interest  expense—intercompany                                                  |       | —                                          |       | (545                        | )          | —                      |       | (20,291                           | )           | 20,836           |       | —           |       |
| Interest income                                                                      |       | —                                          |       | 3,511                       |       | 189                         |       | 81                                |        | —           |       | 3,781            |       |
| Interest  income—intercompany                                                   |       | —                                          |       | 187                         |       | 20,649                      |       | —                            |        | (20,836          | )          | —           |       |
|                                                                                 |       | —                                          |       | (101,385                    | )          | 20,628                      |       | (27,465                           | )           | —           |       | (108,222         | )          |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| **Income  (loss) before income taxes and equity in net income (loss) of affiliates** |       | —                                          |       | (142,399                    | )          | 229,388                     |       | (11,787                           | )           | —           |       | 75,202           |       |
| Income tax  provision                                                                |       | —                                          |       | (910                        | )          | (2,721                      | )          | —                            |        | —           |       | (3,631           | )          |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| **Income  (loss) before equity in net income (loss) of affiliates**                  |       | —                                          |       | (143,309                    | )          | 226,667                     |       | (11,787                           | )           | —           |       | 71,571           |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |        |             |       |             |       |
| **Equity  in net income (loss) of affiliates**                                       |       | 71,571                                          |       | 214,880                     |       | —                      |       | —                            |        | (286,451         | )          | —           |       |
| **Net  income (loss)**                                                               | ** ** | **$**                                           | **71,571** | ** **                  | **$**      | **71,571**                  | ** ** | **$**                             | **226,667** | ** **       | **$**      | **(11,787**      | **)**      | **$** | **(286,451** | **)** | **$** | **71,571** | ** ** |

 

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**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** | ** ** |

 

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**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          |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Due to  (from) affiliates**               |       | —                                          |        | 335,021                     |       | (278,773                    | )          | (56,248                           | )           | —           |       | —           |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **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                          |       | —                                          |        | 329,372                     |       | 843,200                     |       | 75,059                            |        | (1,247,631       | )          | —           |       |
| **Total  capital**                          |       | 350,358                                         |        | 329,372                     |       | 843,200                     |       | 75,059                            |        | (1,247,631       | )          | 350,358          |       |
| **Total  liabilities and capital**          | ** ** | **$**                                           | **356,315** | ** **                  | **$**      | **1,206,256**               | ** ** | **$**                             | **671,600** | ** **       | **$**      | **19,946**       | ** ** | **$** | **(1,253,678** | **)** | **$** | **1,000,439** | ** ** |

 

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

**ConsolidatingBalance Sheets at December 31, 2007**

 
| ** **                     | ** ** | **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           |                        | $          | 56,588                      |       | $                                 | 21            |             | $          | 1,013            |       | $ | — |   | $ | 57,623 |   |
| Receivables                    |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Trade, less  allowances        |       | —                                          |        | —                      |       | (1,939                      | )          | 117,148                           |          | —           |       | 115,209          |       |
| Intercompany                   |       | —                                          |        | —                      |       | 56                          |       | —                            |          | (56              | )          | —           |       |
| Related parties                |       | —                                          |        | 9                           |       | —                      |       | —                            |          | —           |       | 9                |       |
| Other                          |       | —                                          |        | 995                         |       | 3,721                       |       | 2,742                             |          | —           |       | 7,458            |       |
| Inventories                    |       | —                                          |        | 10                          |       | 325,804                     |       | 16,201                            |          | —           |       | 342,015          |       |
| Assets held for  sale          |       | —                                          |        | 13,118                      |       | 1,638,706                   |       | 201,215                           |          | —           |       | 1,853,039        |       |
| Prepaid expenses  and other    |       | —                                          |        | 3,072                       |       | 1,632                       |       | 722                               |          | —           |       | 5,426            |       |
|                           |       | 1                                               |        | 73,792                      |       | 1,968,001                   |       | 339,041                           |          | (56              | )          | 2,380,779        |       |
|                           |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Property**                   |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Property and  equipment, net   |       | —                                          |        | 3,280                       |       | 279,928                     |       | 29,909                            |          | —           |       | 313,117          |       |
| Fiber farms and  deposits      |       | —                                          |        | —                      |       | 7,976                       |       | 16,034                            |          | —           |       | 24,010           |       |
|                           |       | —                                          |        | 3,280                       |       | 287,904                     |       | 45,943                            |          | —           |       | 337,127          |       |
|                           |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Deferred  financing costs**  |       | —                                          |        | 22,927                      |       | —                      |       | 147                               |          | —           |       | 23,074           |       |
| **Goodwill**                   |       | —                                          |        | —                      |       | 12,170                      |       | —                            |          | —           |       | 12,170           |       |
| **Intangible  assets, net**    |       | —                                          |        | —                      |       | 9,668                       |       | —                            |          | —           |       | 9,668            |       |
| **Other  assets**              |       | —                                          |        | 5,014                       |       | 3,261                       |       | 3,099                             |          | —           |       | 11,374           |       |
| **Investments  in affiliates** |       | 991,904                                         |        | 927,670                     |       | —                      |       | —                            |          | (1,919,574       | )          | —           |       |
| **Total  assets**              | ** ** | **$**                                           | **991,905** | ** **                  | **$**      | **1,032,683**               | ** ** | **$**                             | **2,281,004** | ** **       | **$**      | **388,230**      | ** ** | **$** | **(1,919,630** | **)** | **$** | **2,774,192** | ** ** |

 

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**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at December 31, 2007 (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**                                  |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Short-term  borrowings                       |       | $                                               | —      |                        | $          | 10,500                      |       | $                                 | —        |             | $          | —           |       | $ | — |   | $ | 10,500 |   |
| Current portion  of long-term debt           |       | —                                          |        | 7,250                       |       | —                      |       | 40,000                            |          | —           |       | 47,250           |       |
| Accounts payable                             |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Trade                                        |       | —                                          |        | 30,120                      |       | 105,550                     |       | 5,789                             |          | —           |       | 141,459          |       |
| Related party                                |       | —                                          |        | 43                          |       | —                      |       | —                            |          | —           |       | 43               |       |
| Intercompany                                 |       | —                                          |        | —                      |       | —                      |       | 56                                |          | (56              | )          | —           |       |
| Accrued  liabilities                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Compensation and  benefits                   |       | —                                          |        | 9,811                       |       | 26,084                      |       | 1,014                             |          | —           |       | 36,909           |       |
| Interest payable                             |       | —                                          |        | 6,604                       |       | —                      |       | 536                               |          | —           |       | 7,140            |       |
| Other                                        |       | —                                          |        | 10,106                      |       | 17,057                      |       | 2,796                             |          | —           |       | 29,959           |       |
| Liabilities  related to assets held for sale |       | —                                          |        | 87,678                      |       | 243,958                     |       | —                            |          | —           |       | 331,636          |       |
|                                         |       | —                                          |        | 162,112                     |       | 392,649                     |       | 50,191                            |          | (56              | )          | 604,896          |       |
|                                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Debt**                                     |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Long-term debt,  less current portion        |       | —                                          |        | 1,113,313                   |       | —                      |       | —                            |          | —           |       | 1,113,313        |       |
|                                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Other**                                    | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **    | ** **       | ** ** | ** **       | ** ** |
| Compensation and  benefits                   |       | —                                          |        | 46,981                      |       | —                      |       | —                            |          | —           |       | 46,981           |       |
| Other long-term  liabilities                 |       | —                                          |        | 12,704                      |       | 4,393                       |       | —                            |          | —           |       | 17,097           |       |
|                                         |       | —                                          |        | 59,685                      |       | 4,393                       |       | —                            |          | —           |       | 64,078           |       |
|                                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Due to  (from) affiliates**                |       | —                                          |        | (1,294,331                  | )          | 1,040,988                   |       | 253,343                           |          | —           |       | —           |       |
|                                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Redeemable  equity units**                 |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| Series B  equity units                  |       | 16,992                                          |        | —                      |       | —                      |       | —                            |          | —           |       | 16,992           |       |
| Series C  equity units                  |       | 9,489                                           |        | —                      |       | —                      |       | —                            |          | —           |       | 9,489            |       |
| Redeemable  equity units                     |       | —                                          |        | 26,481                      |       | —                      |       | —                            |          | (26,481          | )          | —           |       |
|                                         |       | 26,481                                          |        | 26,481                      |       | —                      |       | —                            |          | (26,481          | )          | 26,481           |       |
|                                         |       |                                            |        |                        |       |                        |       |                              |          |             |       |             |       |
| **Commitment  and contingent liabilities**   | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **    | ** **       | ** ** | ** **       | ** ** |
| ** **                                   | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **    | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                  | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **    | ** **       | ** ** | ** **       | ** ** |
| Series A  equity units                  |       | 78,463                                          |        | —                      |       | —                      |       | —                            |          | —           |       | 78,463           |       |
| Series B  equity units                  |       | 876,693                                         |        | —                      |       | —                      |       | —                            |          | —           |       | 876,693          |       |
| Series C  equity units                  |       | 10,268                                          |        | —                      |       | —                      |       | —                            |          | —           |       | 10,268           |       |
| Subsidiary  equity                           |       | —                                          |        | 965,423                     |       | 842,974                     |       | 84,696                            |          | (1,893,093       | )          | —           |       |
| **Total  capital**                           |       | 965,424                                         |        | 965,423                     |       | 842,974                     |       | 84,696                            |          | (1,893,093       | )          | 965,424          |       |
| **Total  liabilities and capital**           | ** ** | **$**                                           | **991,905** | ** **                  | **$**      | **1,032,683**               | ** ** | **$**                             | **2,281,004** | ** **       | **$**      | **388,230**      | ** ** | **$** | **(1,919,630** | **)** | **$** | **2,774,192** | ** ** |

 

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**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, depletion,  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 and  other postretirement benefit expense                                              |       | —                                          |       | 17,078                      |       | —                      |       | —                            |       | —           |       | 17,078           |       |
| 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          | )          |
| Loss on sale of  note receivable from related party                                            |       | 8,357                                           |       | —                      |       | —                      |       | —                            |       | —           |       | 8,357            |       |
| Facility closure  costs                                                                        |       | —                                          |       | —                      |       | 10,796                      |       | —                            |       | —           |       | 10,796           |       |
| Other                                                                                          |       | —                                          |       | 1,645                       |       | 311                         |       | (159                              | )          | —           |       | 1,797            |       |
| Decrease  (increase) in working capital, net of 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 and  other postretirement benefit payments                                             |       | —                                          |       | (20,959                     | )          | —                      |       | —                            |       | —           |       | (20,959          | )          |
| Current and  deferred income taxes                                                             |       | —                                          |       | (1,504                      | )          | 291                         |       | (658                              | )          | —           |       | (1,871           | )          |
| Other                                                                                          |       | —                                          |       | 12,894                      |       | (14,417                     | )          | 2,746                             |       | —           |       | 1,223            |       |
| 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           |       |
| Distribution of  the proceeds from the sale of the related party note to Boise Cascade, L.L.C. |       | (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          |       |
| Investments in  affiliates                                                                     |       | 1                                               |       | (9,411                      | )          | —                      |       | —                            |       | 9,410            |       | —           |       |
| Other                                                                                          |       | —                                          |       | (968                        | )          | 952                         |       | (386                              | )          | —           |       | (402             | )          |
| Cash provided by  (used for) investment                                                   |       | 1                                               |       | 1,242,359                   |       | (22,339                     | )          | 42,013                            |       | 9,410            |       | 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         | )          |
| Tax  distributions to Boise Cascade Holdings, L.L.C.                                      |       | 128,058                                         |       | (128,058                    | )          | —                      |       | —                            |       | —           |       | —           |       |
| Repurchase of  management equity units                                                         |       | (28,634                                         | )          | —                      |       | —                      |       | —                            |       | —           |       | (28,634          | )          |
| Distribution to  Boise Cascade Holdings, L.L.C., for the repurchase of management equity units |       | 28,634                                          |       | (28,634                     | )          | —                      |       | —                            |       | —           |       | —           |       |
| Cash paid for  termination of interest rate swaps                                         |       | —                                          |       | (11,918                     | )          | —                      |       | —                            |       | —           |       | (11,918          | )          |
| Other                                                                                          |       | —                                          |       | (4,156                      | )          | —                      |       | —                            |       | —           |       | (4,156           | )          |
| Cash provided by  (used for) financing                                                    |       | —                                          |       | (988,829                    | )          | —                      |       | (40,000                           | )          | —           |       | (1,028,829       | )          |
| Due to (from)  affiliates                                                                      |       | —                                          |       | 21,611                      |       | 305,816                     |       | (318,017                          | )          | (9,410           | )          | —           |       |
| **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** | ** ** |

 

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**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 of deferred 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 and  other postretirement benefit expense                                |       | —                                          |       | 25,366                      |       | —                      |       | —                            |       | —           |       | 25,366           |       |
| 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                                                                            |       | —                                          |       | (1,490                      | )          | (1,144                      | )          | (1,185                            | )          | —           |       | (3,819           | )          |
| 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 and  other postretirement benefit payments                               |       | —                                          |       | (1,117                      | )          | —                      |       | —                            |       | —           |       | (1,117           | )          |
| Current and  deferred income taxes                                               |       | —                                          |       | 1,033                       |       | 367                         |       | (323                              | )          | —           |       | 1,077            |       |
| Other                                                                            |       | —                                          |       | 2,127                       |       | (1,008                      | )          | (6                                | )          | —           |       | 1,113            |       |
| 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          |       |
| Investments in  affiliates                                                       |       | 3,747                                           |       | 242,203                     |       | —                      |       | —                            |       | (245,950         | )          | —           |       |
| Additional  Consideration Agreement payment                                      |       | —                                          |       | —                      |       | (32,542                     | )          | —                            |       | —           |       | (32,542          | )          |
| Other                                                                            |       | —                                          |       | 1,576                       |       | 3,652                       |       | 837                               |       | —           |       | 6,065            |       |
| Cash provided by  (used for) investment                                          |       | 3,747                                           |       | 239,206                     |       | (180,069                    | )          | (3,586                            | )          | (245,950         | )          | (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           | )          |
| Tax distribution  to Boise Cascade Holdings, L.L.C.                         |       | —                                          |       | (2,753                      | )          | —                      |       | —                            |       | 2,753            |       | —           |       |
| Repurchase of  management equity units                                           |       | (993                                            | )          | (993                        | )          | —                      |       | —                            |       | 993              |       | (993             | )          |
| Proceeds from  changes to interest rate swaps                                    |       | —                                          |       | 2,848                       |       | —                      |       | —                            |       | —           |       | 2,848            |       |
| Other                                                                            |       | —                                          |       | (4,050                      | )          | —                      |       | —                            |       | —           |       | (4,050           | )          |
| Cash provided by  (used for) financing                                           |       | (3,746                                          | )          | (65,985                     | )          | —                      |       | 15,000                            |       | 3,746            |       | (50,985          | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Due to (from)  affiliates                                                        |       | —                                          |       | (72,705                     | )          | (93,439                     | )          | (76,060                           | )          | 242,204          |       | —           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **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** | ** ** |

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Year Ended December 31, 2006**

 
| ** **                                                                       | ** ** | **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)                                                               |       | $                                               | 71,571     |                        | $          | 71,571                      |       | $                                 | 226,667    |             | $          | (11,787          | )          | $ | (286,451 | ) | $ | 71,571 |   |
| Items in net  income (loss) not using (providing) cash                           |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Equity in net  income of affiliates                                              |       | (71,571                                         | )          | (214,880                    | )          | —                      |       | —                            |       | 286,451          |       | —           |       |
| Depreciation,  depletion, and amortization of deferred financing costs and other |       | —                                          |       | 5,713                       |       | 147,171                     |       | 4,428                             |       | —           |       | 157,312          |       |
| Related-party  interest expense                                                  |       | —                                          |       | 14,615                      |       | —                      |       | 20,291                            |       | (20,836          | )          | 14,070           |       |
| Related-party  interest income                                                   |       | —                                          |       | (187                        | )          | (20,649                     | )          | —                            |       | 20,836           |       | —           |       |
| Deferred income  taxes                                                           |       | —                                          |       | 984                         |       | (16                         | )          | —                            |       | —           |       | 968              |       |
| Pension and  other postretirement benefit expense                           |       | —                                          |       | 27,447                      |       | —                      |       | —                            |       | —           |       | 27,447           |       |
| Gain on changes  in retiree healthcare programs                                  |       | —                                          |       | (3,741                      | )          | —                      |       | —                            |       | —           |       | (3,741           | )          |
| Management  equity units expense                                            |       | —                                          |       | 3,514                       |       | —                      |       | —                            |       | —           |       | 3,514            |       |
| Loss on sales of  assets, net                                                    |       | —                                          |       | 1,602                       |       | 1,709                       |       | —                            |       | —           |       | 3,311            |       |
| Facility closure  costs                                                          |       | —                                          |       | —                      |       | 3,925                       |       | —                            |       | —           |       | 3,925            |       |
| Other                                                                            |       | —                                          |       | 2,120                       |       | (324                        | )          | (2,731                            | )          | —           |       | (935             | )          |
| Decrease  (increase) in working capital, net of acquisitions                     |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Receivables                                                                      |       | —                                          |       | 2,511                       |       | 4,568                       |       | 16,479                            |       | —           |       | 23,558           |       |
| Inventories                                                                      |       | —                                          |       | 107                         |       | (12,927                     | )          | 8,007                             |       | —           |       | (4,813           | )          |
| Prepaid expenses  and other                                                      |       | —                                          |       | 844                         |       | (2,380                      | )          | (114                              | )          | —           |       | (1,650           | )          |
| Accounts payable  and accrued liabilities                                   |       | —                                          |       | (4,242                      | )          | (24,582                     | )          | 3,721                             |       | —           |       | (25,103          | )          |
| Pension and  other postretirement benefit payments                               |       | —                                          |       | (20,736                     | )          | —                      |       | —                            |       | —           |       | (20,736          | )          |
| Current and  deferred income taxes                                               |       | —                                          |       | 6,552                       |       | (2,167                      | )          | —                            |       | —           |       | 4,385            |       |
| Other                                                                            |       | —                                          |       | (2,337                      | )          | 2,955                       |       | (23                               | )          | —           |       | 595              |       |
| Cash provided by  (used for) operations                                          |       | —                                          |       | (108,543                    | )          | 323,950                     |       | 38,271                            |       | —           |       | 253,678          |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) investment**                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Proceeds from  sale of assets                                                    |       | —                                          |       | 27,900                      |       | 15,587                      |       | —                            |       | —           |       | 43,487           |       |
| Expenditures for  property and equipment                                    |       | —                                          |       | (3,164                      | )          | (146,562                    | )          | (3,798                            | )          | —           |       | (153,524         | )          |
| Acquisitions of  businesses and facilities                                       |       | —                                          |       | —                      |       | (42,609                     | )          | —                            |       | —           |       | (42,609          | )          |
| Investments in  affiliates                                                       |       | (261,008                                        | )          | 214,880                     |       | —                      |       | —                            |       | 46,128           |       | —           |       |
| Other                                                                            |       | —                                          |       | (1,989                      | )          | 1,940                       |       | 1,957                             |       | —           |       | 1,908            |       |
| Cash provided by  (used for) investment                                     |       | (261,008                                        | )          | 237,627                     |       | (171,644                    | )          | (1,841                            | )          | 46,128           |       | (150,738         | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) financing**                                       | ** ** | ** **                                      | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of  long-term debt                                                     |       | —                                          |       | 68,300                      |       | —                      |       | 305,000                           |       | —           |       | 373,300          |       |
| Payments of  long-term debt                                                      |       | —                                          |       | (165,200                    | )          | —                      |       | (360,000                          | )          | —           |       | (525,200         | )          |
| Short-term  borrowings                                                           |       | —                                          |       | 3,200                       |       | —                      |       | —                            |       | —           |       | 3,200            |       |
| Tax  distributions to members                                                    |       | (19,269                                         | )          | —                      |       | —                      |       | —                            |       | —           |       | (19,269          | )          |
| Tax distribution to Boise Cascade Holdings, L.L.C.                     |       | —                                          |       | (19,269                     | )          | —                      |       | —                            |       | 19,269           |       | —           |       |
| Repurchase of  management equity units                                           |       | (89                                             | )          | (89                         | )          | —                      |       | —                            |       | 89               |       | (89              | )          |
| Proceeds from  changes to interest rate swaps                                    |       | —                                          |       | 25,620                      |       | —                      |       | —                            |       | —           |       | 25,620           |       |
| Note payable to  related party, net                                              |       | —                                          |       | (283,847                    | )          | —                      |       | —                            |       | —           |       | (283,847         | )          |
| Capital  contribution from members                                               |       | 280,366                                         |       | 280,366                     |       | —                      |       | —                            |       | (280,366         | )          | 280,366          |       |
| Other                                                                            |       | —                                          |       | (15                         | )          | —                      |       | (8                                | )          | —           |       | (23              | )          |
| Cash provided by  (used for) financing                                      |       | 261,008                                         |       | (90,934                     | )          | —                      |       | (55,008                           | )          | (261,008         | )          | (145,942         | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Due to (from)  affiliates                                                        |       | —                                          |       | (80,657                     | )          | (152,308                    | )          | 18,085                            |       | 214,880          |       | —           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Decrease  in cash and cash equivalents**                                  |       | —                                          |       | (42,507                     | )          | (2                          | )          | (493                              | )          | —           |       | (43,002          | )          |
| **Balance  at beginning of the year**                                            |       | —                                          |       | 85,469                      |       | 34                          |       | 2,668                             |       | —           |       | 88,171           |       |
| **Balance  at end of the year**                                                  | ** ** | **$**                                           | **—** | ** **                  | **$**      | **42,962**                  | ** ** | **$**                             | **32**     | ** **       | **$**      | **2,175**        | ** ** | **$** | **—** | ** ** | **$** | **45,169** | ** ** |

 

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***19.******                         LegalProceedings and Contingencies***

 

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.

 

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

 
| ** **              | ** ** | **2008**                    | ** ** |
|-------------------------|------------|-----------------------------|------------|
| ** **              | ** ** | **First  Quarter (a)** | ** ** | **Second  Quarter (b)** | ** ** | **Third  Quarter (c)** | ** ** | **Fourth  Quarter (d)** | ** ** |
|                    |       | **(millions)**              |       |
| ** **              | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales               |       | $                           | 976.6      |   | $ | 757.2 |   | $ | 727.1 |   | $ | 516.6 |   |
| Income from  operations |       | 9.7                         |       | (4.3 | ) | 1.7 |   | (39.9 | ) |
| Net loss                |       | (24.4                       | )          | (15.4 | ) | (207.6 | ) | (40.5 | ) |
|                         |            |                             |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **              | ** ** | **2007**           | ** ** |
|-------------------------|------------|--------------------|------------|
| ** **              | ** ** | **First  Quarter** | ** ** | **Second  Quarter (e)** | ** ** | **Third  Quarter (f)** | ** ** | **Fourth  Quarter (f) (g)** | ** ** |
|                    |       | **(millions)**     |       |
| ** **              | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales               |       | $                  | 1,321.0    |   | $ | 1,448.4 |   | $ | 1,402.1 |   | $ | 1,242.0 |   |
| Income from  operations |       | 33.3               |       | 48.6 |   | 72.0 |   | 66.3 |   |
| Net income              |       | 10.5               |       | 28.9 |   | 49.2 |   | 39.1 |   |
|                         |            |                    |            |  |  |  |  |  |  |  |  |  |  |

 

----

| (a)    |   | Included the results of the Paper and  Packaging & Newsprint segments through February 21, 2008.                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $8.6 million of expense for our  equity in net losses related to our equity investment in Boise Inc.                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included a $7.5 million net gain on assets sales.                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $6.3 million of expense  related to changes in the fair value of our interest rate swaps, which were  terminated in February 2008.                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $4.8 million of expense  related to the fair value of the contingent value rights (CVRs) that we and  Terrapin Partners Venture Partnership granted to certain Boise Inc.  investors.                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (b)    |   | Included a  $12.4 million net  loss on assets sales.                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $8.8 million of expense  for our equity in net losses related to our equity investment in  Boise Inc.                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (c)    |   | Included a $208.1 million  write-down of our investment in Boise Inc., as we concluded that our  investment in Boise Inc. met the definition of other than temporarily  impaired as defined in APB Opinion No. 18.                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included a $2.5 million net gain on assets sales,  partially offset by facility closure costs.                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $2.1 million of income for  our equity in net income related to our equity investment in Boise Inc.                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (d)    |   | Included $8.6 million net expense for facility  closure costs and assets sales.                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included $3.9 million of income for  our equity in net income related to our equity investment in Boise Inc.                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (e)    |   | Included a $4.4 million gain for changes in our retiree  healthcare programs.                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included  $5.4 million of income for the change in fair value of interest rate  swaps related to the anticipated repayment of our senior unsecured  floating-rate notes in October 2007.                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (f)    |   | In third  and fourth quarters 2007, we had approximately $10.4 million and  $31.4 million of lower depreciation and amortization expense as the  result of discontinuing depreciation and amortization on the assets recorded  as held for sale.                                                       |
|   |   |                                                                                                                                                                                                                                                                                                             |
| (g)    |   | Included  $4.5 million of expense related to the write-off of deferred financing  costs in connection with the repayment of debt.                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                             |
|   |   | Included  approximately $3.0 million of income related to the change in the fair  value of interest rate swaps in connection with the repayment of debt, offset  by $4.6 million of expense related to changes in the fair value of our  interest rate swaps that we accounted for as economic hedges. |

 

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**Report ofIndependent Registered Public Accounting Firm**

 

To the Board of Directors of Boise Cascade Holdings,L.L.C.:

 

We have audited the accompanying consolidated balance sheetsof Boise Cascade Holdings, L.L.C. and subsidiaries as of December 31, 2008and 2007, and the related consolidated statements of income (loss), capital,and cash flows for each of the years in the three-year period ended December 31,2008*.* These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of BoiseCascade Holdings, L.L.C. and subsidiaries as of December 31, 2008 and2007, and the results of their operations and their cash flows for each of theyears in the three-year period ended December 31, 2008, in conformity withU.S. generally accepted accounting principles.

 

 

/s/ KPMG LLP

 

 

Boise, IdahoMarch 9, 2009

 

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| ***ITEM  9.*** | *** *** | ***CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE*** |
|----------------|--------------|---------------------------------------------------------------------------------------------|

 

None.

 
| ***ITEM  9A(T).*** | *** *** | ***CONTROLS  AND PROCEDURES*** |
|--------------------|--------------|--------------------------------|

 

Attached asexhibits to this Form 10-K are certifications of our chief executiveofficer and chief financial officer. Rule 13a-14 of the SecuritiesExchange Act of 1934, as amended, requires that we include these certificationswith this report. This Controls and Procedures section includes informationconcerning the disclosure controls and procedures referred to in thecertifications. You should read this section in conjunction with thecertifications.

 

*Evaluation ofDisclosure Controls and Procedures*

 

We maintain“disclosure controls and procedures,” as Rule 13a-15(e) under theSecurities 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 theeffectiveness of our disclosure controls and procedures at least quarterly. Anumber of key components in our internal control system assist us in theseevaluations. Since the company’s inception, we have had a disclosure committee.The committee meets regularly and includes input from our senior management,general counsel, internal audit staff, and independent accountants. Thiscommittee is charged with considering and evaluating the materiality ofinformation and reviewing the company’s disclosure obligations on a timelybasis. Our internal audit department also evaluates components of our internalcontrols on an ongoing basis. To assist in its evaluations, the internal auditstaff identifies, documents, and tests our controls and procedures. Our intentis to maintain disclosure controls and procedures as dynamic processes thatchange as our business and working environments change.

 

In conjunctionwith the February 22, 2008, sale of our Paper and Packaging &Newsprint assets, we entered into an Outsourcing Services Agreement underwhich Boise Inc. provides a number of corporate staff services to us at cost.These services include information technology, accounting, and human resourceservices. 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 fiscal year covered bythis Annual Report on Form 10-K. Based on that evaluation, the CEO and CFOhave concluded that, as of such date, our disclosure controls and procedureswere effective in meeting the objectives for which they were designed and wereoperating at a reasonable assurance level.

 

*Management’sReport on Internal Control Over Financial 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-15(f) and15d-15(f) under the Securities Exchange Act of 1934, as amended. Ourinternal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States of America.Internal control over financial reporting includes those policies andprocedures that:

 

·                  Pertainto the maintenance of records that in reasonable detail accurately and fairlyreflect our transactions and dispositions of assets;

 

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·                  Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America;

 

·                  Providereasonable assurance that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and

 

·                  Providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of our assets that could have a materialeffect 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, 2008, management conducted an assessmentof the effectiveness of BC Holdings’ internal control over financial reporting,including theeffectiveness of the services provided to us under the Outsourcing ServicesAgreement with Boise Inc., based on criteria for effective internalcontrol over financial reporting described in “Internal Control—IntegratedFramework” issued by the Committee of Sponsoring Organizations of the TreadwayCommission. Management’s assessment included an evaluation of the design ofinternal control over financial reporting and testing of the operationaleffectiveness of internal control over financial reporting. Management reviewedthe results of its assessment with our CEO and CFO. Based on this assessment,our CEO and CFO concluded that, as of December 31, 2008, our internalcontrol over financial 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 Over FinancialReporting*

 

There have been no changes in our internal controlover financial reporting that occurred during our fourth quarter ended December 31,2008, that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 
| ***ITEM  9B.*** | *** *** | ***OTHER  INFORMATION*** |
|-----------------|--------------|--------------------------|

 

None.

 

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**PART III**

 
| ***ITEM 10.*** | *** *** | ***DIRECTORS,  EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE*** |
|---------------------|--------------|----------------------------------------------------------------|

 

The following is a list of our directors and thoseindividuals deemed “executive officers” under Section 16 of the SecuritiesExchange Act of 1934, along with brief descriptions of their business positionsand experience during the past five years and their educational background.

 
| **Name**                | ** ** | **Age** | ** ** | **Position**                                               |
|-------------------------|------------|---------|------------|------------------------------------------------------------|
|                    |       |    |       |                                                       |
| Matthew R. Broad        |       | 49      |       | Nonexecutive Director                                      |
| John W. Madigan         |       | 71      |       | Nonexecutive Director                                      |
| Christopher J. McGowan  |       | 37      |       | Nonexecutive Director                                      |
| Samuel M. Mencoff       |       | 52      |       | Nonexecutive Director                                      |
| Matthew W. Norton       |       | 30      |       | Nonexecutive Director                                      |
| Thomas S. Souleles      |       | 40      |       | Nonexecutive Director                                      |
| Duane C. McDougall      |       | 57      |       | Chief Executive Officer and Chairman, Director             |
| Thomas E. Carlile       |       | 57      |       | Executive Vice President and Chief Financial Officer       |
| Stanley R. Bell         |       | 62      |       | President, Building Materials Distribution                 |
| Thomas A. Lovlien       |       | 53      |       | President, Wood Products Manufacturing                     |
| David G. Gadda          |       | 61      |       | Vice President and General Counsel                         |
| Bernadette M. Madarieta |       | 33      |       | Vice President and Controller                              |
| Wayne M. Rancourt       |       | 46      |       | Vice President and Treasurer                               |
| John T. Sahlberg        |       | 55      |       | Vice President, Human Resources &  Communications |

 

*Matthew R. Broad, Director*

 

Mr. Broad has served as one of our directorssince November 2006. Mr. Broad became the executive vice presidentand general counsel of OfficeMax Incorporated (formerly known as Boise CascadeCorporation) in 2004. OfficeMax provides office supplies and paper, print anddocument services, technology products and solutions, and furniture to large,medium, and small businesses and consumers. From 1989 to 2004, Mr. Broadwas associate general counsel of Boise Cascade Corporation and also served ascorporate secretary of Boise Cascade Office Products Corporation, a whollyowned subsidiary of Boise Cascade Corporation. Mr. Broad received a B.A.in business economics from the University of California, Santa Barbara, and aJ.D. from the University of California, Hastings College of Law. Mr. Broaddoes not hold any public company directorships. Mr. Broad serves on ourboard as a designee of OfficeMax.

 

*John W. Madigan, Director*

 

Mr. Madigan has served as one of our directorssince January 2005. Mr. Madigan serves as a special advisor toMadison Dearborn Partners, LLC. In December 2003, Mr. Madigan retiredfrom Tribune Company, where he had served as chairman and chief executiveofficer since 1996. Tribune Company operates businesses in publishing,interactive media, and broadcasting. Mr. Madigan holds bachelor’s andmaster’s degrees in business administration from the University of Michigan. Mr. Madiganis also a member of the board of directors of Gilead Sciences, Inc.

 

*Christopher J. McGowan, Director*

 

Mr. McGowan has served as one of our directorssince October 2004. Mr. McGowan has been employed by our equitysponsor, Madison Dearborn Partners, LLC, since 1999 and currently serves as amanaging director concentrating on investments in the basic industries sector.Prior to joining Madison Dearborn Partners, Mr. McGowan was with AEAInvestors, Inc., and Morgan Stanley & Co. Incorporated. Mr. McGowanreceived a B.A. from Columbia University and an M.B.A. from the HarvardGraduate School of Business Administration. Mr. McGowan currently serveson the boards of directors of Forest Products Holdings, L.L.C., and SmurfitKappa Group Ltd. (formerly known as Jefferson Smurfit Group). Mr. McGowanserves on our board as a designee of our majority owner, Forest ProductsHoldings, L.L.C., (FPH).

 

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*Samuel M. Mencoff, Director*

 

Mr. Mencoff has served as one of our directorssince October 2004. Mr. Mencoff has been employed by our equitysponsor, Madison Dearborn Partners, LLC, since 1992 and currently serves asco-CEO. Prior to cofounding Madison Dearborn Partners, Mr. Mencoff waswith First Chicago Venture Capital for 11 years. Mr. Mencoff has morethan 24 years of experience in private equity investing with a particular focuson investments in the basic industries sector. Mr. Mencoff received anA.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 serves on our board as a designee of our majorityowner, FPH.

 

*Matthew W. Norton, Director*

 

Mr. Norton has served as one of our directorssince December 2008. Mr. Norton has been employed by our equitysponsor, Madison Dearborn Partners, LLC, since 2008 and currently serves as avice president. From August 2006 to May 2008, Mr. Nortonattended The Wharton School of the University of Pennsylvania. From 2004 to August 2006,he was employed by Madison Dearborn Partners as an associate. From 2001 to2004, he was employed by Merrill Lynch. Mr. Norton received a B.S. and anM.B.A. from The Wharton School of the University of Pennsylvania. Mr. Nortonis also a member of the boards of directors of Boise Inc. and Forest ProductsHoldings, L.L.C. Mr. Norton serves on our board as a designee of ourmajority owner, FPH.

 

*Thomas S. Souleles, Director*

 

Mr. Souleles has served as one of our directorssince October 2004. Mr. Souleles has been employed by our equitysponsor, Madison Dearborn Partners, LLC, since 1995 and currently serves as amanaging director concentrating on investments in the basic industries sector.Prior to joining Madison Dearborn Partners, Mr. Souleles was withWasserstein Perella & Co., Inc. Mr. Souleles received anA.B. from Princeton University, a J.D. from Harvard Law School, and an 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, US PowerGenerating Company, and The Children’s Memorial Medical Center and of the boardof trustees of the National Multiple Sclerosis Society, Greater IllinoisChapter. Mr. Souleles serves on our board as a designee of our majorityowner, FPH.

 

*Duane C. McDougall, Chief Executive Officer andChairman, Director*

 

Mr. McDougall became our chief executive officerand chairman and a director in December 2008. Mr. McDougallpreviously served as one of our nonexecutive directors from July 2005through November 2008. Mr. McDougall was president and chiefexecutive officer of Willamette Industries, an international paper and forestproducts company, until its sale in 2002. During his 23-year career withWillamette, Mr. McDougall held numerous operating and finance positionsbefore becoming president and chief executive officer of Willamette. Mr. McDougallreceived a B.S. in accounting from Oregon State University. Mr. McDougallis also a member of the boards of directors of Cascade Corporation, ForestProducts Holdings, L.L.C., The Greenbrier Companies, and West Coast Bancorp. Mr. McDougallserves on our board of directors pursuant to an agreement between FPH,OfficeMax, and us.

 

*Thomas E. Carlile, Executive Vice President andChief Financial Officer*

 

Mr. Carlile became our executive vice presidentand chief financial officer in February 2008, following the divestiture ofour paper and packaging businesses. From October 2004 to January 2008,he served as senior vice president and chief financial officer followingMadison Dearborn Partners’ acquisition of the forest products 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.

 

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*Stanley R. Bell, President, Building MaterialsDistribution*

 

Mr. Bell became our president, Building MaterialsDistribution, in February 2008, following the divestiture of our paper andpackaging businesses. From October 2004 to January 2008, he served assenior vice president, Building Materials Distribution, following MadisonDearborn Partners’ acquisition of the forest products assets from OfficeMax.From 2000 to October 2004, Mr. Bell served as senior vice presidentand general manager, Boise Building Solutions Distribution, of Boise CascadeCorporation. Mr. Bell received a B.A. in economics from the University ofUtah and an M.B.A. from the University of Utah.

 

*Thomas A. Lovlien, President, Wood ProductsManufacturing*

 

Mr. Lovlien became our president, Wood ProductsManufacturing, in February 2008, following the divestiture of our paperand packaging businesses. From October 2004 to January 2008, heserved as senior vice president, Wood Products, following Madison DearbornPartners’ acquisition of the forest products assets from OfficeMax. From 2000to October 2004, Mr. Lovlien served as vice president of operations,Boise Building Solutions Manufacturing, of Boise Cascade Corporation. Mr. Lovlienreceived a bachelor’s degree in accounting and a master’s degree in woodtechnology from Oregon State University.

 

*David G. Gadda, Vice President and General Counsel*

 

Mr. Gadda became our vice president, generalcounsel, and corporate secretary in February 2008, following thedivestiture of our paper and packaging businesses. From December 2005 to January 2008,Mr. Gadda served as our vice president, Legal. From October 2004 to November 2005,Mr. Gadda served as associate general counsel in our legal department.From 1997 to October 2004, he served as associate general counsel of BoiseCascade Corporation. Mr. Gadda received a B.S. in economics from theUniversity of Oregon and a J.D. from the University of California, BerkeleySchool of Law, and completed the Stanford Executive Program. Mr. Gadda isa member of the California, Idaho, and Oregon bar associations.

 

*Bernadette M. Madarieta, Vice President andController*

 

Mrs. Madarieta became our vice president andcontroller in February 2008, following the divestiture of our paper andpackaging businesses. From October 2004 to January 2008, Mrs. Madarietaserved as director of financial reporting. From 2002 to October 2004, Mrs. Madarietaserved as supervisor of external financial reporting for Boise CascadeCorporation. Prior to joining Boise Cascade Corporation, Mrs. Madarietawas an assurance and business advisory manager at KPMG and Arthur Andersenwhere she was responsible for planning and supervising audit engagements forcorporations and privately held companies. Mrs. Madarieta received a B.B.A.in accounting from Boise State University and is a certified public accountant.

 

*Wayne M. Rancourt, Vice President and Treasurer*

 

Mr. Rancourt became our vice president,treasurer, and investor relations in February 2008, following thedivestiture of our paper and packaging businesses. From October 2004 to January 2008,he served as vice president and treasurer. From 2000 to June 2004, Mr. Rancourtwas the director of retirement funds and risk management for Boise CascadeCorporation. From June 2004 to October 2004, Mr. Rancourt wasvice president and treasurer for Boise Cascade Corporation. Mr. Rancourtreceived a B.S. degree in accounting from Central Washington University.

 

*John T. Sahlberg, Vice President, Human Resources &Communications*

 

Mr. Sahlberg became ourvice 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 J.D. from Georgetown University and abachelor’s degree in economics from Harvard College. He is a member of theIdaho bar association.

 

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Messrs. Norton, McGowan, Mencoff, and Soulelesserve on our board of directors as designees of FPH pursuant to theSecurityholders Agreement dated October 29, 2004, as amended on November 10,2006, among FPH, OfficeMax, and us (the Securityholders Agreement). Mr. Broadserves on our board of directors as a designee of OfficeMax pursuant to theSecurityholders Agreement. Mr. McDougall serves on our board of directorsas our chief executive officer pursuant to the Securityholders Agreement andthe terms of his employment agreement (see Item 11*.**Executive Compensation — Compensation Discussionand Analysis — Agreements With, and Potential Payments to, Named ExecutiveOfficers*of this Form 10-K for a description of Mr. McDougall’semployment agreement). We have further described the Securityholders Agreementin Item* *13*.**Certain Relationships and Related Transactions, andDirector Independence* of this Form 10-K. There are no otherarrangements or understandings between any member of the board of directors orexecutive officer and any other person pursuant to which that person waselected or appointed to his or her position.

 

Each of our directors will serve until such person’ssuccessor is elected and qualified or until such person’s death, resignation,or removal. Our board of directors has the power to appoint our officers. Eachofficer will hold office for the term determined by the board of directors anduntil such person’s successor is chosen and qualified or until such person’sdeath, resignation, or removal.

 

There are no arrangements or understandings betweenany of our executive officers and any other person pursuant to which he or shewas selected to be an officer of the company, except for Mr. McDougall’sEmployment Agreement described above.

 

There are no family relationships among any of ourdirectors or executive officers.

 

***Committees of the Board of Directors***

 

Our board of directors currently has an auditcommittee and a compensation committee. The composition, duties, andresponsibilities of these committees are set forth in written charters that ourboard has adopted for each committee.

 

*Audit Committee*

 

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

 

The audit committee is responsible for:

 

·                  Selecting theindependent auditor;

 

·                  Approving theoverall scope of the audit;

 

·                  Discussing theannual audited financial statements and quarterly financial statements,including matters required to be reviewed under applicable legal and regulatoryrequirements, with management and the independent auditor;

 

·                  Discussingearnings press releases and other financial information provided to the publicwith management and the independent auditor, as appropriate;

 

·                  Discussing withmanagement and the independent auditor, as appropriate, any audit problems ordifficulties and management’s response;

 

·                  Discussing thecompany’s risk assessment and risk management policies;

 

·                  Reviewing thecompany’s financial reporting and accounting standards and principles, significantchanges in such standards or principles, and the key accounting decisionsaffecting the company’s financial statements;

 

·                  Reviewing andapproving the internal corporate audit staff functions;

 

·                  Reviewing thecompany’s internal system of audit, financial, and disclosure controls and theresults of internal audits;

 

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·                  Annuallyreviewing the independent auditor’s written report describing the auditingfirm’s internal quality-control procedures and any material issues raised bythe auditing firm’s internal quality-control review or peer reviews of theauditing firm;

 

·                  Reviewing andinvestigating matters pertaining to the integrity of management;

 

·                  Establishingprocedures concerning the treatment of complaints and concerns regardingaccounting, internal accounting controls, or audit matters;

 

·                  Meetingseparately with management, the corporate audit staff, and the independentauditor;

 

·                  Handling suchother matters that are specifically delegated to the audit committee by theboard of directors from time to time; and

 

·                  Reportingregularly to the full board of directors.

 

During 2008, our audit committee held five meetings.

 

During2008, no officer or employee served as a member of the audit committee. Mr. McDougall’smembership in the audit committee terminated when he became chief executiveofficer of the company.

 

*Compensation Committee*

 

Messrs. Mencoff and Souleles, both members of ourcompensation committee, have relationships with our equity sponsor, MadisonDearborn Partners, LLC (MDP). From time to time, we may pay fees to MDP forproviding management, consulting, or other advisory services. As such, Messrs. Mencoffand Souleles may be indirect beneficiaries of the relationship between MDP andus. For more information about these relationships, please refer to**Item 13*. Certain Relationshipsand Related Transactions, and Director Independence* of this Form 10-K.

 

The compensation committee is responsible for:

 

·                  Reviewing andapproving corporate goals and objectives relevant to the compensation of ourchief executive officer and annually evaluating the chief executive officer’sperformance in light of these goals;

 

·                  Reviewing andapproving the compensation and incentive opportunities of our executiveofficers;

 

·                  Reviewing andapproving employment contracts, severance arrangements, incentive arrangements,change-in-control arrangements, and other similar arrangements between us andour executive officers;

 

·                  Receivingperiodic reports on the company’s compensation programs as they affect allemployees;

 

·                  Reviewingexecutive succession plans for business and staff organizations; and

 

·                  Handling suchother matters that are specifically delegated to the compensation committee bythe board of directors from time to time.

 

During 2008, our compensation committee held threemeetings.

 

*Compensation Committee Interlocks and InsiderParticipation*

 

During2008, no officer or employee served as a member of the compensation committee. Mr. McDougall’smembership in the compensation committee terminated when he became chiefexecutive officer of the company. Messrs. Mencoff and Souleles each servedas initial officers of the company when it was formed in 2004. None of ourexecutive officers serve as a member of the board of directors or compensationcommittee of any entity that has one or more executive officers serving on ourboard of directors or compensation committee, except that Mr. McDougallserves 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

 

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Souleles may be indirect beneficiaries of therelationship between MDP and us. For more information about theserelationships, please refer to Item 13. *CertainRelationships and Related Transactions, and Director Independence* ofthis Form 10-K.

 

*Other Committees*

 

Our board of directors may establish other committeesas it deems necessary or appropriate from time to time.

 

***Code of 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. Copies of our Code of Ethics areavailable, free of charge, on our website at www.bc.com by clicking on *About Boise**Cascade* andthen *Code of Ethics*. You may also obtaincopies of our Code of Ethics by contacting our Investor Relations Department,1111 West Jefferson Street, Suite 300, Boise, Idaho 83702-5389 or bycalling 208/384-6545. 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 above address.

 
| ***ITEM  11.*** | *** *** | ***EXECUTIVE  COMPENSATION*** |
|-----------------|--------------|-------------------------------|

 

***Compensation Discussion and Analysis***

 

*Executive Compensation Program Objectives*

 

Our compensation committee’s overall compensationobjectives applicable to our executive officers are to provide a compensationpackage intended to:

 

·                  Aligncompensation with the company’s performance on both a short-term and long-termbasis;

 

·                  Link eachexecutive officer’s compensation to his or her performance and the areas forwhich he or she is responsible;

 

·                  Attract,motivate, reward, and retain the broad-based management talent critical toachieving the company’s business goals; and

 

·                  Align theinterests of our executive officers with those of our principal equity ownersthrough their ownership of the company’s management equity units.

 

Although we anticipate executive compensation andbenefits may be altered to reflect the company’s business strategies, theobjectives of our compensation and benefits should remain substantially thesame over time. The compensation committee regularly reviewscompensation paid to executives in other comparable companies and uses surveysproduced by Hewitt Associates and the Forest Products Industry CompensationAssociation (FPICA) as its principal resources in this regard.

 

For the 2008 compensation analysis, a general industry peer group ofapproximately 350 manufacturing and services companies, excluding utilities andfinancial companies, was used from the Hewitt Associates’ survey group.Hewitt’s TCM (Total Compensation Measurement) is a consistent and proprietarymethodology for valuing “total” compensation. TCM captures, among other things,base salary, short-term cash incentives (actual and targets), and long-termincentives. There are a wide range of consistent benchmark positions in TCM thatcover a broad spectrum of organizational functions. Access to TCM data isavailable exclusively through participation, and TCM adheres to strict dataprivacy regulations. No individual company information is reported on anidentifiable basis. Hewitt applied a regression analysis based on sales scopeto the TCM survey data. This provided us with compensation information for ourbenchmarked 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

 

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publishedannually, is only available to FPICA members, and is comprised of approximately50 to 60 companies. Forty-five of these companies report into the CorporateSection of the survey, which was also used for our compensation analysis.Of these, not all 45 companies report on every position. The FPICA surveyprovides information on base salaries, short-term cash incentives (actual andtargets), and annual total cash compensation that was paid by the surveyedcompanies for benchmarked positions, of which there are a wide range that covera broad spectrum of organizational functions. No individual company informationis reported on an identifiable basis. A regression analysis was also applied tothe FPICA survey data.

 

Management used this information to:

 

·                  Provide amarket-based foundation for executive compensation decisions;

 

·                  Assist instructuring the company’s compensation programs; and

 

·                  Benchmarkthe officer compensation recommendations that management provided to thecompensation committee.

 

Compensation for the company’s executive officers (base salary, annualvariable incentive compensation, and long-term incentive compensation) wastargeted at the 50th percentile of the company’s surveyed companies. However,the specific compensation paid to any of our executive officers may be below orabove such target level depending on subjective judgments made by thecompensation committee based on factors such as the specific officer’s tenurewith the company and in his or her position, responsibilities which vary fromthe benchmark position, and historical performance in the job.

 

***Executive Compensation Program Elements***

 

The four elements of the company’s executivecompensation program are:

 

·                  Base salary;

 

·                  Annual variableincentive compensation (Incentive and Performance Plan);

 

·                  Long-termincentive compensation (Management Equity Plan); and

 

·                  Othercompensation and benefit plans.

 

***Base Salary***

 

The company provides a base salary to executiveofficers to attract and retain talented and experienced individuals to providemanagement and leadership services to the company.

 

The committee reviews base salaries for executiveofficers annually and at the time of promotions or other changes inresponsibilities. Almost all salaried positions, including each executiveofficer position, have an established salary guideline. The midpoint of eachsalary guideline approximates the median salary, adjusted for company size (insales), of equivalent positions at our surveyed companies. While the salarytarget range for our executive officers is the midpoint of the salaryguideline, an individual’s salary may fall above or below the midpoint based ona subjective evaluation of factors such as the individual’s level ofresponsibility, performance, and years of experience.

 

The company is paying Mr. McDougall, our currentchairman of the board and chief executive officer, pursuant to an EmploymentAgreement dated November 20, 2008, as amended in February of 2009.For a description of the material terms of Mr. McDougall’s EmploymentAgreement, please refer to the section of this *CompensationDiscussion and Analysis* titled *Agreements With, andPotential Payments to, Named Executive Officers*. The committeereviews Mr. McDougall’s performance against a performance plan.

 

The company paid Mr. Stephens, our formerchairman of the board and chief executive officer, pursuant to an EmploymentAgreement dated October 29, 2004, as amended February 6, 2008, February 22,2008, and March 12, 2008. For a description of the material terms of Mr. Stephens’Employment Agreement, please refer to the section of this *CompensationDiscussion and Analysis* titled *Agreements With, andPotential Payments to, Named Executive Officers*.

 

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***Annual Variable Incentive Compensation (Incentive and Performance Plan)***

 

Theannual Incentive and Performance Plan is designed to recognize and reward thecontributions that the executive officers and other participating employeeshave made to the company’s annual performance. The plan does this by linking aportion of the annual cash compensation of each executive officer and otherparticipating employees to performance measures that are expected to positivelyaffect the company’s financial performance. We offer this plan to encourage andreward conduct that will lead to better performance of our businesses asmeasured by the criteria used for determining award amounts.

 

For 2008, each of the Named Executive Officers (aslisted below) earned an incentive award pursuant to our Incentive andPerformance Plan. These awards were based on the attainment of annual financialgoals at corporate and business unit levels and the exercise by thecompensation committee of its discretion and business judgment. The planprovided for awards to be calculated as a percentage of base salary, based onthe extent to which the financial goals and performance objectives were metduring the year and the exercise of the committee’s discretion described below.The 2008 target incentive awards for Messrs. McDougall and Stephens were100% of their base salary (prorated with respect to Mr. McDougall toreflect the fact that his service as an executive officer was limited to December 2008).The 2008 target incentive award for Mr. Carlile was 65% of his basesalary. The 2008 target incentive awards for Messrs. Bell and Lovlien were55% of their base salaries. The 2008 target incentive award for Mr. Gaddawas 45% of his base salary. Depending on the achievement of predeterminedfinancial goals and performance objectives and the exercise of the committee’sdiscretion, the annual incentive awards for the Named Executive Officers couldbe less than or greater than the target incentive amounts. The maximum awardpayable to each of our Named Executive Officers is set out in the table foundin the section of this Item 11, *Grants of Plan-BasedAwards*. The actual awards paid are set out in the *Summary Compensation Table* section of this Item 11*.*

 

The annual financial goals required for each of ourNamed Executive Officers under our 2008 annual variable incentive plan were asfollows:

 
| **Officer**        | ** ** | **Financial  Criteria**                                                    | ** ** | **Threshold  Performance  For Any Payment**   | ** ** | **Requirement  For  Target Payment** | ** ** | **Requirement  For Maximum  Payment** | ** ** |
|--------------------|------------|----------------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|
| W. Thomas Stephens |       | 100% Corporate EBITDA                                                      |       | $(10) million                            |       | $10 million                          |       | $40 million                           |       |
| Duane C. McDougall |       | 100% Corporate EBITDA                                                      |       | $(10) million                            |       | $10 million                          |       | $40 million                           |       |
| Thomas E. Carlile  |       | 100% Corporate EBITDA                                                      |       | $(10) million                            |       | $10 million                          |       | $40 million                           |       |
| Stanley R. Bell    |       | 25% Corporate EBITDA  37.5% BMD Division EBITDA  37.5% BMD Division PRONWC |       | $(10) million  $15 million  10%     |       | $10 million  $31 million  18.5%      |       | $40 million  $60 million  31.5%       |       |
| Thomas A. Lovlien  |       | 25% Corporate EBITDA  75% Wood Products Division EBITDA                    |       | $(10) million

 

$(5) million |       | $10 million

 

$5 million      |       | $40 million

 

$30 million      |       |
| David G. Gadda     |       | 100% Corporate EBITDA                                                      |       | $(10) million                            |       | $10 million                          |       | $40 million                           |       |

 

EBITDA means earnings before interest, taxes, depreciationand amortization at the corporate or division level as indicated in the tableabove, and adjusted in each case for special items. PRONWC means pre-tax returnon net working capital, adjusted for special items. The compensation committeebelieves that EBITDA adjusted for special items represents a financial measurethat closely approximates value delivered by management to the company’s equityowners and is a key measure of performance frequently used by the company’sdebt holders. The compensation 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 a distribution business. In

 

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addition to the foregoing financial criteria, the plan provided for aten percent reduction in the payout if performance against division level orcorporate level safety criteria were not met.

 

At the time that the 2008 Annual IncentiveCompensation Plan was adopted, the compensation committee recognized that thecompany had recently completed the Sale which was a transformational event forthe company and that the ability of management to focus on the specificperformance criteria recognized by the mechanical features of the plandescribed above was likely to be impacted by the work required to respond tothe significant changes arising from the Sale. In addition, the compensationcommittee recognized that most of the products produced and sold by the companyare commodities and as such are subject to significant volatility in price andvolume, which may not always be matched by changes in the company’s cost ofproducing or procuring such products. As a result, the company’s financialperformance may, within the period of a plan year, fluctuate in a significantmanner in response to the volatility of market conditions in its products. Inrecognition of the fact that the company’s performance on the financialcriteria included in the plan may vary significantly depending on marketconditions, which are beyond the control of its management and employees andbecause of the significant changes impacting the company as a result of theSale, the committee retained broad discretion to adjust the formula payout ofeach annual incentive plan based on its perception of the performance of thecompany relevant to market conditions prevailing during the plan period and otherfactors it deems relevant, including the company’s performance compared tocompetitors and its ability to bear the cost of the payout.

 

In recognition of the extraordinary market conditionsthat prevailed during 2008 and the impact of the Sale on the company’soperations, the committee exercised its reserved discretion to modify theawards that would have otherwise prevailed under a purely mechanicalimplementation of the plan. In particular, the committee exercised itsdiscretion to increase the payout for 2008 that would have been applicable toparticipating employees in its Wood Products segment, including Mr. Lovlien,from zero to 42% of the target incentive award. Accordingly, Mr. Lovlien’spayment under the plan is reported under the bonus column of the SummaryCompensation Table. In addition, the awards were based on management’s December estimateof performance against the criteria, rather than final year end numbers. Theexercise of such discretion was applied to all participants in the plan and notjust the Named Executive Officers.

 

From time to time the committee may elect to grant an *ad hoc*bonus to one or more of the Named Executive Officersor other employees based on exemplary performance. These are payable over andabove any amount payable to the affected individual pursuant to our Incentiveand Performance Plan. During 2008, the committee granted such bonuses to Mr. Carlileand Mr. Gadda in the amounts described in the Summary Compensation Tablefor their exemplary work in completion of the Sale and other significant assetdivestitures occurring during 2008. These amounts are recorded under the bonus columnof the Summary Compensation Table.

 

***Long-Term Incentive Compensation (Management Equity Plan)***

 

Our principal equity owner is an investment fundmanaged by Madison Dearborn Partners, LLC (MDP). MDP believes that the seniormanagement of its portfolio companies should hold a personally significantinterest in the equity of the portfolio company and maintain that ownershipthroughout the period of MDP’s ownership of the portfolio company. The purposeof this requirement is to impose a close alignment between the interests ofMDP, as the principal equity owner of the portfolio company, and the interestsof the company’s senior management. The terms of these arrangements arestructured uniquely to fit the conditions of each portfolio company, but theoverriding philosophy is to require investment by key managers in theenterprise so their interests are aligned with those of MDP.

 

MDP implemented its management investment philosophyin our case through the creation of our Management Equity Plan, which is ouronly long-term compensation plan for executive officers. Shortly after thecompletion of our acquisition of the forest products assets of OfficeMax, ourparent company, Forest Products Holdings, L.L.C. (FPH) offered its Series Bequity units to each of our 171 key managers (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 the Series B equity units (which all of theexecutive officers then in office and substantially all of the other offereeselected to do), he or she was also awarded a grant of the FPH Series Cequity units. The Series B equity units are the voting common equity unitsof FPH and the Series C equity units are a nonvoting equity unit of FPH,which shares in the appreciation in the value of FPH only after the holders ofthe Series B equity units have recovered their initial investment in FPH. In2006, an additional offering

 

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of the FPH Series B equity units was made to two executiveofficers who had recently joined the company, and an award of additional Series Cequity units was made to such new executive officers, to two executive officersrecently promoted, and to four independent directors, with a participationthreshold of $2.00 per unit. In 2009, a grant of Series C equityunits 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 2004, 2006, and 2009 purchases and awards and the subsequent ownership ofthe FPH Series B and Series C equity units so purchased or awardedare governed by a series of Management Equity Agreements between FPH, MDP, andeach of the Management Investors, which collectively constitute our ManagementEquity Plan. The FPH Series B and Series C equity units currentlyheld by our Named Executive Officers are disclosed in Item 12 of thisannual report on Form 10-K.

 

Thecommittee believes that the Management Equity Plan aligns the interests of theNamed Executive Officers and other Management Investors with those of thecompany’s equity investors. Under the terms of the Management Equity Plan, eachManagement Investor has made a personally significant investment in the companyor holds through his or her Series C equity units a personally significantequity interest in the company, and with limited exceptions described below, heor she may be required to maintain that investment or interest for the sameterm as MDP maintains its investment in the company.

 

*Terms ofthe Management Equity Plan*

 

TheManagement Equity Plan contains many of the features typical to an investorrights agreement for a closely held company. The material terms of theManagement Equity Plan are:

 

1.               The ManagementInvestor is not permitted to sell or otherwise transfer his or her equity unitsgoverned by the agreement except in connection with estate planning activities(in which case, the equity units remain subject to the plan) and in connectionwith implementation of the liquidity features described below.

 

2.               The ManagementInvestor is required to sell his or her units in connection with a sale of FPHapproved by MDP and may require that MDP cause a purchase of all or any portionof the FPH equity units held by MDP to include in its purchase of the equityunits of the Management Investor (or the applicable proportion thereof in thecase of a purchase of less than all of the FPH equity units) at the same priceand on the same terms as are provided to MDP (with due allowance for therelevant participation threshold applicable to Series C equity units).

 

3.               FPH may, but isnot required to, purchase from the Management Investor his or her equity unitsupon termination of the Management Investor’s employment with the company (orservice on the board of directors) at a formula price intended to approximatethe fair market value of the equity units being repurchased (with due allowancefor the relevant participation threshold applicable to Series C equityunits), but only to the extent that they are vested in accordance with the nextparagraph. The purchase price of the unvested Series B equity units is equal tothe original purchase price of $1.00 per unit, and unvested Series Cequity units are forfeited for no consideration. A Management Investor mayrequire the company to exercise its option to repurchase his or her equityunits upon termination of employment with the company (or service on its boardof directors) only if such termination arises from either (i) the death orpermanent disability of the Management Investor or (ii) the sale of adivision of the company.

 

4.               Prior to theamendments to the Management Equity Agreements described below, a ManagementInvestor’s Series B units and half of his Series C units vestedevenly over a five year period ending on December 31, 2009. The remaininghalf of his Series C units vested on the basis of an internal rate ofreturn calculation for MDP’s investment, to be made on December 31, 2009.Accelerated vesting was provided for Management Investors who turned65 years of age prior to that date. In addition, accelerated vesting (inwhole or in part) was also provided in the event of a sale of the company, aninitial public offering, termination of the Management Investor’s employmentdue to sale of a division of the company, and upon death or disability of theManagement Investor. It should be noted that, unlike many public company equitycompensation plans, vesting does not, under our plan, necessarily create aliquidity opportunity for the Management Investor. Its only effect is on thevaluation formulas that may be used when and if a liquidity event does occur.

 

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*2008Repurchases of Management Equity Units*

 

During 2008, FPH made two significant repurchases ofits equity units from Management Investors. In each case, the repurchase wasfunded by parallel repurchases by Boise Cascade Holdings, L.L.C., of its Series Band C equity units held by FPH.

 

The first repurchase arose from the Sale, whichconstituted the sale of a division for purposes of the Management Equity Plan.As a result, FPH was obligated to repurchase such equity units from thoseManagement Investors whose employment with Boise Cascade, L.L.C., terminated inconnection with the Sale. We paid $18.3 million to repurchase the equityunits from 75 such terminated Management Investors on March 31, 2008.

 

In addition, on May 23, 2008, FPH entered into aRepurchase Agreement and Amendment No. 1 to the Management EquityAgreement (the Repurchase and Amendment Agreements) with each of the 66Management Investors who hold FPH Series B and Series C equity unitspursuant to individual Management Equity Agreements dated November 29,2004. Under the redemption provisions of the Repurchase and AmendmentAgreements, FPH repurchased from each participating Management Investor anumber of his or her Series B equity units derived by dividing suchManagement Investor’s original aggregate purchase price paid for FPH Series Bequity units by $2.06 (which was the same repurchase price paid to managementinvestors who left the company in connection with the Sale). As a result, FPHredeemed 48.5% of each Management Investor’s Series B equity units for anamount equal to such Management Investor’s original investment in FPH. Cashdistributions and equity redemptions were made on May 23, 2008.

 

The repurchases were effective with respect to each ofour executive officers, including the Named Executive Officers set forth below.The cash distributed to each of the Named Executive Officers for redemption ofa portion of his or her Series B equity units is set forth below. Inaddition, each of the Named Executive Officers retained, after the redemptionand currently, the equity unit positions described below:

 
| ** **                        | ** ** | **Equity Units Retained** | ** ** |
|-----------------------------------|------------|-------------------------------------|------------|
| **Name**                          | ** ** | **Redemption  Payment**             | ** ** | **Series B  Equity Units** | ** ** | **2004  Series C  Equity Units** | ** ** | **2006  Series C  Equity Units** | ** ** | **2009  Series C  Equity Units** | ** ** |
|                              |       |                                |       |   |   |   |   |   |   |   |   |
| Duane C.  McDougall (1)           |       | $                                   | —     |   | — |   | — |   | 400,000 |   | 8,972,980 |   |
| W. Thomas  Stephens (2) |       | 4,000,000                           |       | 2,058,252 |   | 11,183,000 |   | — |   | — |   |
| Thomas E.  Carlile           |       | 850,000                             |       | 437,379 |   | 2,396,000 |   | — |   | — |   |
| Stanley R.  Bell             |       | 740,000                             |       | 380,777 |   | 1,917,000 |   | — |   | — |   |
| Thomas A.  Lovlien                |       | 400,000                             |       | 205,825 |   | 851,000 |   | — |   | — |   |
| David G. Gadda                    |       | 124,500                             |       | 64,063 |   | 209,980 |   | 400,000 |   | — |   |
|                                   |            |                                     |            |  |  |  |  |  |  |  |  |  |

 

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(1)                                  Mr. McDougall’s 2009 Series C equityunits were granted to him in February 2009.

 

(2)                                  Mr. Stephens’ remaining equity units werenot repurchased upon his retirement, and he continues to hold them subject tothe terms of the Management Equity Plan.

 

*2008 Amendments to the Management Equity Plan*

 

Under the terms of the Repurchase and Amendment Agreements,a series of amendments were made to the Management Equity Plan, including thefollowing:

 

·                  The vestingterms applicable to 62.9% of each participating Management Investor’sPerformance Vesting Series C equity units that were formerly subject to marketcondition vesting were amended to become subject to service period vesting (seeNote 14, Redeemable Equity Units, of the Notes to Consolidated FinancialStatements in “Item 8. Financial Statements and Supplementary Data” of thisForm 10-K);

 

·                  The vestingperiod for all unvested service period vesting FPH Series C equity units(including those FPH Series C equity units that were formerly PerformanceVesting Series C units) was extended by one year, with vesting to occur ona daily pro rata basis from February 22, 2008, through December 31,2010;

 

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·                  Thedetermination date for calculation of vesting for the remaining PerformanceVesting Series C units was extended by one year to December 31, 2010;and

 

·                  The formula usedfor calculation of the fair market value repurchase price applicable todeparting Management Investors in the event that FPH decides to exercise itsrepurchase option was changed. The new formula will be dependent upon acombination of a periodic third-party appraisal of our wood productsmanufacturing and distribution businesses, plus the market value of ourholdings of the stock of Boise Inc., less our indebtedness (net of cash).

 

***Other Compensation and Benefit Plans***

 

The company’s executive officers receive additionalcompensation in the form of payments, allocations, or accruals under variousother compensation and benefit plans. Among these plans and benefits are apension plan, supplemental pension plans, a 401(k) plan, a deferredcompensation plan, and formalized agreements that cover our executive officers’potential severance benefits. These plans and benefits, which are describedbelow, are provided to ensure that we are providing an aggregate compensationand benefits package that is competitive in the market place.

 

*PensionBenefits*

 

We maintain a defined benefit pension plan, referredto as the Salaried Pension Plan, as well as supplemental pension plans forcertain salaried employees, including four of the Named Executive Officers — Messrs. Carlile,Bell, Lovlien, and Gadda.The Salaried Pension Plan is available only to employees who were employed byOfficeMax before November 2003. Accordingly, Mr. McDougall is not,and Mr. Stephens was not, eligible to participate in the company’s pensionplans.

 

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 multiplied by the participant’s years of servicethrough December 31, 2003, plus 1% of the average of the highest fiveconsecutive years of compensation out of the last ten years of employmentmultiplied by the participant’s years of service after December 31, 2003.Under the Salaried Pension Plan, “compensation” is defined as the employee’sbase salary plus any amounts earned under our variable incentive compensationprograms. Benefitsare computed on a straight-line annuity basis and are not offset by SocialSecurity or other retirement-type benefits. An employee is 100% vested in hisor her pension benefit after five years of service, except for breaks inservice.

 

Ifan employee is entitled to a greater benefit under the Salaried Pension Planformula than the Internal Revenue Code allows for tax-qualified plans, theexcess benefits will be paid from the company’s general assets under ourunfunded nonqualified Supplemental Pension Plan, referred to as the SUPP. TheSUPP will also provide payments to the extent that participation in thedeferred compensation plans has the effect of reducing an individual’s pensionbenefit under the qualified plan.

 

Underour unfunded nonqualified Supplemental Early Retirement Plan, referred to asthe SERP, an officer who was an officer of OfficeMax immediately prior to MadisonDearborn Partners’ acquisition of the forest products assets from OfficeMax, who is55 years old or older (or 58 years old or older for officers electedon or after June 1, 2004), has ten or more years of service, has served asan officer for at least five full years, and retires before the age of 62 iseligible for benefits under the plan. Eligible officers retiring prior to age62 receive an early retirement benefit from the SERP which, in combination withtheir benefit under the Salaried Pension Plan equals the benefit calculatedunder the Salaried Pension Plan without reduction due to the officer’s earlyretirement. Benefits payable under the SERP are offset in part by benefitspayable under a similar plan maintained by OfficeMax. Messrs. Carlile andBell are currently eligible for early retirement under the SERP. Mr. Lovlienwill become eligible for benefits under the SERP when he reaches age 55. Mr. Gaddadoes not participate in the SERP because he was not an officer of OfficeMaximmediately prior to MDP’s acquisition of the company.

 

*401(k);Nonqualified Deferred Compensation*

 

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 to

 

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participate maycontribute up to 25% of their pretax income unless they are considered “highlycompensated.” The company places a limit on the contributions, and it ismonitored regularly and adjusted as necessary during the year to ensure thenondiscrimination tests are passed. For eligible employees participating in ourpension plan, the company provides a matching contribution to the plan of $0.70for each employee dollar contributed up to 6% of the employee’s eligiblecompensation. For eligible employees not participating in our pension plan(i.e., those hired on or after November 1, 2003, including Messrs. Stephensand McDougall), the company provides an additional discretionary match to thoseemployees who are employed by the company on the last day of the plan year (December 31).The amount of this discretionary match is announced each year and may vary fromyear to year. Currently, the discretionary match is $0.30 on each $1.00contributed up to the first 6% of eligible compensation, which gives theemployee a dollar-for-dollar match up to 6%.

 

OurDeferred Compensation Plan is an unfunded plan. Under the plan, participatingemployees may irrevocably elect each year to defer receipt of a portion oftheir base salary and incentive compensation. A participant’s account iscredited with imputed interest at a rate equal to 130% of Moody’s CompositeAverage of Yields on Corporate Bonds. In addition, participants may elect toreceive their company-matching contribution in our Deferred Compensation Planin lieu of any matching contribution in our 401(k) savings plan. Participantselect the form and timing of distributions of their deferred compensationbalances. Participants may receive payment in cash in a lump sum or in monthlyinstallments over a specified period of years following the termination oftheir employment with the company.

 

*AgreementsWith, and Potential Payments to, Named Executive 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 serves as our chairman andchief executive officer. Mr. McDougall’s Employment Agreement was amended inFebruary of 2009. Pursuant to the terms of the agreement, as amended (theAgreement), Mr. McDougall receives an annual base salary of $808,250,which is subject to adjustment at the discretion of the compensation committeeof our board of directors. In addition to base salary, Mr. McDougall iseligible to receive an annual target incentive award of 100% of his basesalary, based upon the achievement of financial and other objective targets asdetermined by the compensation committee of our board of directors or the boarditself. The initial term of this Agreement expires on December 31, 2010.It then automatically renews each year thereafter unless either party gives theother party 60 days’ written notice prior to the renewal date. TheAgreement also imposes on Mr. McDougall a permanent confidentialityobligation and a noncompete and nonsolicitation obligation that will continueto be in effect for two years after his employment terminates.

 

During Mr. McDougall’s employment, we areproviding him, at our cost, with a furnished condominium for his use in Boise,Idaho. To the extent this benefit results in any increase in Mr. McDougall’snet taxable income, we have agreed to pay him a gross-up payment to cover anyadditional tax liability for which he may be responsible.

 

Upon termination of his employment, Mr. McDougallwill receive his base salary through the date of termination and a payment forthe value of his earned and unused paid time off, through such date. Inaddition, if Mr. McDougall voluntarily terminates employment with goodreason or if he is involuntarily terminated without cause, each as defined inthe agreement, he will be entitled to receive a lump sum severance paymentequal to two times the sum of (a) Mr. McDougall’s base salary then ineffect and (b) his target bonus for the year of termination. In addition,for 18 months after such termination Mr. McDougall will also receive life,health, and accidental death and dismemberment insurance provided under oursalaried employee benefits program and other benefits customarily provided toour salaried employees (other than savings and retirement benefits), subject topayment by Mr. McDougall of amounts customarily paid by our salariedemployees for such insurance coverage.

 

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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 under theportion of this Compensation and Discussion Analysis titled, *Long-Term Incentive Compensation (Management Equity Plan)*and as amended by the 2008 amendments thereto. On February 20, 2009, Mr. McDougallwas awarded 8,972,980 Series C equity units issued by our parent company,Forest Products Holdings, L.L.C.

 

*W. Thomas Stephens*

 

The company, acting through its principal subsidiary,Boise Cascade, L.L.C., entered into an Employment Agreement with Mr. Stephenson October 29, 2004, as amended on February 6, 2008, February 22,2008, and March 12, 2008, pursuant to which he served as our chairman andchief executive officer. Pursuant to the terms of the agreement, Mr. Stephensreceived an annual base salary of $800,000, which was subject to adjustment atthe discretion of our board of directors. In addition to base salary, Mr. Stephenswas eligible to receive an annual target incentive award of 100% of his basesalary, based upon the achievement of financial and other objective targets asdetermined by the compensation committee of our board of directors or the boarditself. The Employment Agreement had an initial expiration date of October 29,2007. It would then be automatically extended each year thereafter unlesseither party gave the other party 60 days’ written notice prior to theextension date. The agreement also imposed on Mr. Stephens a permanentconfidentiality obligation and a noncompete and nonsolicitation obligation thatwill continue to be in effect for two years after his termination ofemployment.

 

On November 20, 2008, Mr. Stephens enteredinto a Retirement Agreement with us, our principal subsidiary, Boise Cascade,L.L.C., and our principal equity holder, Forest Products Holdings, L.L.C.(FPH). The Retirement Agreement provided for: (i) Mr. Stephens’ retirement from employment with andresignation from all positions he held as an officer, director, or manager ofthe company or any of our affiliates effective November 30, 2008 (exceptas a director of Boise Inc.); (ii) payment to Mr. Stephens prior toyear-end 2008 of his unpaid salary through November 30, 2008, and apayment under our 2008 Annual Incentive and Performance Plan in the amount of$850,000; and (iii) termination of all severance payment provisionsof the Employment Agreement (except to the limited extent described in the nextsentence). The Retirement Agreement also provided, for a period of one yearfor: (1) continuing participation by Mr. Stephens and his covereddependents in the company’s healthcare program at the same cost to Mr. Stephensthat he would have paid had he remained in his position and (2) continuation,at Mr. Stephens’ cost, of term life insurance previously provided by thecompany to Mr. Stephens. These provisions constituted an amendment to hisEmployment Agreement. In addition, the Retirement Agreement modified theManagement Equity Agreement between Mr. Stephens and FPH by eliminatingthe provisions entitling FPH to repurchase Mr. Stephens’ equity units andeliminating any provisions entitling Mr. Stephens to require FPH torepurchase his equity units. No repurchase of any of Mr. Stephens’ equityunits has occurred or will occur as a result of or in connection with hisretirement. The Retirement Agreement also provided that Boise Cascade, L.L.C.,would purchase Mr. Stephens’ condominium in Boise, Idaho, on or prior to December 31,2008, at its fair market value as determined by an appraiser selected by thecompany. This purchase was completed on December 31, 2008, at a purchaseprice of $935,000.

 

*Thomas E. Carlile, Stanley R. Bell, Thomas A.Lovlien, David G. Gadda*

 

On February 22, 2008, the company entered intonew severance agreements with certain of its officers, including Messrs. Bell,Carlile, Lovlien, and Gadda. The severance agreements are effective for threeyears, provided that on the second anniversary and each anniversary thereafter,the term of each severance agreement is automatically extended for anadditional year unless the company gives 60 days’ prior notice statingotherwise.

 

The severance agreements provide that in the event ofa “qualifying termination” (meaning any termination with the exception of atermination by the company for cause or disability, by the employee other thanfor good reason, or in the case of the employee’s death), an employee will beentitled to receive (i) his or her full base salary through the date oftermination, a bonus payment for the year of termination based on the actualpayout for the year and prorated to reflect the portion of the year expired,and all other compensation to which he or she is then entitled including (ii) alump-sum severance payment equal to one or two times the sum of such employee’sannual base salary plus target annual incentive bonus for the year in which thetermination occurs and (iii) a lump-sum amount equal to the

 

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value of suchemployee’s unused and accrued time off, less any advanced time off.Additionally, the severance agreements provide for full maintenance ofhealthcare and insurance benefits for a period of 12 or 18 monthsfollowing the termination date, subject to payment of required contributions,payment of the premium under the company’s Supplemental Life Plan for 12 or24 months following the termination date and, if applicable, receipt ofthe monthly benefit that such employee would have been entitled to receiveunder the company’s Supplemental Early Retirement Plan for Executive Officers,had such employee’s employment not been terminated. The higher levels ofseverance benefits are reserved for those Named Executive Officers at the levelof senior vice president and higher (Messrs. Carlile, Lovlien, and Bell).

 

The severance agreements provide that in the event ofa voluntary termination other than for good reason, termination for cause, ortermination due to death or disability, such employee will be entitled toreceive his or her full base salary through the date of termination, plus allother compensation to which he or she is then entitled. In the event of afailure to perform duties as a result of incapacity due to physical or mentalillness or injury, such employee will be entitled to continue to receive his orher full base salary until such time as his or her employment is terminated dueto 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 severance agreement.

 

*SupplementalLife Plan*

 

Messrs. Carlile, Bell, and Lovlien participate inthe company’s Supplemental Life Plan, which provides them with an insured deathbenefit during their employment with the company. The plan provides the officerwith a target death benefit equal to two times his or her base salary whileemployed with the company and a target postretirement death benefit equal toone times his or her final base salary, in each case less any amount payableunder the company’s group term life insurance policy.

 

*Compensation Committee Interlocks and InsiderParticipation*

 

During2008, no officer or employee served as a member of the compensation committee. Mr. McDougall’smembership in the compensation committee terminated when he became chief executiveofficer of the company. Messrs. Mencoff and Souleles each served asinitial officers of the company when it was formed in 2004. None of ourexecutive officers serve as a member of the board of directors or compensationcommittee of any entity that has one or more executive officers serving on ourboard of directors or compensation committee, except that Mr. McDougallserves 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, please refer to Item 13*.**CertainRelationships and Related Transactions, and Director Independence* ofthis Form 10-K.

 

***Compensation Committee Report***

 

Ourcompensation committee has reviewed and discussed with our management the *Compensation Discussion and Analysis* setforth above. Based on the review and discussion, our compensation committee hasrecommended to the board of directors that the *CompensationDiscussion and Analysis* be included in the company’s annual reporton Form 10-K for the year ended December 31, 2008.

 

Bythe compensation committee:

 

SamuelM. Mencoff, Chair

JohnW. Madigan

ThomasS. Souleles

 

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***SummaryCompensation Table***

 

The following table presents compensation informationfor Messrs. McDougall, Stephens, Carlile, Lovlien, Bell, and Gadda for2008, 2007, 2006 to the extent each of them served as one of our NamedExecutive Officers during each of such years:

 
| **Name and  Principal Position** | ** ** | **Year** | ** ** | **Salary  ($)(1)** | ** ** | **Bonus  ($)(2)** | ** ** | **Stock  Awards  ($)(3)** | ** ** | **Nonequity  Incentive  Plan  Compensation  ($)(4)(5)** | ** ** | **Change in  Pension  Value and  Nonqualified  Deferred  Compensation  Earnings  ($)(6)** | ** ** | **All Other  Compensation  ($)(7)** | ** ** | **Total  ($)** | ** ** |
|--------------------------------------------|------------|----------|------------|--------------------|------------|-------------------|------------|---------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|----------------|------------|
|                                       |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **Duane  C. McDougall**                    |       | 2008     |       | $                  | 66,667     |              | $          | —                    |       | $                                                       | 2,649      |                                                                                                | $          | 28,000                                   |       | $              | —     |   | $ | 86 |   | $ | 97,402 |   |
| Chairman of the  Board and                 |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| Chief Executive  Officer                   |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
|                                       |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **W.  Thomas Stephens**                    |       | 2008     |       | 761,667            |       | —            |       | —                    |       | 850,000                                                 |       | —                                                                                              |       | 9,660                                    |       | 1,621,327      |       |
| Former Chairman  of the                    |       | 2007     |       | 1,000,000          |       | —            |       | 1,621,535                 |       | 604,110                                                 |       | —                                                                                              |       | 47,503                                   |       | 3,273,148      |       |
| Board and Chief  Executive Officer         |       | 2006     |       | 1,000,000          |       | —            |       | 1,621,535                 |       | 560,000                                                 |       | —                                                                                              |       | 9,741                                    |       | 3,191,276      |       |
| ** **                                 |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **Thomas  E. Carlile**                     |       | 2008     |       | 460,000            |       | 50,000            |       | 237,838                   |       | 125,580                                                 |       | 524,386                                                                                             |       | 43,354                                   |       | 1,441,158      |       |
| Executive Vice  President                  |       | 2007     |       | 451,250            |       | —            |       | 146,156                   |       | 277,891                                                 |       | 412,353                                                                                             |       | 41,659                                   |       | 1,329,309      |       |
| and Chief  Financial Officer               |       | 2006     |       | 425,000            |       | —            |       | 146,156                   |       | 240,000                                                 |       | 579,687                                                                                             |       | 47,316                                   |       | 1,438,159      |       |
|                                       |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **Stanley  R. Bell**                       |       | 2008     |       | 414,333            |       | —            |       | 190,289                   |       | 160,000                                                 |       | 732,242                                                                                             |       | 46,126                                   |       | 1,542,990      |       |
| President,  Building Materials             |       | 2007     |       | 377,500            |       | 46,000            |       | 116,937                   |       | 154,000                                                 |       | 372,061                                                                                             |       | 45,142                                   |       | 1,111,640      |       |
| Distribution                               |       | 2006     |       | 370,000            |       | —            |       | 116,937                   |       | 286,528                                                 |       | 659,985                                                                                             |       | 63,806                                   |       | 1,497,256      |       |
|                                       |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **Thomas  A. Lovlien**                     |       | 2008     |       | 414,333            |       | 97,020            |       | 84,474                    |       | —                                                  |       | 421,618                                                                                             |       | 43,542                                   |       | 1,060,987      |       |
| President, Wood  Products                  |       | 2007     |       | 372,500            |       | 6,096             |       | 51,911                    |       | 193,904                                                 |       | 238,793                                                                                             |       | 38,416                                   |       | 901,620        |       |
| Manufacturing                              |       | 2006     |       | 341,667            |       | 69,910            |       | 51,911                    |       | 90,090                                                  |       | 375,728                                                                                             |       | 42,556                                   |       | 971,862        |       |
|                                       |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| **David  G. Gadda**                        |       | 2008     |       | 292,917            |       | 30,000            |       | 48,792                    |       | 56,700                                                  |       | 182,745                                                                                             |       | 18,278                                   |       | 629,432        |       |
| Vice President  and                        |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
| General Counsel                            |       |     |       |               |       |              |       |                      |       |                                                    |       |                                                                                                |       |                                     |       |           |       |
|                                            |            |          |            |                    |            |                   |            |                           |            |                                                         |            |                                                                                                     |            |                                          |            |                |            |  |  |  |  |  |  |  |

 

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| (1)    |   | Includes amounts deferred under our Savings Plan and Deferred  Compensation Plan, including company matching payments. The Savings Plan is a  defined contribution plan intended to be qualified under  Section 401(a) of the Internal Revenue Code that contains a cash or  deferred arrangement meeting the requirements of Section 401(k) of  the code. The Deferred Compensation Plan is a nonqualified savings plan  offered to a select group of management and key employees.                                                                                                                                                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (2)    |   | The 2008 amounts reported for Messrs. Carlile and Gadda represent  discretionary bonuses paid to them for their exemplary work in completion of  the Sale and other significant asset divestitures occurring during 2008. The  payment to Mr. Lovlien represents his payment received under our variable  Incentive and Performance Plan.  It is  reported in this column because the committee exercised its discretion to  increase his award (in common with the remainder of the Wood Products  division plan participants) above the level which would have resulted from  strict application of the plan’s formula.   See *Compensation Discussion and Analysis –  Annual Variable Incentive Compensation (Incentive and Performance Plan).* |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (3)    |   | The amounts reported for each individual with respect to the 2004  Series C equity units and 2006 Series C equity units reflect the  dollar amount recognized for financial statement reporting purposes for the  year ended December 31, 2008 in accordance with Statement of Financial Accounting Standards (SFAS) No. 123(R), *Share-Based  Payment.*For further information on the terms of these equity unit  awards, please refer to the *Compensation Discussion  and Analysis — Long-Term Incentive Compensation (Management Equity Plan)*section  above.                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (4)    |   | Represents payments awarded under our annual variable Incentive and  Performance Plan. The specific financial goals and performance objectives at  corporate and business unit levels of the Performance Plan are described in  the *Compensation Discussion and Analysis — Annual  Variable Incentive Compensation (Incentive and Performance Plan)*section  of this Item 11*.*As noted in  such section, the payments which would have resulted from a mechanical application  of the financial criteria were modified by the exercise by the compensation  committee of discretion reserved by it at the time of its approval of the  plan.                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (5)    |   | Mr. Stephens’ 2008 payout under our 2008 Variable Incentive  Compensation Plan was set at $850,000, pursuant to the terms of his  Retirement Agreement. For more information concerning Mr. Stephen’s Retirement  Agreement see the description of the Retirement Agreement under the heading, *Compensation and Discussion Analysis — Agreements With and Potential  Payments to, Named Executive Officers.*                                                                                                                                                                                                                                                                                                                                      |

 

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| (6) |   | Amounts disclosed in this column include the following: |
|-----|--------|---------------------------------------------------------|

 
| ** **          | ** ** | ** ** | ** ** | ** **                                | ** ** | **Nonqualified  Deferred**    | ** ** |
|---------------------|------------|------------|------------|-------------------------------------------|------------|-------------------------------|------------|
| **Name**            | ** ** | **Year**   | ** ** | **Change in  Pension Value(a)** | ** ** | **Compensation  Earnings(b)** | ** ** |
| ** **          | ** ** | ** ** | ** ** | ** **                                | ** ** | ** **                    | ** ** |
| Duane C.  McDougall |       | 2008       |       | $                                         | —     |                          | $          | — |   |
|                |       |       |       |                                      |       |                          |       |
| W. Thomas  Stephens |       | 2008       |       | —                                    |       | —                        |       |
|                |       | 2007       |       | —                                    |       | —                        |       |
|                |       | 2006       |       | —                                    |       | —                        |       |
|                |       |       |       |                                      |       |                          |       |
| Thomas E.  Carlile  |       | 2008       |       | 516,417                                   |       | 7,969                         |       |
|                |       | 2007       |       | 407,581                                   |       | 4,772                         |       |
|                |       | 2006       |       | 577,978                                   |       | 1,709                         |       |
|                |       |       |       |                                      |       |                          |       |
| Stanley R. Bell     |       | 2008       |       | 714,300                                   |       | 17,942                        |       |
|                |       | 2007       |       | 360,458                                   |       | 11,603                        |       |
|                |       | 2006       |       | 655,796                                   |       | 4,189                         |       |
|                |       |       |       |                                      |       |                          |       |
| Thomas A.  Lovlien  |       | 2008       |       | 412,475                                   |       | 9,143                         |       |
|                |       | 2007       |       | 233,258                                   |       | 5,535                         |       |
|                |       | 2006       |       | 373,684                                   |       | 2,044                         |       |
|                |       |       |       |                                      |       |                          |       |
| David G. Gadda      |       | 2008       |       | 176,210                                   |       | 6,535                         |       |
|                     |            |            |            |                                           |            |                               |            |  |  |

 

----

(a)                                 The amounts reported for Messrs. Carlile,Bell, Lovlien, and Gadda reflect the actuarial increase in the present value oftheir benefits under all pension plans established by the company usinginterest rate and mortality rate assumptions consistent with those used in thecompany’s financial statements and include amounts that such officers may notbe currently entitled to receive because such amounts may not be fully vested. Mr. McDougallis not, and Mr. Stephens was not, eligible to participate in the company’spension plans.

 

(b)                                The amounts reported for Messrs. Carlile,Bell, Lovlien, and Gadda reflect the above-market portion of the interest theyearned on their deferred compensation. Mr. McDougall did not participatein the company’s Deferred Compensation Plan during 2008. Mr. Stephens didnot participate in the company’s Deferred Compensation Plan during 2008, 2007,or 2006.

 

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| (7) |   | Amounts disclosed 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** | ** ** | **Reportable  Perquisites(b)** | ** ** |
|---------------------|------------|----------|------------|---------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|--------------------------------|------------|
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| Duane C.  McDougall |       | 2008     |       | $                                                                                                 | —     |                                                                       | $          | 86                             |       | $ | — |   |
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| W. Thomas  Stephens |       | 2008     |       | 9,660                                                                                             |       | —                                                                     |       | —                         |       |
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| Thomas E.  Carlile  |       | 2008     |       | 30,991                                                                                            |       | 12,363                                                                     |       | —                         |       |
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| Stanley R. Bell     |       | 2008     |       | 25,802                                                                                            |       | 20,324                                                                     |       | —                         |       |
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| Thomas A.  Lovlien  |       | 2008     |       | 25,802                                                                                            |       | 17,740                                                                     |       | —                         |       |
|                |       |     |       |                                                                                              |       |                                                                       |       |                           |       |
| David G. Gadda      |       | 2008     |       | 16,694                                                                                            |       | 1,584                                                                      |       | —                         |       |
|                     |            |          |            |                                                                                                   |            |                                                                            |            |                                |            |  |  |  |

 

----

| (a)    | The company’s Savings Plan is a defined contribution plan intended to  be qualified under Section 401(a) of the Internal Revenue Code that  contains a cash or deferred arrangement meeting the requirements of  Section 401(k) of the code. The Deferred Compensation Plan is a  nonqualified savings plan offered to a select group of management and key  employees. Participants in the Deferred Compensation Plan may choose to have  matching contributions made under the Deferred Compensation Plan in lieu of  receiving matching contributions under the Savings Plan. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (b)    | The company’s  costs in 2008 for various perquisites provided to our Named Executive  Officers are not reflected because the total amount for each officer did not  exceed $10,000.                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

***Grants of Plan-Based Awards***

 

The company did not grant any equity incentive planawards to the Named Executive Officers in 2008, and no payments were made toNamed Executive Officers with respect to any previously granted equityincentive awards during 2008.

 

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The following table reflects the threshold, target,and maximum incentive awards for the Named Executive Officers possible for 2008under our Annual Variable Incentive and Performance Plan. For furtherinformation on the terms of these incentive awards, please refer to the *Compensation Discussion and Analysis — Annual Variable IncentiveCompensation (Incentive and Performance Plan)* section above. TheNamed Executive Officers’ actual incentive awards earned in 2008 are shown inthe *Nonequity Incentive Plan Compensation*column of the *Summary Compensation Table*. Withthe exception of Mr. Stephens, all such awards were paid on February 13,2009. Mr. Stephens’ award was paid in December of 2008 pursuant tothe terms of his Retirement Agreement.

 

**Estimated Future Payouts UnderNonequity Incentive Plan Awards**

 
| **Name**               | ** ** | **Grant Date** | ** ** | **Threshold** | ** ** | **Target** | ** ** | **Maximum** | ** ** |
|------------------------|------------|---------------------|------------|---------------|------------|------------|------------|-------------|------------|
|                   |       |                |       |          |       |       |       |        |       |
| Duane C.  McDougall(1) |       | 11/20/08            |       | $             | 0          |       | $          | 66,667      |       | $ | 133,334 |   |
|                   |       |                |       |          |       |       |       |        |       |
| W. Thomas  Stephens    |       | 3/12/08             |       | 0             |       | 800,000    |       | 1,600,000   |       |
|                   |       |                |       |          |       |       |       |        |       |
| Thomas E.  Carlile     |       | 3/12/08             |       | 0             |       | 299,000    |       | 598,000     |       |
|                   |       |                |       |          |       |       |       |        |       |
| Stanley R. Bell        |       | 3/12/08             |       | 0             |       | 231,000    |       | 483,656     |       |
|                   |       |                |       |          |       |       |       |        |       |
| Thomas A.  Lovlien     |       | 3/12/08             |       | 0             |       | 231,000    |       | 462,000     |       |
|                   |       |                |       |          |       |       |       |        |       |
| David G. Gadda         |       | 3/12/08             |       | 0             |       | 135,000    |       | 270,000     |       |
|                        |            |                     |            |               |            |            |            |             |            |  |  |  |

 

----

(1)        Mr. McDougall’spayment formula was prorated to reflect one month of employment during 2008.

 

***OutstandingEquity Awards at Fiscal Year-End***

 

The following table reflects the number of the NamedExecutive Officers’ 2004 Series C equity units and 2006 Series Cequity units that had not vested as of December 31, 2008:

** **
| ** **             | ** ** | **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    |       | 214,182                                                                                                        |       | $ | — |   |
| W. Thomas  Stephens(2) |       | —                                                                                                         |       | — |   |
| Thomas E.  Carlile     |       | 1,282,943                                                                                                      |       | 384,883 |   |
| Stanley R. Bell        |       | 1,026,463                                                                                                      |       | 307,939 |   |
| Thomas A.  Lovlien     |       | 455,669                                                                                                        |       | 136,701 |   |
| David G. Gadda         |       | 326,614                                                                                                        |       | 33,729 |   |
|                        |            |                                                                                                                |            |  |  |  |

 

----

| (1) |   | Because these units are not publicly traded, there was no  ascertainable market value for the units. Accordingly, the values reflect the  amount which would have been payable under the terms of the Management Equity  Plan if the Named Executive Officer’s employment were terminated other than  for cause and the company elected to exercise its repurchase option under the  plan. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| (2) |   | On December 31, 2007, all of Mr. Stephens’ 2004  Series C equity units were fully vested. Pursuant to the terms of the  Management Equity Plan, investors like Mr. Stephens, who were at least  60 years old as of the grant date, enjoy an accelerated vesting schedule  under which time vesting units fully vest by, and vesting determinations for  Performance Vesting Series C units are calculated as of,  December 31 following the investor’s 65th birthday. Vesting does not  trigger a right or obligation on the part of FPH or us to repurchase equity  units. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

For a discussion of the rules of the plangoverning vesting of the equity units described above see, C*ompensation Discussion and Analysis — Long-Term Incentive Compensation(Management Equity Plan)*in this Item 11.

 

***OptionExercises 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 2008:

 
| ** **             | ** ** | **Stock Awards**                                              | ** ** |
|------------------------|------------|--------------------------------------------------------------------|------------|
| **Name**               | ** ** | **Number of Shares Acquired  on Vesting  (#)** | ** ** | **Value Realized  on Vesting  ($)(1)** | ** ** |
|                   |       |                                                               |       |   |   |
| Duane C.  McDougall    |       | 65,818                                                             |       | $ | — |   |
| W. Thomas  Stephens(2) |       | —                                                             |       | — |   |
| Thomas E.  Carlile     |       | 394,257                                                            |       | 118,277 |   |
| Stanley R. Bell        |       | 315,437                                                            |       | 94,631 |   |
| Thomas A.  Lovlien     |       | 140,031                                                            |       | 42,009 |   |
| David G. Gadda         |       | 100,372                                                            |       | 10,366 |   |
|                        |            |                                                                    |            |  |  |  |

 

----

| (1) |   | Because these units are not publicly traded, there was no  ascertainable market value for the units on the vesting date. Accordingly,  the values reflect amounts which would have been payable under the terms of  the Management Equity Plan if the Named Executive Officer’s employment were  terminated other than for cause and the company elected to exercise its  repurchase option under the plan. |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (2) |   | On December 31, 2007, all of Mr. Stephens’ 2004  Series C equity units were fully vested. Pursuant to the terms of the  Management Equity Plan, investors like Mr. Stephens, who were at least  60 years old as of the grant date, enjoy an accelerated vesting schedule  under which time vesting units fully vest by, and vesting determinations for  Performance Vesting Series C units are calculated as of,  December 31 following the investor’s 65th birthday. Vesting does not  trigger a right or obligation on the part of FPH or us to repurchase equity  units. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

For a discussion of the rules of the plangoverning vesting of the equity units described above see, C*ompensation Discussion and Analysis — Long-Term Incentive Compensation(Management Equity Plan)*in this Item 11.

 

***PensionBenefits***

 

Thefollowing table reflects the present value of accumulated benefits payable to Messrs. Carlile,Bell, Lovlien, and Gadda, including the number of years of service credited toeach of them, under the Salaried Pension Plan, the SUPP, and the SERP. Messrs. Carlile,Bell, Lovlien, and Gadda did not receive any payments under any of our pensionplans during 2008. Mr. McDougall is not, and Mr. Stephens was not,eligible to participate in the company’s pension plans.

 

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| **Name**            | ** ** | **Plan Name**    | ** ** | **Number of  Years  Credited  Service  (#)(1)** | ** ** | **Present Value  of  Accumulated  Benefit  ($)(3)** | ** ** | **Payments  during Last  Fiscal Year** | ** ** |
|---------------------|------------|-----------------------|------------|------------------------------------------------------|------------|----------------------------------------------------------|------------|--------------------------------------------------|------------|
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| Duane C.  McDougall |       | Salaried Pension Plan |       | —                                               |       | $                                                        | —     |                                             | $          | — |   |
|                |       | SUPP                  |       | —                                               |       | —                                                   |       | —                                           |       |
|                |       | SERP                  |       | —                                               |       | —                                                   |       | —                                           |       |
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| W. Thomas  Stephens |       | Salaried Pension Plan |       | —                                               |       | —                                                   |       | —                                           |       |
|                |       | SUPP                  |       | —                                               |       | —                                                   |       | —                                           |       |
|                |       | SERP                  |       | —                                               |       | —                                                   |       | —                                           |       |
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| Thomas E.  Carlile  |       | Salaried Pension Plan |       | 36.0                                                 |       | 990,803                                                  |       | —                                           |       |
|                |       | SUPP                  |       | 36.0                                                 |       | 954,648                                                  |       | —                                           |       |
|                |       | SERP                  |       | 36.0                                                 |       | 765,701                                                  |       | —                                           |       |
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| Stanley R. Bell     |       | Salaried Pension Plan |       | 38.0                                                 |       | 1,764,362                                                |       | —                                           |       |
|                |       | SUPP                  |       | 38.0                                                 |       | 1,340,885                                                |       | —                                           |       |
|                |       | SERP                  |       | 38.0                                                 |       | —                                                   |       | —                                           |       |
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| Thomas A.  Lovlien  |       | Salaried Pension Plan |       | 30.0                                                 |       | 501,425                                                  |       | —                                           |       |
|                |       | SUPP                  |       | 30.0                                                 |       | 475,019                                                  |       | —                                           |       |
| ** **          |       | SERP(2)               |       | 30.0                                                 |       | 611,202                                                  |       | —                                           |       |
|                |       |                  |       |                                                 |       |                                                     |       |                                             |       |
| David G. Gadda      |       | Salaried Pension Plan |       | 32.7                                                 |       | 539,638                                                  |       | —                                           |       |
|                |       | SUPP                  |       | 32.7                                                 |       | 406,666                                                  |       | —                                           |       |
|                |       | SERP(2)               |       | 32.7                                                 |       | —                                                   |       | —                                           |       |
|                     |            |                       |            |                                                      |            |                                                          |            |                                                  |            |  |  |

 

----

| (1) |   | Number of years credited service for Messrs. Carlile, Bell,  Lovlien, and Gadda include amounts attributable to employment with OfficeMax  prior to Madison Dearborn Partners’ acquisition of the forest products assets  from OfficeMax. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (2) |   | Assumes Mr. Lovlien remains employed with the company until age  55 and becomes vested in the SERP. Mr. Gadda does not participate in the  SERP. |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (3) |   | These values were calculated on the same basis and using the same  assumptions used in the Company’s financial statements. See Note 13,  Retirement and Benefit Plans, of the  Notes to Consolidated Financial Statements in “Item 8. Financial  Statements and Supplementary Data” of this Form 10-K. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

For more information concerning our pension plans see,C*ompensation Discussion and Analysis — PensionBenefits*in this**Item 11*.*

 

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***Nonqualified Deferred Compensation***

 

Withthe exception of Messrs. McDougall and Stephens, all of the NamedExecutive Officers participated in our Deferred Compensation Plan during 2008.For Messrs. Carlile, Bell, Lovlien, and Gadda, the matching contributionis equal to $0.70 on the dollar up to the first 6% of eligible compensation.None of the Named Executive Officers had withdrawals or distributions under ourDeferred Compensation Plan during 2008.

 
| **Name**            | ** ** | **Executive  Contributions in  Last FY  ($)(1)** | ** ** | **Registrant  Contributions  in Last FY  ($)(2)** | ** ** | **Aggregate  Earnings  in Last FY  ($)(3)** | ** ** | **Aggregate  Balance  in Last FYE  ($)(4)** | ** ** |
|---------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
| Duane C.  McDougall |       | $                                                          | —     |                                                        | $          | —                                                |       | $                                                     | —     |   | $ | — |   |
| W. Thomas  Stephens |       | —                                                     |       | —                                                      |       | —                                                |       | —                                                |       |
| Thomas E.  Carlile  |       | 44,273                                                     |       | 30,991                                                      |       | 21,366                                                |       | 302,935                                               |       |
| Stanley R. Bell     |       | 105,433                                                    |       | 25,802                                                      |       | 48,204                                                |       | 660,189                                               |       |
| Thomas A.  Lovlien  |       | 61,433                                                     |       | 25,802                                                      |       | 24,510                                                |       | 349,866                                               |       |
| David G. Gadda      |       | 50,203                                                     |       | 16,694                                                      |       | 17,508                                                |       | 250,672                                               |       |
|                     |            |                                                            |            |                                                             |            |                                                       |            |                                                       |            |  |  |  |  |

 

----

| (1) |   | These amounts are  included in the 2008 Salary column of the Summary Compensation Table. |
|-----|--------|------------------------------------------------------------------------------------------|

 
| (2) |   | These amounts are  included in the 2008 All Other Compensation column of the Summary  Compensation Table. |
|-----|--------|-----------------------------------------------------------------------------------------------------------|

 
| (3) |   | The above-market portion  of these amounts is included in the 2008 Change in Pension Value and  Nonqualified Deferred Compensation Earnings column of the Summary  Compensation Table, as is the above market portion of interest earned under  this plan during prior years reported on in the Summary Compensation Table. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (4) |   | Amounts reported in this column were disclosed in the Summary  Compensation Table of this Form 10-K and in the Summary Compensation  Table of prior years’ Form 10-Ks (depending on when such compensation  was earned) to the extent that the Named Executive Officer was a Named  Executive Officer in the year in which such compensation was earned. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

For more information concerning our nonqualifieddeferred compensation plan, see C*ompensation Discussion andAnalysis — 401(k); Nonqualified Deferred Compensation*in this**Item 11.

 

***Agreements With, and Potential Payments to, Named ExecutiveOfficers Upon Termination 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:

 

·                  Voluntarytermination with good reason;

 

·                  Involuntarytermination without cause;

 

·                  Forcause termination or voluntary termination without good reason;

 

·                  Involuntarytermination due to employment agreement not being renewed;

 

·                  Death;or

 

·                  Disability.

 

The amounts shown for Messrs. McDougall, Carlile,Bell, Lovlien, and Gadda assume that such termination was effective as of December 31,2008. 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. Theamounts disclosed here do not include amounts earned by the executive officerthrough that time as base salary, any bonuses approved by the committee priorto that date, and payments approved by the committee prior to that date asawards earned during 2008 pursuant to our 2008 *Incentiveand Performance Plan*, nor do they include amounts payable pursuantto the 401(k), deferred compensation, or pension plans. Such amounts are notincluded because neither their amount nor the timing of their 

 

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payment isaffected by the fact of or the nature of the termination of employment.Disclosure of amounts earned during 2008 as base salary, bonuses, and awardsunder the 2008 Incentive and Performance Plan may be found in the SummaryCompensation table of this Item 11*.**Executive Compensation*. Pension benefits and deferredcompensation arrangements are described under the headings, *Pension Benefits* and *Nonqualified DeferredCompensation*, respectively, of this Item 11. *Executive Compensation*.

 

The amounts shown for Mr. Stephens reflectamounts actually paid to him during December of 2008 pursuant to the termsof his Retirement Agreement and healthcare benefits to be made available to himduring the 12 months following his retirement.

 

The availability of severance payments and continuedhealthcare and insurance benefits beyond termination of employment arecontractually 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. Stephens, by his Retirement Agreement; with respect toMr. McDougall by his Employment Agreement and the Management Equity Plan;with respect to Messrs. Carlile, Bell, Lovlien, and Gadda by a severanceagreement between each of them and the company; and for all such NamedExecutive Officers, the terms of the Management Equity Plan. For a descriptionof these contractual arrangements, see *Compensation Discussionand Analysis*, under the headings, *Long-TermIncentive Compensation (Management Equity Plan)*and *Agreements With, and Potential Payments to, Named Executive Officers*ofthis Item 11*.*

 

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***Duane C. McDougall***

 
| **Benefit**                                               | ** ** | **Voluntary  Termination  With Good  Reason** | ** **    | **Involuntary  Termination  Without  Cause** | ** ** | **For Cause  Termination  or  Voluntary  Termination  Without  Good  Reason** | ** ** | **Involuntary  Termination  Due to  Employment  Agreement  Not Being  Renewed** | ** ** | **Death**  | ** ** | **Disability** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------|---------------|----------------------------------------------|------------|------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Base salary  (2 x base salary of $800,000)                |       | $                                                  | 1,600,000     |                                         | $          | 1,600,000                                                                          |       | $                                                                                         | —     |       | $          | —         |       | $ | — |   | $ | — |   |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Incentive and  Performance Plan  (2 x target 100% award)  |       | 1,600,000                                          |          | 1,600,000                                    |       | —                                                                             |       | —                                                                                    |       | —     |       | —         |       |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Insurance — life  and AD&D  (for 18 months) |       | 2,995                                              |          | 2,995                                        |       | —                                                                             |       | —                                                                                    |       | —     |       | —         |       |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Financial  counseling  (for 18 months)               |       | 7,500                                              |          | 7,500                                        |       | —                                                                             |       | —                                                                                    |       | —     |       | —         |       |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Unused vacation  time — 0 hours                 |       | —                                             |          | —                                       |       | —                                                                             |       | —                                                                                    |       | —     |       | —         |       |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| Repurchase of  management equity units                    |       | —                                             |          | —                                       |       | —                                                                             |       | —                                                                                    |       | —     |       | —         |       |
|                                                      |       |                                               |          |                                         |       |                                                                               |       |                                                                                      |       |       |       |           |       |
| **TOTAL**                                                 | ** ** | **$**                                              | **3,210,495** | ** **                                   | **$**      | **3,210,495**                                                                      | ** ** | **$**                                                                                     | **—** | ** ** | **$**      | **—**     | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |

 

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***W. Thomas Stephens***

 

Underthe terms of Mr. Stephens’ Retirement Agreement, he was paid his basesalary, which was earned at a rate of $800,000 per year, payable twice monthly,through his November 30, 2008, retirement date. He was paid the sum of$850,000 as an award under our 2008 Incentive and Performance Plan. Inaddition, Mr. Stephens and his dependents are eligible for a 12-monthperiod ending November 30, 2009, to participate in the company’s healthand welfare benefit plan on the same terms as any other salaried employee(including payment of a portion of the cost thereof). The estimated cost to thecompany for this benefit during such 12-month period is $9,470. In addition,the company agreed to pay Mr. Stephens’ cost of moving his personaleffects from Boise, Idaho to his home in Denver, Colorado. The cost of thisretirement benefit was $8,952.43.

 

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***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 $460,000)                                   |       | $                                                  | 920,000       |                                         | $          | 920,000                                                                            |       | $         | —     |           | $          | — |   | $ | — |   |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Incentive and  Performance Plan  (2 x target 65% award)                      |       | 598,000                                            |          | 598,000                                      |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)                   |       | 24,726                                             |          | 24,726                                       |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance —  healthcare, disability, and accident  (for 18 months) |       | 11,167                                             |          | 11,167                                       |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Financial  counseling  (for 18 months)                                  |       | 7,500                                              |          | 7,500                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Unused paid time  off — 112 hours                                  |       | 24,769                                             |          | 24,769                                       |       | 24,769                                                                             |       | 24,769    |       | 24,769         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Repurchase of  management equity units                                       |       | —                                             |          | —                                       |       | —                                                                             |       | 1,028,282 |       | 1,028,282      |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| **TOTAL**                                                                    | ** ** | **$**                                              | **1,586,162** | ** **                                   | **$**      | **1,586,162**                                                                      | ** ** | **$**     | **24,769** | ** **     | **$**      | **1,053,051** | ** ** | **$** | **1,053,051** | ** ** |

 

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**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                                      |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)              |       | 40,647                                             |          | 40,647                                       |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance —  healthcare, disability, and accident  (for 18 months) |       | 11,167                                             |          | 11,167                                       |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Financial  counseling  (for 18 months)                             |       | 7,500                                              |          | 7,500                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Unused paid time  off — 264 hours                             |       | 53,308                                             |          | 53,308                                       |       | 53,308                                                                             |       | 53,308    |       | 53,308         |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Repurchase of  management equity units                                  |       | —                                             |          | —                                       |       | —                                                                             |       | 862,800   |       | 862,800        |       |
|                                                                    |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| **TOTAL**                                                               | ** ** | **$**                                              | **1,414,622** | ** **                                   | **$**      | **1,414,622**                                                                      | ** ** | **$**     | **53,308** | ** **     | **$**      | **916,108** | ** ** | **$** | **916,108** | ** ** |

 

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**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                                      |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance  premiums — term life  (for 24 months)                   |       | 35,480                                             |          | 35,480                                       |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Insurance —  healthcare, disability, and accident  (for 18 months) |       | 9,997                                              |          | 9,997                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Financial  counseling  (for 18 months)                                  |       | 7,500                                              |          | 7,500                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Unused paid time  off — 228 hours                                  |       | 46,038                                             |          | 46,038                                       |       | 46,038                                                                             |       | 46,038    |       | 46,038         |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| Repurchase of  management equity units                                       |       | —                                             |          | —                                       |       | —                                                                             |       | 430,843   |       | 430,843        |       |
|                                                                         |       |                                               |          |                                         |       |                                                                               |       |      |       |           |       |
| **TOTAL**                                                                    | ** ** | **$**                                              | **1,401,015** | ** **                                   | **$**      | **1,401,015**                                                                      | ** ** | **$**     | **46,038** | ** **     | **$**      | **476,881** | ** ** | **$** | **476,881** | ** ** |

 

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**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) |       | 9,797                                              |        | 9,797                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |        |                                         |       |                                                                               |       |      |       |           |       |
| Financial  counseling  (for 12 months)                             |       | 5,000                                              |        | 5,000                                        |       | —                                                                             |       | —    |       | —         |       |
|                                                                    |       |                                               |        |                                         |       |                                                                               |       |      |       |           |       |
| Unused paid time  off — 64 hours                              |       | 9,231                                              |        | 9,231                                        |       | 9,231                                                                              |       | 9,231     |       | 9,231          |       |
|                                                                    |       |                                               |        |                                         |       |                                                                               |       |      |       |           |       |
| Repurchase of management  equity units                                  |       | —                                             |        | —                                       |       | —                                                                             |       | 123,568   |       | 123,568        |       |
|                                                                    |       |                                               |        |                                         |       |                                                                               |       |      |       |           |       |
| **TOTAL**                                                               | ** ** | **$**                                              | **459,028** | ** **                                   | **$**      | **459,028**                                                                        | ** ** | **$**     | **9,231**  | ** **     | **$**      | **132,799** | ** ** | **$** | **132,799** | ** ** |

 

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***Compensation of 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.

 

Directors who are neitheremployees of the company nor representatives of the company’s two investors,MDP and OfficeMax, receive compensation for their board service. In 2008, thatcompensation included:

 
| Annual Retainer: |   | $50,000                                                                                                                           |
|------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                              |
| Attendance Fees: |   | $1,500 for each board and  committee meeting (attended in person, conducted by telephone, or written  consent in lieu of meeting) |
|             |   |                                                                                                                              |
|             |   | Expenses related to  attendance                                                                                                   |

 

Atthis time, Mr. Madigan is the only director receiving compensation for hisservices as a director.

 

*Directors Deferred Compensation Plan*

 

We maintain a DirectorsDeferred Compensation Plan, which allows each director who receivescompensation for board service to defer all or a portion of such compensationin a calendar year. Amounts deferred are credited with imputed interest at arate equal to 130% of Moody’s Composite Average of Yields on Corporate Bonds.Participants elect the form and timing of distributions of their deferredcompensation balances. Participants may receive payment in cash in a lump sumor in annual installments following their service on the board. Mr. Madigan deferred 100% of his 2008fees under this plan. Mr. Madigan is the only director eligible toparticipate in the plan in 2009, and he has elected not to defer any of his2009 fees.

 

Thefollowing table reflects the fees our paid directors earned for their serviceon our board during 2008.

** **
| **Name**               | ** ** | **Fees Earned  or Paid in  Cash  ($)** | ** ** | **Stock Awards  ($)(2)** | ** ** | **Change in  Pension Value  and  Nonqualified  Deferred  Compensation  Earnings ($)(3)** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total ($)** | ** ** |
|------------------------|------------|-------------------------------------------------------|------------|-------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|--------------------|------------|
|                   |       |                                                  |       |                          |       |                                                                                                    |       |                                  |       |               |       |
| Hank Brown(1)          |       | $                                                     | 15,500     |                          | $          | —                                                                                                  |       | $                                     | —     |               | $          | — |   | $ | 15,500 |   |
|                   |       |                                                  |       |                          |       |                                                                                                    |       |                                  |       |               |       |
| William S.  Kirsch(1)  |       | 15,500                                                |       | 1,324                         |       | —                                                                                                  |       | —                                |       | 16,824             |       |
|                   |       |                                                  |       |                          |       |                                                                                                    |       |                                  |       |               |       |
| John W. Madigan        |       | 72,500                                                |       | —                        |       | 5,479                                                                                                   |       | —                                |       | 77,979             |       |
|                   |       |                                                  |       |                          |       |                                                                                                    |       |                                  |       |               |       |
| Duane C.  McDougall(4) |       | 68,288                                                |       | 25,299                        |       | —                                                                                                  |       | —                                |       | 93,587             |       |
|                        |            |                                                       |            |                               |            |                                                                                                         |            |                                       |            |                    |            |  |  |  |  |  |

 

----

| (1) |   | Effective March 12,  2008, Messrs. Brown and Kirsch resigned from the company’s board of  directors. Their decision to resign was not due to any disagreement with the  company on any matter relating to the company’s operations, policies, or  practices. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (2) |   | On  April 3, 2006, Messrs. Brown, Kirsch, Madigan, and McDougall were  each granted, at no cost, 400,000 2006 Series C equity units. The terms  of these grants are further described in the Director Equity Agreement dated  April 3, 2006, and filed with the Securities and Exchange Commission on  April 6, 2006, as Exhibit 99.2 to the company’s report on  Form 8-K. These 2006 Series C equity units were valued for |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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|   |   | financial  statement reporting purposes, in accordance with SFAS No. 123(R), *Share-Based Payment*. As calculated under SFAS  No. 123(R), the fair values of these units as of their grant date were:  Hank Brown — $44,000; William S. Kirsch — $38,000; John W. Madigan —  $44,000; and Duane C. McDougall — $38,000. The amounts recorded for  Messrs. Brown and Madigan was higher than that recorded for  Messrs. Kirsch and McDougall because Messrs. Brown and Madigan’s  ages resulted in accelerated vesting provisions being applied to their units  which were not applicable to Messrs. Kirsch and McDougall’s units.  Messrs. Brown and Madigan were fully vested as of year end 2007.  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | Effective  upon their resignation from the company’s board of directors on  March 12, 2008, Mr. Brown’s 400,000 2006 Series C equity units  were fully vested due to his age, and Mr. Kirsch forfeited 272,131.15 of  his 2006 Series C equity units, leaving a remaining vested balance of  127,868.85 units.                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | The  amounts reported above for 2008 for Messrs. Brown and Madigan reflect  the fact that they were fully vested for the entire year. The amount reported  for Mr. Kirsch reflects the SFAS 123(R) cost of his vesting prior  to his resignation and the impact of the forfeiture of a portion of his units  resulting from his resignation. The cost reported for Mr. McDougall is  prorated for the fact that for the first 11 months of the year he served  only as a director. The balance of the SFAS 123(R) cost for his units  for the year is reported in the Summary Compensation Table.                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | Effective  as of May 23, 2008, Messrs. Madigan and McDougall’s 2006 Director  Equity Agreements were modified as described in the *Compensation  Discussion and Analysis — Long-Term Incentive Compensation — 2008 Amendments  to the Management Equity Plan*. As a result of this modification,  the valuation of Mr. McDougall’s units, determined in accordance with  SFAS No. 123(R), *Share-Based Payment*,**increased by**$75,480.  Because the portion of the amendment which impacted SFAS  No. 123(R) valuation was limited to a change in vesting  requirements and Mr. Madigan’s units were already fully vested, the  amendment had no impact on the SFAS No. 123(R) value of his units. |

 
| (3) |   | We do not provide our  directors with pension benefits. The amount reported in this column reflects  the above-market portion of the interest Mr. Madigan earned on his 2008  deferred compensation. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (4) |   | On December 1, 2008, Mr. McDougall  became our chairman and chief executive officer and an employee of the  company. Accordingly, although he continues to be a member of our board of  directors, he did not earn director fees after that date. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

***ITEM 12.******                 ******SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS***

 

The following table sets forth information as of February 28,2009**,** regarding the beneficial ownership ofour equity units held by:

 

·                  Each person thatis a beneficial owner of more than 5% of each series of our equity units;

 

·                  Each of ourNamed Executive Officers;

 

·                  Each of ourdirectors; and

 

·                  All executiveofficers 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 Bequity units — 535,329,693 as of 2/28/09

 

·                  2004 Series Cequity units — 20,464,301 as of 2/28/09

 

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·                  2006 Series Cequity units — 1,727,869 as of 2/28/09

 

·                  2009 Series Cequity units — 8,972,980 as of 2/28/09

 

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)                          |       | 426,329,693                          |       | 79.6                                           | %          | 20,464,301                                     |       | 100                                            | %          | 1,727,869 |   | 100 | % | 8,972,980 |   | 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 |   | 8,972,980 |   | 100 | % |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| W. Thomas  Stephens                                           |       | 2,058,252                            |       | *                                              |       | 11,183,000                                     |       | 54.7                                           |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| Thomas E. Carlile                                             |       | 437,379                              |       | *                                              |       | 2,396,000                                      |       | 11.7                                           |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| Stanley R. Bell                                               |       | 380,777                              |       | *                                              |       | 1,917,000                                      |       | 9.4                                            |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| Thomas A. Lovlien                                             |       | 205,825                              |       | *                                              |       | 851,000                                        |       | 4.2                                            |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| David G. Gadda                                                |       | 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(5)                                         |       | 419,556,601                          |       | 78.4                                           |       | —                                         |       | —                                         |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| Matthew W.  Norton(3)                                         |       | —                               |       | —                                         |       | —                                         |       | —                                         |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| Thomas S.  Souleles(3)                                        |       | —                               |       | —                                         |       | —                                         |       | —                                         |       | — |   | — |   | — |   | — |   |
|                                                          |       |                                 |       |                                           |       |                                           |       |                                           |       |   |   |   |   |   |   |   |   |
| All Executive  Officers and Directors as a Group (15 Persons) |       | 423,875,276                          |       | 79.2                                           |       | 17,125,620                                     |       | 83.7                                           |       | 1,200,000 |   | 69.5 |   | 8,972,980 |   | 100.0 |   |

 

----

* Less than 1%.

 
| (1)    |   | Forest Products Holdings,  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 general  partner of MDCP IV. John A. Canning, Jr., Paul J. Finnegan and  Samuel M. Mencoff are the sole members of a limited partner committee of  MDP IV (which is the general partner of MDCP IV) that have the power, acting  by majority vote, to vote or dispose of the shares held by MDCP IV. The  address for each of MDCP IV and MDP IV are c/o Madison Dearborn  Partners, LLC, 70 W. Madison Street, Suite 4600, Chicago,  Illinois 60602. The current board of directors of FPH is comprised of Messrs. McDougall,  McGowan, Mencoff, Norton, and Souleles. The address for FPH is c/o Boise  Cascade Holdings, L.L.C., 1111 West Jefferson Street, Suite 300, P.O. Box  50, Boise, Idaho 83728. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)    |   | The address for OfficeMax  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), and  each has a pecuniary interest in the units held by FPH. Messrs. Souleles,  McGowan, and Norton expressly disclaim beneficial ownership except to the extent  of their pecuniary interest therein. The address of Messrs. Souleles,  McGowan, and Norton is c/o Madison Dearborn Partners, LLC, Three First  National Plaza, Suite 4600, 70 West Madison Street, Chicago, Illinois  60602.                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

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| (4)    |   | Mr. Madigan is an  investor in FPH, and the Series B equity units listed in the table  represent Mr. Madigan’s proportionate ownership interest in the units  held by FPH. Mr. Madigan does not exercise voting or investment power  over any of the units held by FPH. Mr. Madigan’s address is 435 North  Michigan Avenue, Suite 702, Chicago, Illinois 60611.                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (5)    |   | Mr. Mencoff is a  co-CEO of MDP. As a member of the limited partner committee of MDP IV, Mr. Mencoff  may be deemed to share beneficial ownership of the units owned by FPH. Mr. Mencoff  expressly disclaims beneficial ownership of the units owned by FPH except to  the extent of his pecuniary interest therein. The address of Mr. Mencoff  is c/o Madison Dearborn Partners, LLC, Three First National Plaza, Suite 4600,  70 West Madison Street, Chicago, Illinois 60602. |

** **

***ITEM 13.******                 ******CERTAIN******RELATIONSHIPS******AND RELATED TRANSACTIONS, ANDDIRECTOR 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.

 

***Securitiesand Exchange Commission (SEC) Disclosure***

 

The SEC has specificdisclosure requirements regarding transactions and relationships between us andour directors, executive officers, or other specified parties. We have severalrelationships that require disclosure under these SEC rules. These disclosuresinvolve our relationships and transactions with our affiliates, such asOfficeMax Incorporated, and we describe those relationships in further detailbelow.

 

# ***OfficeMaxand the Forest Products Acquisition***

# * *

In 2004, our parent company, Forest Products Holdings(FPH), acquired the forest products and timberland operations from OfficeMax(the Forest Products Acquisition) for an aggregate purchase price of $3.9billion. In connection with the Forest Products Acquisition, FPH and/or itssubsidiaries entered into an Asset Purchase Agreement, a Paper SupplyAgreement, an Additional Consideration Agreement, a Securityholders Agreement,and a Registration Rights Agreement with OfficeMax and/or its subsidiaries.

 

Under the Asset Purchase Agreement, OfficeMaxindemnifies us for specified pre-Forest Products Acquisition liabilities,including environmental, asbestos, tax, benefits, and other legacy liabilities.The agreement also contains customary representations, warranties, andcovenants, including an obligation by OfficeMax to indemnify us for anybreaches of its representations, warranties, and covenants. OfficeMax’sindemnification obligations with respect to such breaches generally surviveduntil April 29, 2006. Indemnification obligations with respect to breachesrelating to employee and environmental law matters survive until October 29,2009. OfficeMax’s indemnification obligations for breaches of representations,warranties, and covenants are, with certain exceptions, subject to a deductibleof $20.7 million and an aggregate cap of $248.9 million. To date,neither the deductible nor the aggregate cap has been depleted materially.

 

For five years after the closing of the ForestProducts Acquisition, OfficeMax may not compete with us anywhere in the UnitedStates in the businesses purchased in the Forest Products Acquisition, nor mayOfficeMax induce or attempt to induce any customer to terminate or reduce itsrelationship with us.

 

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***Paper SupplyAgreement With OfficeMax***

 

Under this agreement, OfficeMax will purchase from usall of its North American requirements for cut-size office paper, to the extentwe choose to supply such paper to them, through December 2012 at pricesapproximating market prices. The agreement renews automatically foradditional one-year terms unless either party gives notice of termination. Ifthe agreement terminates, OfficeMax will be required to ratably phase out itspurchases of our paper over a four-year period beginning on January 1following the last year of the agreement. The earliest the four-year phaseoutperiod could begin is January 1, 2013. Ownership of our side of thisagreement was held by our subsidiary, Boise White Paper, L.L.C., which wastransferred on February 22, 2008, to a subsidiary of Boise Inc. inconnection with our sale of paper and containerboard assets to that firm.Accordingly, we held no direct interest in this agreement after February 22,2008.

 

***AdditionalConsideration Agreement With OfficeMax***

 

In connection with the Forest Products Acquisition, weentered into a six-year agreement with OfficeMax. Under the agreement, OfficeMaxwill pay us $710,000 for each dollar by which the average market price per tonof a specified benchmark grade of cut-size office paper during each 12-monthperiod ending on the anniversary of the closing of the Forest ProductsAcquisition, or the annual paper price, is less than $800 per ton. In addition,we will pay $710,000 to OfficeMax for each dollar by which the annual paperprice exceeds $920 per ton. Neither party will be obligated to makepayments under the agreement (i) in excess of $45.0 million in anyone year or (ii) in excess of $125.0 million in the aggregate duringthe first four years following the closing, $115.0 million in theaggregate if the determination is made during the fifth year following theclosing, and $105.0 million in the aggregate if the determination is madeduring the sixth year following the closing, in each case net of paymentsreceived (the Maximum Aggregate Consideration). If a party has paid the MaximumAggregate Consideration during the first four years following the closing, theparty will not be entitled to recoup in years five or six the amount previouslypaid in excess of the Maximum Aggregate Consideration applicable in years fiveand six. This agreement will expire as of the earliest of (i) six yearsafter the closing, (ii) the sale of 50% or more of the outstanding commonequity (as measured on October 29, 2004) of Boise Cascade, L.L.C., oursubsidiary, in an underwritten public offering, (iii) the sale or transferby Boise Cascade, L.L.C., of more than 50% of its common equity in Boise WhitePaper, L.L.C. (the subsidiary that operates our Paper business), and (iv) terminationby either party upon a payment default by the other party not cured within30 days.

 

After each anniversary ofthe closing, we review paper prices with the provisions of the AdditionalConsideration Agreement to determine whether any amounts are owed or receivableunder the agreement. For the first and second anniversary periods, which ended October 29,2005 and 2006, neither Boise nor OfficeMax owed additional consideration forthe purchase price. Based on paper prices during the third anniversary periodended October 29, 2007, we paid OfficeMax $32.5 million under theAdditional Consideration Agreement, which increased goodwill in our Papersegment. Pursuant to the Additional Consideration Agreement,the payment was treated as an adjustment to the purchase price and, therefore,was not be reported in our Consolidated Statement of Income but will beincluded in earnings before interest, taxes, depreciation and amortization(EBITDA) for purposes of certain covenants under our debt agreements.

 

This agreement terminated on February 22,2008 because of our transfer of our paper and containerboard assets to BoiseInc., and no further payments are required by either party.

 

***Securityholders Agreement WithOfficeMax***

 

In connection with the Forest Products Acquisition,we entered into a Securityholders Agreement with OfficeMax. This agreementdescribes the rights and responsibilities regarding OfficeMax’s equityownership in Boise Cascade Holdings, L.L.C. Specifically, under the agreement,OfficeMax has the right to appoint one director to our board of directors. Theagreement also requires that OfficeMax obtain our consent before transferringits equity interest in our company. The agreement grants “tag-along” rights,which entitle OfficeMax to participate in sales of equity interests to thirdparties. In addition, the agreement grants “drag-along” rights, which entitleOfficeMax to require the other equity holders to participate in sales of all orsubstantially all of the equity interests in our company. If we propose toissue additional equity securities, we will generally be required to offerOfficeMax a pro rata portion of the securities issued in such a transaction.The agreement will terminate in a liquidation or dissolution of the 

 

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company, in an initial public offering, or in a sale of all orsubstantially all of the company’s stock or assets.

 

***Registration RightsAgreement With FPH and OfficeMax***

 

In connection with the Forest Products Acquisition, weentered into a Registration Rights Agreement with FPH and OfficeMax withrespect to the equity interests they own in us. Under the Registration RightsAgreement, (i) FPH has the right to demand that we effect an unlimitednumber of registrations of its equity interests, whether pursuant to along-form registration statement or a short-form registration, and pay allexpenses, other than underwriting discounts and commissions, related to suchregistrations and (ii) after the earlier of the fifth anniversary of thecompletion of the Forest Products Acquisition or completion of an initialpublic offering by us, 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. 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. FPHand OfficeMax have agreed not to effect any public sale or private placement ofany of 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.

 

***Other***

 

For a description ofother relationships the company has with its directors and executive officers,refer to Item 10*. Directors, ExecutiveOfficers, and Corporate Governance* and Item 11*. Executive Compensation* of this Form 10-K. Inparticular, see the portion of the *Compensation Discussionand Analysis* of Item 11, titled *Long-TermIncentive Compensation (Management Equity Plan),* for a disclosure ofamounts paid by FPH to Named Executive Officers to repurchase a portion of theFPH Series B equity units held by each such individual.

 

On December 31, 2008, we purchased a condominiumin Boise, Idaho, which was used by our former chief executive officer, W.Thomas Stephens, as his Boise residence. The purchase was made pursuant to therequirements of Mr. Stephens’ retirement agreement with the company (seeItem 11.*Executive Compensation — CompensationDiscussion and Analysis — Agreements With, and Potential Payments to, NamedExecutive Officers*). The purchase price of $935,000 was the fairmarket value of the property, as determined by an appraiser selected by thecompany. The seller was Alice W. Stephens, Mr. Stephens’ spouse, whowas the sole owner of the property.

 

***ITEM 14.******                 ******PRINCIPAL ACCOUNTING FEES ANDSERVICES***

 

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 financial assurance agreed-upon procedurereports and technical accounting research and consultation). Management submitsto the audit committee a list of proposed audit-related and other nonauditservices and associated fees that it recommends be provided by KPMG for thefiscal year. Management and KPMG each confirm to the committee that all theservices on the list are permissible under applicable legal requirements. Thecommittee reviews the proposed services and fees and, if agreed to by committeemembers, approves those services and associated fees. KPMG periodically informsthe audit committee of the services it provides pursuant to this approvalprocess.

 

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.

 

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The company has neverused KPMG for any of the following nonaudit services:

 

·                  Bookkeepingor other services related to our accounting records or financial statements;

 

·                  Financialinformation systems design and implementation;

 

·                  Appraisalor valuation services, fairness opinions, or contribution-in-kind reports;

 

·                  Actuarialservices;

 

·                  Internalaudit outsourcing services;

 

·                  Managementfunctions or human resources;

 

·                  Brokeror dealer, investment advisor, or investment banking services; or

 

·                  Legalservices and expert services unrelated 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**         | ** ** | **2008**    | ** ** | **2007** | ** ** |
|                    |       |        |       |   |   |
| Audit fees (a)          |       | $           | 955,000    |   | $ | 2,082,000 |   |
| Audit-related  fees (b) |       | 750         |       | 33,000 |   |
| Tax fees (c)            |       | —      |       | — |   |
| All other fees  (d)     |       | —      |       | — |   |
|                         |            |             |            |  |  |  |  |

 

----

(a)                                  Professional audit services include KPMG’s audit of the company’s annualconsolidated financial statements for 2008 and 2007; its review of theconsolidated financial statements included in the company’s Forms 10-Q; itsaudit of the company’s subsidiary annual consolidated financial statements;assistance with registration statements, comfort letters, consents, and otherservices pertaining to Securities and Exchange Commission matters; andconsultation on accounting standards.

 

(b)                                 Audit-related feesinclude attestation and other services traditionally performed by theregistrants’ independent accountants (such as certain agreed-upon proceduresreports for environmental assurance letters).

 

(c)                                  None.

 

(d)           None.

 

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**PART IV**

 

***ITEM 15.            EXHIBITSAND FINANCIAL STATEMENT SCHEDULES***

 

(a)         The following documents are filed as apart of this Form 10-K:

 

(1)         ConsolidatedFinancial Statements

 

The Consolidated Financial Statements, the Notes toConsolidated Financial Statements, and the Report of Independent RegisteredPublic Accounting Firm for Boise Cascade Holdings, L.L.C., are presented in“Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

 

·        Consolidated Balance Sheets as of December 31,2008 and 2007.

 

·        Consolidated Statements of Income (Loss)for the years ended December 31, 2008, 2007, and 2006.

 

·        Consolidated Statements of Cash Flowsfor the years ended December 31, 2008, 2007, and 2006.

 

·        Consolidated Statements of Capital forthe years ended December 31, 2008, 2007, and 2006.

 

·        Notes to Consolidated FinancialStatements.

 

·        Report of Independent Registered PublicAccounting Firm.

 

(2)         FinancialStatement Schedules

 

All financial statement schedules have been omitted becausethey are inapplicable, not required, or shown in the consolidated financialstatements and notes in “Item 8. Financial Statements and SupplementaryData” of this Form 10-K.

 

(3)         Exhibits

 

A list of the exhibits required to be filed as part of thisreport is set forth in the Index to Exhibits and is incorporated by reference.

 

(b)         See Index to Exhibits.

 

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**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/ Duane C. McDougall  |
|   |                           |                    |
|   |                           | Duane C. McDougall      |
|   |                           | Chief Executive Officer |
|        |                                |                         |  |

 

Dated:  March 10,2009

 

Pursuant to the requirements of the Securities Exchange Actof 1934, this report has been signed below on March 10, 2009 by thefollowing persons on behalf of the registrant and in the capacities indicated.

 
| **Signature** | ** ** | **Capacity**                      |
|---------------|------------|-----------------------------------|
|          |       |                              |   |   |
| **(i)**       | ** ** | **Principal Executive Officer:**  | ** ** | ** ** |
|          |       |                              |   |   |
|          |       | /s/ Duane C. McDougall            |   | Chief Executive Officer |
|          |       |                              |   |   |
|          |       | Duane C. McDougall                |   |   |
|          |       |                              |   |   |
| **(ii)**      | ** ** | **Principal Financial Officer:**  | ** ** | ** ** |
|          |       |                              |   |   |
|          |       | /s/ Thomas E. Carlile             |   | Executive Vice President and Chief  Financial Officer |
|          |       |                              |   |   |
|          |       | Thomas E. Carlile                 |   |   |
|          |       |                              |   |   |
| **(iii)**     | ** ** | **Principal Accounting Officer:** | ** ** | ** ** |
|          |       |                              |   |   |
|          |       | /s/ Bernadette M. Madarieta       |   | Vice President and Controller |
|          |       |                              |   |   |
|          |       | Bernadette M. Madarieta           |   |   |
|          |       |                              |   |   |
| **(iv)**      | ** ** | **Directors:**                    | ** ** | ** ** |
|          |       |                              |   |   |
|          |       | /s/ Duane C. McDougall            |   | /s/ Matthew W. Norton |
|          |       |                              |   |   |
|          |       | Duane C. McDougall                |   | Matthew W. Norton |
|          |       |                              |   |   |
|          |       | /s/ Matthew R. Broad              |   | /s/ Thomas S. Souleles |
|          |       |                              |   |   |
|          |       | Matthew R. Broad                  |   | Thomas S. Souleles |
|          |       |                              |   |   |
|          |       | /s/ John W. Madigan               |   |   |
|          |       |                              |   |   |
|          |       | John W. Madigan                   |   |   |
|          |       |                              |   |   |
|          |       | /s/ Christopher J. McGowan        |   |   |
|          |       |                              |   |   |
|          |       | Christopher J. McGowan            |   |   |
|          |       |                              |   |   |
|          |       | /s/ Samuel M. Mencoff             |   |   |
|          |       |                              |   |   |
|          |       | Samuel M. Mencoff                 |   |   |

 

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**BOISECASCADE HOLDINGS, L.L.C.**

 

**INDEX TO EXHIBITS**

 

Filed or FurnishedWith the Annual Report on Form 10-K for the Year Ended December 31,2008

 
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | **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 December 21, 2004, between Boise Land & Timber  Corp., Boise Cascade, Meriwether Investments LLC, Forest Products Holdings,  L.L.C., and Forest Capital Partners, LLC                                                                                                                                                                                                                      |       | S-1  Amend. No. 3                  |       | 333-122770      |   | 2.2 |   | 5/2/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 2.3                 |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 2.4                 |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 2.5                 |       | 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                                                                                                                                                                                              |       | 8-K                                     |       | 333-122770      |   | 10.5 |   | 2/28/08 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                              | ** ** | **Incorporated by Reference** |       |            |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                            | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing Date** | ** ** | **Filed  Herewith** |
|                |       | Transportation Holdings  Corp., Aldabra 2 Acquisition Corp., and Aldabra Sub LLC                                        |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 2.6                 |       | Certificate of  Conversion from a Domestic Corporation to a Limited Liability Company                                   |       | 8-K                                     |       | 333-122770      |   | 2.1 |   | 12/27/05 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 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 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 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 White Paper, L.L.C.                                                                  |       | S-4                                     |       | 333-125768      |   | 3.11 |   | 6/13/05 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 3.10                |       | Operating Agreement of  Boise White Paper, L.L.C., effective September 20, 2004                                    |       | S-4                                     |       | 333-125768      |   | 3.12 |   | 6/13/05 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 3.11                |       | Certificate of  Formation of Boise Packaging & Newsprint, L.L.C., dated August 6,  2004                   |       | S-4                                     |       | 333-125768      |   | 3.13 |   | 6/13/05 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 3.12                |       | Operating Agreement of  Boise Packaging & Newsprint, L.L.C., effective September 20,  2004                |       | S-4                                     |       | 333-125768      |   | 3.14 |   | 6/13/05 |   |   |
|                |       |                                                                                                                    |       |                                    |       |            |   |   |   |   |   |   |
| 3.13                |       | Certificate of  Formation of Boise Building Solutions Manufacturing, L.L.C., dated August 6,  2004                 |       | S-4                                     |       | 333-125768      |   | 3.15 |   | 6/13/05 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                  | ** ** | **Incorporated by Reference** |       |            |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.14                |       | Operating Agreement of  Boise Building Solutions Manufacturing, L.L.C., effective September 20,  2004                                                                                                  |       | S-4                                     |       | 333-125768      |   | 3.16 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.15                |       | Certificate of  Formation of Boise Building Solutions Distribution, L.L.C., dated August 26,  2004                                                                                                     |       | S-4                                     |       | 333-125768      |   | 3.17 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.16                |       | Operating Agreement of  Boise Building Solutions Distribution, L.L.C., effective September 20,  2004                                                                                                   |       | S-4                                     |       | 333-125768      |   | 3.18 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.17                |       | 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 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.18                |       | Bylaws of Boise  Building Solutions Manufacturing Holdings Corp.                                                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.20 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.19                |       | Amended and Restated  Certificate of Incorporation of BC Chile Investment Corporation dated October 27,  2004                                                                                          |       | S-4                                     |       | 333-125768      |   | 3.21 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.20                |       | Amended and Restated  Bylaws of BC Chile Investment Corporation                                                                                                                                             |       | S-4                                     |       | 333-125768      |   | 3.22 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.21                |       | Amended and Restated  Certificate of Incorporation of BC Brazil Investment Corporation dated October 27,  2004                                                                                         |       | S-4                                     |       | 333-125768      |   | 3.23 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.22                |       | Amended and Restated  Bylaws of BC Brazil Investment Corporation                                                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.24 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.23                |       | Certificate of  Amendment to the Certificate of Incorporation of Boise Cascade Transportation, Inc.,  dated September 8, 2004 (changing name to Boise White Paper Holdings  Corp.)                |       | S-4                                     |       | 333-125768      |   | 3.25 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.24                |       | Bylaws of Boise White  Paper Holdings Corp.                                                                                                                                                                 |       | S-4                                     |       | 333-125768      |   | 3.26 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                                        |       |                                    |       |            |   |   |   |   |   |   |
| 3.25                |       | Amended and Restated  Articles of Incorporation to the Certificate of Amendment of Minnesota,  Dakota & Western Railway Company dated October 27, 2004                                        |       | S-4                                     |       | 333-125768      |   | 3.27 |   | 6/13/05 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                   | ** ** | **Incorporated by Reference** |       |            |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                 | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing Date** | ** ** | **Filed  Herewith** |
| 3.26                |       | Amended and Restated  Bylaws of Minnesota, Dakota & Western Railway Company                                                                                                         |       | S-4                                     |       | 333-125768      |   | 3.28 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.27                |       | Amended and Restated Certificate  of Incorporation of International Falls Power Company dated October 27,  2004                                                                         |       | S-4                                     |       | 333-125768      |   | 3.29 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.28                |       | Amended and Restated  Bylaws of International Falls Power Company                                                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.30 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.29                |       | Amended and Restated Certificate of Incorporation of  BC China Corporation dated October 27, 2004                                                                                       |       | S-4                                     |       | 333-125768      |   | 3.31 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.30                |       | Amended and Restated  Bylaws of BC China Corporation                                                                                                                                         |       | S-4                                     |       | 333-125768      |   | 3.32 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.31                |       | Certificate of  Incorporation of Boise Cascade Transportation Holdings Corp. dated September 1,  2004                                                                                   |       | S-4                                     |       | 333-125768      |   | 3.33 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.32                |       | Bylaws of Boise Cascade  Transportation Holdings Corp.                                                                                                                                       |       | S-4                                     |       | 333-125768      |   | 3.34 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.33                |       | Amended and Restated  Certificate of Incorporation of BCT, Inc., dated October 27, 2004                                                                                            |       | S-4                                     |       | 333-125768      |   | 3.35 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.34                |       | Amended and Restated  Bylaws of BCT, Inc.                                                                                                                                               |       | S-4                                     |       | 333-125768      |   | 3.36 |   | 6/13/05 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.35                |       | Certificate of  Incorporation of Bemis Corporation dated July 25, 2006                                                                                                                  |       | 10-K                                    |       | 333-122770      |   | 3.35 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.36                |       | Bylaws of Bemis  Corporation                                                                                                                                                                 |       | 10-K                                    |       | 333-122770      |   | 3.36 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.37                |       | Certificate of  Amendment to the Certificate of Incorporation of Birch Creek Funding  Corporation dated December 12, 2006 (changing name to Boise White Paper  Sales Corp.)             |       | 10-K                                    |       | 333-122770      |   | 3.37 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 3.38                |       | Bylaws of Boise White  Paper Sales Corp. (formerly Birch Creek Funding Corporation)                                                                                                          |       | 10-K                                    |       | 333-122770      |   | 3.38 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
| 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, |       | S-1                                     |       | 333-122770      |   | 4.3 |   | 2/11/05 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | **Incorporated by Reference** |       |            |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------|
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **Form**                                | ** ** | **File Number** | ** ** | **Exhibit  Number** | ** ** | **Filing Date** | ** ** | **Filed  Herewith** |
|                |       | and U.S. Bank National Association, as Trustee                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 9                   |       | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.1                |       | Additional  Consideration Agreement dated October 29, 2004, between Boise Cascade  Corporation (now OfficeMax Incorporated) and Boise Cascade                                                                                                                                                                                                                                                                                                                     |       | S-1                                     |       | 333-122770      |   | 10.1 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.2 (a)            |       | Amended and Restated  Paper Purchase Agreement dated April 28, 2004, between Boise White  Paper, L.L.C., and Boise Cascade Corporation (now OfficeMax Incorporated),  together with the Assignment Assumption and Consent Agreement dated October 29,  2004, between Boise Cascade Corporation (now OfficeMax Incorporated), Boise  White Paper, L.L.C., OfficeMax Contract, Inc., and OfficeMax North  America, Inc.                              |       | S-1

Amend. No. 1                  |       | 333-122770      |   | 10.2 |   | 4/4/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.3                |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.4                |       | Rescission Agreement  dated December 20, 2005, between Boise Cascade, Boise Land &  Timber Holdings Corp., OfficeMax Incorporated, Kooskia Investment  Corporation, and Forest Products Holdings, L.L.C.                                                                                                                                                                                                                                                 |       | 8-K                                     |       | 333-122770      |   | 99.1 |   | 12/27/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.5                |       | Amendment and  Restatement Agreement dated as of May 3, 2007, between Boise Cascade  Holdings, L.L.C., Boise Cascade, L.L.C., the Lenders party thereto, and  JPMorgan Chase Bank, N.A., as Administrative Agent; Including form of Third  Amended and Restated Credit Agreement dated as of May 3, 2007, between  Boise Cascade Holdings, L.L.C., Boise Cascade, L.L.C., the Lenders party  thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent |       | 10-Q                                    |       | 333-122770      |   | 10.2 |   | 5/9/07 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                    |       |            |   |   |   |   |   |   |
| 10.6                |       | Loan and Security  Agreement, dated as of February 22, 2008, by                                                                                                                                                                                                                                                                                                                                                                                                   |       | 8-K                                     |       | 333-122770      |   | 10.6 |   | 2/28/08 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                            | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                                                                                                                                                                                                                                                                                              | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | 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     |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.7                |       | First Amendment to Loan  and Security Agreement dated April 17, 2008                                                                                                                                                                                                                                                                                                             |       | 8-K                            |       | 333-122770       |   | 99.1 |   | 4/21/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.8                |       | Guarantee and Collateral  Agreement dated October 29, 2004, between Boise Cascade Holdings,  L.L.C., Boise Land & Timber Holdings Corp., Boise Cascade, L.L.C.,  Boise Land & Timber Corp., certain of the subsidiaries of Boise  Cascade, L.L.C., and Boise Land & Timber Corp. as identified  therein, and JPMorgan Chase Bank, as Collateral Agent |       | S-1                            |       | 333-122770       |   | 10.7 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.9                |       | Subordinated Guaranty,  dated as of February 22, 2008, by the subsidiary guarantors of Boise  Inc., party thereto                                                                                                                                                                                                                                                                |       | 8-K                            |       | 333-122770       |   | 10.9 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.10               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.11               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.12               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 10.13               |       | Intercompany Promissory  Note dated February 4, 2005, in the                                                                                                                                                                                                                                                                                                                     |       | S-1                            |       | 333-122770       |   | 10.9 |   | 2/11/05 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                       | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                                                                                                                                                                                                                                                                                         | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       | original principal amount of $264,798,660.05 made by  Boise Cascade in favor of Boise Land & Timber Corp.                                                                                                                                                                                                                                                               |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.14               |       | Installment Notes dated  October 29, 2004, in original principal amounts totaling $1,635,000,000  made by Boise Land & Timber, L.L.C., and Boise Land &  Timber II, L.L.C., each a wholly-owned subsidiary of Boise Land &  Timber Corp., in favor of each of Boise Cascade Corporation (now OfficeMax  Incorporated) and Boise Southern Company |       | S-1                            |       | 333-122770       |   | 10.10 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.15               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.16               |       | Restructuring Agreement  and Amendment No. 1 to Securityholders Agreement dated as of  November 10, 2006, between Boise Cascade Holdings, L.L.C., Boise  Cascade, L.L.C., Boise Land & Timber Holdings Corp., Boise  Land & Timber Corp., OfficeMax Incorporated, Kooskia Investment  Corporation, and Forest Products Holdings, L.L.C.              |       | 8-K                            |       | 333-122770       |   | 99.1 |   | 11/16/06 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.17               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.18               |       | Transfer and  Administration Agreement (for securitization of receivables) dated  October 26, 2005, between Boise Cascade, several of its subsidiaries  including Birch Creek Investments, L.L.C., Bank of America, National  Association, Calyon New York Branch, and certain other investors named in  such Agreement                                                     |       | 8-K                            |       | 333-122770       |   | 10.1 |   | 11/1/05 |   |   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                             |       |                           |       |             |   |   |   |   |   |   |
| 10.19               |       | 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 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                                                   | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                                                                                                                                                     | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.20               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.21               |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.22               |       | Outsourcing 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       |   | 10.4 |   | 2/28/08 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.23 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.24 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.25 +             |       | Employment Agreement  dated October 29, 2004, between Boise Cascade and W. Thomas Stephens                                                                                                                                              |       | S-1                            |       | 333-122770       |   | 10.11 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.26 +             |       | Amendment to Employment  Agreement dated February 6, 2008, between Boise Cascade and W. Thomas  Stephens                                                                                                                                |       | 10-K                           |       | 333-122770       |   | 10.14 |   | 2/20/08 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.27 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.28 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                                         |       |                           |       |             |   |   |   |   |   |   |
| 10.29 +             |       | 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 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                              | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                                                | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.30 +             |       | Offer of Future  Employment dated October 1, 2005, by Boise Cascade to Alexander Toeldte                                           |       | 8-K                            |       | 333-122770       |   | 10.1 |   | 10/6/05 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.31 +             |       | Foreign Service Policy  (Relocation) Agreement dated October 1, 2005, between Boise Cascade and  Alexander Toeldte                 |       | 8-K                            |       | 333-122770       |   | 10.2 |   | 10/6/05 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.32 +             |       | Severance Agreement  dated February 6, 2008, between Boise Cascade and Alexander Toeldte                                           |       | 10-K                           |       | 333-122770       |   | 10.17 |   | 2/20/08 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.33 +             |       | 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 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.34 +             |       | Executive Officer  Severance Pay Policy, as amended through November 1, 2007                                                       |       | 8-K                            |       | 333-122770       |   | 99.1 |   | 11/2/07 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.35 +             |       | Boise Cascade  Supplemental Pension Plan, as amended through December 12, 2007                                                     |       | 8-K                            |       | 333-122770       |   | 99.2 |   | 12/18/07 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.36 +             |       | Boise Cascade  Supplemental Early Retirement Plan for Executive Officers, as amended through  December 12, 2007                    |       | 8-K                            |       | 333-122770       |   | 99.3 |   | 12/18/07 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.37 +             |       | Boise Cascade Supplemental Life Plan, as amended  December 19, 2006                                                                |       | 10-K                           |       | 333-122770       |   | 10.20 |   | 3/1/07 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.38 +             |       | Boise Cascade  Supplemental Healthcare Plan for Executive Officers, effective  October 29, 2004                                    |       | S-1                            |       | 333-122770       |   | 10.19 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.39 +             |       | Boise Cascade Financial  Counseling Program, as amended through December 12, 2007                                                  |       | 8-K                            |       | 333-122770       |   | 99.4 |   | 12/18/07 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.40 +             |       | Boise Incentive and  Performance Plan, effective October 29, 2004                                                                  |       | S-1                            |       | 333-122770       |   | 10.16 |   | 2/11/05 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.41 +             |       | 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 |   |   |
|                |       |                                                                                                                                    |       |                           |       |             |   |   |   |   |   |   |
| 10.42 +             |       | Boise Cascade 2004  Deferred Compensation Plan, as amended through December 12, 2007                                               |       | 8-K                            |       | 333-122770       |   | 99.1 |   | 12/18/07 |   |   |

 

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| ** **          | ** ** | ** **                                                                                                                                                                                                                     | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                                                                                                                                       | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
| 10.43 +             |       | Boise Cascade Directors  Deferred Compensation Plan, as amended through December 12, 2007                                                                                                                                 |       | 10-K                           |       | 333-122770       |   | 10.27 |   | 2/20/08 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.44 +             |       | Management Equity  Agreement dated November 29, 2004, between Forest Products Holdings,  L.L.C., and each of the persons listed on the signature pages thereto                                                       |       | S-1  Amend. No. 3         |       | 333-122770       |   | 10.25 |   | 5/2/05 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.45 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.46 +             |       | Amendment to Management  Equity Agreement entered into February 20, 2009                                                                                                                                                  |       | 8-K                            |       | 333-122770       |   | 10.2 |   | 2/26/09 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.47 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.48 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.49 +             |       | 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 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.50 +             |       | Amendment to Director  Equity Agreement entered into February 20, 2009                                                                                                                                                    |       | 8-K                            |       | 333-122770       |   | 10.3 |   | 2/26/09 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 10.51 +             |       | Directors Compensation  Summary Sheet                                                                                                                                                                                          |       | 8-K                            |       | 333-122770       |   | 10.1 |   | 8/2/05 |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 11                  |       | Inapplicable                                                                                                                                                                                                                   |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 12                  |       | Ratio of Earnings to  Fixed Charges                                                                                                                                                                                            |       |                           |       |             |   |   |   |   |   | X |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 13                  |       | None                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 14 (b)              |       | Boise Cascade Code of  Ethics                                                                                                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |
| 16                  |       | None                                                                                                                                                                                                                           |       |                           |       |             |   |   |   |   |   |   |

 

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| ** **          | ** ** | ** **                                                                                                            | ** ** | **Incorporated  by Reference** | ** ** | ** **       |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------|
| **Exhibit  Number** | ** ** | **Exhibit  Description**                                                                                              | ** ** | **Form**                       | ** ** | **File  Number** | ** ** | **Exhibit  Number** | ** ** | **Filing  Date** | ** ** | **Filed  Herewith** |
| 18                  |       | None                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 21                  |       | Boise Cascade  Subsidiaries                                                                                           |       |                           |       |             |   |   |   |   |   | X |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 22                  |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 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 |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 32                  |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 33                  |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 34                  |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 35                  |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 99                  |       | Consolidated Financial  Statements of Boise Inc., pursuant to Rule 3-09 of Regulation S-X  (filed herewith) |       |                           |       |             |   |   |   |   |   | X |
|                |       |                                                                                                                  |       |                           |       |             |   |   |   |   |   |   |
| 100                 |       | Inapplicable                                                                                                          |       |                           |       |             |   |   |   |   |   |   |

 

----

+                                           Indicatesexhibits that constitute management contracts or compensatory plans orarrangements.

 

(a)                                    Confidentialinformation in this exhibit has been omitted and filed separately with theSecurities and Exchange Commission pursuant to a confidential treatment requestunder Rule 406 of the Securities Act of 1933, as amended.

 

(b)                                   OurCode of Ethics can be found on our website (www.bc.com) by clicking on “AboutBoise” and then “Code of Ethics.”

 

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