** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549**

** **

**FORM 10-Q**

** **

| **x**                                                   | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**   |
|---------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
|                                                    |       |                                                                                                     |
| **For the quarterly period ended  March 31, 2008** |
|                                                    |       |                                                                                                     |
| **o**                                                   | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

** **

**For the transition period from                      to                      **

** **

**Commission File Number:  333-122770**

 
| **Boise Cascade Holdings, 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.) |

 
| **1111  West Jefferson Street****Suite 300  Boise, Idaho 83702-5389**(Address of principal  executive offices) (Zip Code) |
|--------------------------------------------------------------------------------------------------------------------------------|

 
| **(208)  384-6161**                                        |
|------------------------------------------------------------|
| (Registrant’s  telephone number, including area code) |

 

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

 

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

 

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

 

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

 

The registrant, a limitedliability company, has no voting or nonvoting equity held by nonaffiliates andno common stock outstanding. Equity units issued and outstanding on April 30,2008, were as follows:

 

| **Series**                  | ** ** | **Units Outstanding as of April 30, 2008** |
|-----------------------------|------------|-------------------------------------------------|
| Series A  Common Units |       | 66,000,000                                      |
| Series B  Common Units |       | 540,178,763                                     |
| Series C  Common Units |       | 22,784,727                                      |

 

These units areneither registered nor publicly traded.

 

 

----

 

**Table ofContents**

 

**PART I—FINANCIAL INFORMATION**

 
| Item  1.      |                                                        | Consolidated  Financial Statements                                                          | 1                                                               |
|---------------|-------------------------------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------|
|          |                                                        | Notes to  Unaudited Quarterly Consolidated Financial Statements                             | 6                                                               |
|          |                                                        |   1.                                                                              | Nature of  Operations and Basis of Presentation                 | 6 |
|          |                                                        |   2.                                                                              | Sale of Our  Paper and Packaging & Newsprint Assets    | 6 |
|          |                                                        |   3.                                                                              | Assets and  Liabilities Held for Sale                           | 7 |
|          |                                                        |   4.                                                                              | Transactions  With Related Parties                              | 8 |
|          |                                                        |   5.                                                                              | Vendor and  Customer Rebates and Allowances                     | 9 |
|          |                                                        |   6.                                                                              | Other (Income)  Expense, Net                                    | 10 |
|          |                                                        |   7.                                                                              | Leases                                                          | 10 |
|          |                                                        |   8.                                                                              | Income Taxes                                                    | 10 |
|          |                                                        |   9.                                                                              | Inventories                                                     | 11 |
|          |                                                        | 10.                                                                                         | Property and  Equipment, Net                                    | 11 |
|          |                                                        | 11.                                                                                         | Goodwill and  Intangible Assets                                 | 11 |
|          |                                                        | 12.                                                                                         | Investment in  Equity Affiliate                                 | 12 |
|          |                                                        | 13.                                                                                         | Asset  Retirement Obligations                                   | 13 |
|          |                                                        | 14.                                                                                         | Debt                                                            | 14 |
|          |                                                        | 15.                                                                                         | Financial Instruments                                           | 15 |
|          |                                                        | 16.                                                                                         | New and  Recently Adopted Accounting Standards                  | 17 |
|          |                                                        | 17.                                                                                         | Retirement and  Benefit Plans                                   | 17 |
|          |                                                        | 18.                                                                                         | Redeemable Equity  Units                                        | 18 |
|          |                                                        | 19.                                                                                         | Segment Information                                             | 19 |
|          |                                                        | 20.                                                                                         | Commitments and  Guarantees                                     | 20 |
|          |                                                        | 21.                                                                                         | Consolidating Guarantor and Nonguarantor Financial  Information | 22 |
|          |                                                        | 22.                                                                                         | Legal Proceedings and Contingencies                             | 31 |
|          |                                                        |                                                                                        |                                                            |   |
| Item 2.  |                                                        | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 31                                                              |
|          |                                                        |                                                                                        | Understanding  Our Financial Information                        | 31 |
|          |                                                        |                                                                                        | Background and Executive Overview                               | 31 |
|          |                                                        |                                                                                        | Sale of Our Paper and Packaging & Newsprint  Assets    | 32 |
|          |                                                        |                                                                                        | Effects of the Sale                                             | 33 |
|          |                                                        |                                                                                        | Recent Trends and Operational Outlook                           | 34 |
|          |                                                        |                                                                                        | Factors That Affect Our Operating Results                       | 35 |
|          |                                                        |                                                                                        | Our Operating Results                                           | 39 |
|          |                                                        |                                                                                        | Industry Mergers and Acquisitions                               | 43 |
|          |                                                        |                                                                                        | Acquisitions                                                    | 43 |
|          |                                                        |                                                                                        | Divestitures                                                    | 44 |
|          |                                                        |                                                                                        | Liquidity and Capital Resources                                 | 44 |
|          |                                                        |                                                                                        | Contractual  Obligations                                        | 47 |
|          |                                                        |                                                                                        | Off-Balance-Sheet Activities                                    | 49 |
|          |                                                        |                                                                                        | Guarantees                                                      | 49 |
|          |                                                        |                                                                                        | Environmental                                                   | 49 |
|          |                                                        |                                                                                        | Critical Accounting Estimates                                   | 49 |
|          |                                                        |                                                                                        | New and Recently Adopted Accounting Standards                   | 49 |
|          |                                                        |                                                                                        |                                                            |   |
| Item 3.  | Quantitative  and Qualitative Disclosures About Market Risk | 50                                                                                          |
|          |                                                        |                                                                                        |                                                            |   |
| Item 4T. | Controls and Procedures                                     | 52                                                                                          |
|          |                                                        |                                                                                        |
|          | **PART II—OTHER  INFORMATION**                    |                                                                                        |
|          |                                                        |                                                                                        |
| Item 1.  |                                                        |                                                                                        | Legal Proceedings                                               | 54 |
|          |                                                        |                                                                                        |                                                            |   |
| Item 1A. |                                                        |                                                                                        | Risk Factors                                                    | 54 |
|               |                                                             |                                                                                             |                                                                 |  |  |

 

ii

----

 
| Item 2.      |   |   | Unregistered  Sales of Equity Securities and Use of Proceeds | 58     |
|--------------|--------|--------|--------------------------------------------------------------|--------|
|         |   |   |                                                         |   |
| Item 3.      |   |   | Defaults Upon  Senior Securities                             | 58     |
|         |   |   |                                                         |   |
| Item 4.      |   |   | Submission  of Matters to a Vote of Securityholders          | 58     |
|         |   |   |                                                         |   |
| Item  5.     |   |   | Other  Information                                           | 58     |
|         |   |   |                                                         |   |
| Item 6. |   |   | Exhibits                                                     | 58     |

 

All reports we file with the Securities and ExchangeCommission (SEC) are available free of charge via Electronic Data GatheringAnalysis and Retrieval (EDGAR) through the SEC website at www.sec.gov. We alsoprovide copies of our SEC filings at no charge upon request and make electroniccopies of our reports available through our website at www.bc.com as soon asreasonably practicable after filing such material with the SEC.

 

iii

----

 
| **PART 1—FINANCIAL INFORMATION** |
|--------------------------------------------|

 

***ITEM 1.             CONSOLIDATEDFINANCIAL STATEMENTS***

 

**Boise Cascade Holdings,L.L.C.Consolidated Statements of Income (Loss)**

**(unaudited)**

** **
| ** **                                                       | ** ** | **Three Months Ended  March 31** | ** **  |
|------------------------------------------------------------------|------------|-------------------------------------------------|-------------|
| ** **                                                       | ** ** | **2008**                                        | ** **  | **2007** | ** ** |
| ** **                                                       | ** ** | ** **                                      | ** **  | ** ** | ** ** |
|                                                             |       | (thousands)                                     |        |
| **Sales**                                                        |       |                                            |        |   |   |
| Trade                                                            |       | $                                               | 880,800     |   | $ | 1,163,173 |   |
| Related parties                                                  |       | 95,782                                          |        | 157,795 |   |
|                                                             |       | 976,582                                         |        | 1,320,968 |   |
|                                                             |       |                                            |        |   |   |
| **Costs  and expenses**                                          |       |                                            |        |   |   |
| Materials,  labor, and other operating expenses                  |       | 886,838                                         |        | 1,156,899 |   |
| Depreciation,  amortization, and depletion                       |       | 10,035                                          |        | 40,360 |   |
| Selling and distribution expenses                                |       | 63,365                                          |        | 68,408 |   |
| General and  administrative expenses                             |       | 15,630                                          |        | 19,495 |   |
| Gain on sale of  Paper and Packaging & Newsprint Assets |       | (8,063                                          | )           | — |   |
| Other (income)  expense, net                                     |       | (942                                            | )           | 2,546 |   |
|                                                             |       | 966,863                                         |        | 1,287,708 |   |
|                                                             |       |                                            |        |   |   |
| **Income  from operations**                                      |       | 9,719                                           |        | 33,260 |   |
|                                                             |       |                                            |        |   |   |
| Equity in net  loss of affiliate                                 |       | (8,552                                          | )           | — |   |
| Foreign exchange  gain (loss)                                    |       | (613                                            | )           | 242 |   |
| Change in fair  value of contingent value rights                 |       | (4,773                                          | )           | — |   |
| Change in fair  value of interest rate swaps                     |       | (6,284                                          | )           | — |   |
| Interest expense                                                 |       | (15,381                                         | )           | (22,343 | ) |
| Interest income                                                  |       | 2,601                                           |        | 601 |   |
|                                                             |       | (33,002                                         | )           | (21,500 | ) |
|                                                             |       |                                            |        |   |   |
| **Income  (loss) before income taxes**                           |       | (23,283                                         | )           | 11,760 |   |
| Income tax  provision                                            |       | (1,155                                          | )           | (1,223 | ) |
| **Net  income (loss)**                                           | ** ** | **$**                                           | **(24,438** | **)** | **$** | **10,537** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

1

----

 

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

**Consolidated Balance Sheets**

(unaudited)

 
| ** **                                        | ** ** | **March 31,  2008** | ** **    | **December 31,  2007** | ** ** |
|---------------------------------------------------|------------|--------------------------|---------------|-----------------------------|------------|
|                                              |       |                     |          |                        |       |
|                                              |       | (thousands)              |          |
| **ASSETS**                                        |       |                     |          |                        |       |
|                                              |       |                     |          |                        |       |
| **Current**                                       |       |                     |          |                        |       |
| Cash and cash  equivalents                        |       | $                        | 151,100       |                        | $          | 57,623 |   |
| Restricted cash                                   |       | 183,290                  |          | —                      |       |
| Receivables                                       |       |                     |          |                        |       |
| Trade, less  allowances of $1,906 and $1,664 |       | 161,764                  |          | 115,209                     |       |
| Related parties                                   |       | 7,172                    |          | 9                           |       |
| Other                                             |       | 9,107                    |          | 7,458                       |       |
| Inventories                                       |       | 334,906                  |          | 342,015                     |       |
| Assets held for  sale                             |       | —                   |          | 1,853,039                   |       |
| Other                                             |       | 7,803                    |          | 5,426                       |       |
|                                              |       | 855,142                  |          | 2,380,779                   |       |
|                                              |       |                     |          |                        |       |
| **Property**                                      |       |                     |          |                        |       |
| Property and  equipment, net                      |       | 306,417                  |          | 313,117                     |       |
| Fiber farms and  deposits                         |       | 25,890                   |          | 24,010                      |       |
|                                              |       | 332,307                  |          | 337,127                     |       |
|                                              |       |                     |          |                        |       |
| **Investment  in equity affiliate**               |       | 268,873                  |          | —                      |       |
| **Note  receivable from related party**           |       | 58,793                   |          | —                      |       |
| **Deferred  financing costs**                     |       | 11,703                   |          | 23,074                      |       |
| **Goodwill**                                      |       | 12,170                   |          | 12,170                      |       |
| **Intangible  assets, net**                       |       | 9,563                    |          | 9,668                       |       |
| **Other  assets**                                 |       | 9,057                    |          | 11,374                      |       |
| **Total  assets**                                 | ** ** | **$**                    | **1,557,608** | ** **                  | **$**      | **2,774,192** | ** ** |

 

See accompanying notes tounaudited quarterly consolidated financial statements.

 

2

----

 

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

**Consolidated Balance Sheets (continued)**

(unaudited)

 
| ** **                                                                                                       | ** ** | **March 31,  2008** | ** **    | **December 31,  2007** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|--------------------------|---------------|-----------------------------|------------|
|                                                                                                             |       |                     |          |                        |       |
|                                                                                                             |       | (thousands)              |          |
| **LIABILITIES  AND CAPITAL**                                                                                     |       |                     |          |                        |       |
|                                                                                                             |       |                     |          |                        |       |
| **Current**                                                                                                      |       |                     |          |                        |       |
| Short-term  borrowings                                                                                           |       | $                        | —        |                        | $          | 10,500 |   |
| Current portion  of long-term debt                                                                               |       | 160,000                  |          | 47,250                      |       |
| Accounts payable                                                                                                 |       |                     |          |                        |       |
| Trade                                                                                                            |       | 154,902                  |          | 141,459                     |       |
| Related parties                                                                                                  |       | 9,587                    |          | 43                          |       |
| Accrued  liabilities                                                                                             |       |                     |          |                        |       |
| Compensation and  benefits                                                                                       |       | 36,464                   |          | 36,909                      |       |
| Interest payable                                                                                                 |       | 13,418                   |          | 7,140                       |       |
| Other                                                                                                            |       | 83,977                   |          | 29,959                      |       |
| Liabilities  related to assets held for sale                                                                     |       | —                   |          | 331,636                     |       |
|                                                                                                             |       | 458,348                  |          | 604,896                     |       |
|                                                                                                             |       |                     |          |                        |       |
| **Debt**                                                                                                         |       |                     |          |                        |       |
| Long-term debt,  less current portion                                                                            |       | 304,224                  |          | 1,113,313                   |       |
|                                                                                                             |       |                     |          |                        |       |
| **Other**                                                                                                        |       |                     |          |                        |       |
| Compensation and  benefits                                                                                       |       | 43,508                   |          | 46,981                      |       |
| Other long-term  liabilities                                                                                     |       | 10,587                   |          | 17,097                      |       |
|                                                                                                             |       | 54,095                   |          | 64,078                      |       |
|                                                                                                             |       |                     |          |                        |       |
| **Redeemable  equity units**                                                                                     |       |                     |          |                        |       |
| Series B  equity units – 9,822,162 units and 16,622,421 units outstanding                         |       | 9,891                    |          | 16,992                      |       |
| Series C  equity units – 22,784,727 units and 39,069,411 units outstanding                        |       | 6,317                    |          | 9,489                       |       |
|                                                                                                             |       | 16,208                   |          | 26,481                      |       |
|                                                                                                             |       |                     |          |                        |       |
| **Commitments  and contingent liabilities**                                                                      |       |                     |          |                        |       |
|                                                                                                             |       |                     |          |                        |       |
| **Capital**                                                                                                      |       |                     |          |                        |       |
| Series A  equity units – no par value; 66,000,000 units authorized and outstanding                |       | 76,332                   |          | 78,463                      |       |
| Series B  equity units – no par value; 550,000,000 units authorized and 530,356,601  units outstanding |       | 648,401                  |          | 876,693                     |       |
| Series C  equity units – no par value; 44,000,000 units and 44,000,000 units authorized                |       | —                   |          | 10,268                      |       |
| **Total  capital**                                                                                               |       | 724,733                  |          | 965,424                     |       |
|                                                                                                             |       |                     |          |                        |       |
| **Total  liabilities and capital**                                                                               | ** ** | **$**                    | **1,557,608** | ** **                  | **$**      | **2,774,192** | ** ** |

 

See accompanying notes tounaudited quarterly consolidated financial statements.

 

3

----

 

**BoiseCascade Holdings, L.L.C.**

**Consolidated Statements of Cash Flows**

(unaudited)

** **
| ** **                                                                       | ** ** | **Three Months Ended  March 31** | ** **  |
|----------------------------------------------------------------------------------|------------|-------------------------------------------------|-------------|
| ** **                                                                       | ** ** | **2008**                                        | ** **  | **2007** | ** ** |
| ** **                                                                       | ** ** | **(thousands)**                                 | ** **  |
| **Cash  provided by (used for) operations**                                      |       |                                            |        |   |   |
| Net income  (loss)                                                               |       | $                                               | (24,438     | ) | $ | 10,537 |   |
| Items in net  income (loss) not using (providing) cash                           |       |                                            |        |   |   |
| Equity in net  loss of affiliate                                                 |       | 8,552                                           |        | — |   |
| Depreciation,  depletion, and amortization of deferred financing costs and other |       | 10,378                                          |        | 40,084 |   |
| Related-party  interest income                                                   |       | (986                                            | )           | — |   |
| Deferred income  taxes                                                           |       | 54                                              |        | 493 |   |
| Pension and  other postretirement benefit expense                                |       | 5,007                                           |        | 6,066 |   |
| Change in fair  value of contingent value rights                                 |       | 4,773                                           |        | — |   |
| Change in fair  value of interest rate swaps                                     |       | 6,284                                           |        | — |   |
| Management  equity units expense                                                 |       | 347                                             |        | 822 |   |
| (Gain) loss on  sale of assets, net                                              |       | (10,972                                         | )           | 999 |   |
| Other                                                                            |       | 579                                             |        | 194 |   |
| Decrease  (increase) in working capital, net of dispositions                     |       |                                            |        |   |   |
| Receivables                                                                      |       | (75,192                                         | )           | (56,662 | ) |
| Inventories                                                                      |       | 12,765                                          |        | (20,309 | ) |
| Prepaid expenses                                                                 |       | (1,646                                          | )           | 4,234 |   |
| Accounts payable  and accrued liabilities                                        |       | 21,143                                          |        | 19,466 |   |
| Pension and  other postretirement benefit payments                               |       | (20,716                                         | )           | (339 | ) |
| Current and  deferred income taxes                                               |       | 1,403                                           |        | 771 |   |
| Other                                                                            |       | (155                                            | )           | 4,397 |   |
| Cash provided by  (used for) operations                                          |       | (62,820                                         | )           | 10,753 |   |
|                                                                             |       |                                            |        |   |   |
| **Cash  provided by (used for) investment**                                      |       |                                            |        |   |   |
| Proceeds from  sale of assets, net of cash contributed                           |       | 1,227,327                                       |        | 3,384 |   |
| Expenditures for  property and equipment                                         |       | (18,219                                         | )           | (47,242 | ) |
| Increase in  restricted cash                                                     |       | (183,290                                        | )           | — |   |
| Other                                                                            |       | (1,019                                          | )           | 166 |   |
| Cash provided by  (used for) investment                                          |       | 1,024,799                                       |        | (43,692 | ) |
|                                                                             |       |                                            |        |   |   |
| **Cash  provided by (used for) financing**                                       |       |                                            |        |   |   |
| Issuances of  long-term debt                                                     |       | 229,224                                         |        | 100,000 |   |
| Payments of  long-term debt                                                      |       | (925,563                                        | )           | (40,000 | ) |
| Short-term  borrowings                                                           |       | (10,500                                         | )           | (3,200 | ) |
| Tax distributions  to members                                                    |       | (127,342                                        | )           | (2,753 | ) |
| Repurchase of  management equity units                                           |       | (18,289                                         | )           | (94 | ) |
| Cash paid for  termination of interest rate swaps                                |       | (11,918                                         | )           | — |   |
| Other                                                                            |       | (4,114                                          | )           | (7 | ) |
| Cash provided by  (used for) financing                                           |       | (868,502                                        | )           | 53,946 |   |
|                                                                             |       |                                            |        |   |   |
| **Increase  in cash and cash equivalents**                                       |       | 93,477                                          |        | 21,007 |   |
|                                                                             |       |                                            |        |   |   |
| **Balance  at beginning of the period**                                          |       | 57,623                                          |        | 45,169 |   |
|                                                                             |       |                                            |        |   |   |
| **Balance  at end of the period**                                                | ** ** | **$**                                           | **151,100** | ** ** | **$** | **66,176** | ** ** |

 

See accompanying notes tounaudited quarterly consolidated financial statements.

 

4

----

 

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

**Consolidated Statements of Capital**

(unaudited)

 
| ** **                                                       | ** ** | **Series A  Equity Units** | ** ** | **Series B  Equity Units** | ** ** | **Series C  Equity Units** | ** **  | **Total**  | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|--------------------------------------|-------------|------------|------------|
| ** **                                                       | ** ** | **Units**                            | ** ** | **Amount**                           | ** ** | **Units**                            | ** **  | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Capital** | ** ** |
|                                                             |       | **(thousands)**                      |       |
|                                                             |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Balance at  December 31, 2006                               |       | 66,000                               |       | $                                    | 78,290     |                                 | 530,357     |       | $          | 724,988 |   | — |   | $ | 11,655 |   | $ | 814,933 |   |
|                                                             |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Net income (a)                                                   |       | —                               |       | —                               |       | —                               |        | 127,697    |       | — |   | — |   | 127,697 |   |
| Other comprehensive  income (loss), net of tax (a) (b) |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Cash flow hedges                                                 |       | —                               |       | —                               |       | —                               |        | (3,070     | )          | — |   | — |   | (3,070 | ) |
| Unfunded  accumulated benefit obligation                         |       | —                               |       | —                               |       | —                               |        | 33,705     |       | — |   | — |   | 33,705 |   |
| Paid-in-kind  dividend                                           |       | —                               |       | 5,770                                |       | —                               |        | (5,770     | )          | — |   | — |   | — |   |
| Tax  distributions to members                                    |       | —                               |       | (5,597                               | )          | —                               |        | (1,803     | )          | — |   | — |   | (7,400 | ) |
| Allocation of  profit interest to Series C equity units     |       | —                               |       | —                               |       | —                               |        | 1,387      |       | — |   | (1,387 | ) | — |   |
| Fair market  value adjustment of mature equity units             |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Other                                                            |       | —                               |       | —                               |       | —                               |        | (441       | )          | — |   | — |   | (441 | ) |
| **Balance  at December 31, 2007**(c)                        |       | 66,000                               |       | $                                    | 78,463     |                                 | 530,357     |       | $          | 876,693 |   | — |   | $ | 10,268 |   | $ | 965,424 |   |
|                                                             |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Net loss (a)                                                     |       | —                               |       | —                               |       | —                               |        | (24,438    | )          | — |   | — |   | (24,438 | ) |
| Other  comprehensive loss, net of tax (a) (b)          |       |                                 |       |                                 |       |                                 |        |       |       |   |   |   |   |   |   |
| Cash flow hedges                                                 |       | —                               |       | —                               |       | —                               |        | (133       | )          | — |   | — |   | (133 | ) |
| Unfunded  accumulated benefit obligation                         |       | —                               |       | —                               |       |                                 |        | (35,980    | )          | — |   | — |   | (35,980 | ) |
| Paid-in-kind  dividend                                           |       | —                               |       | 1,559                                |       | —                               |        | (1,559     | )          | — |   | — |   | — |   |
| Tax  distributions to members                                    |       | —                               |       | (3,690                               | )          | —                               |        | (172,561   | )          | — |   | — |   | (176,251 | ) |
| Allocation of  profit interest from Series C equity units   |       | —                               |       | —                               |       | —                               |        | 10,268     |       | — |   | (10,268 | ) | — |   |
| Fair market  value adjustment of mature equity units             |       | —                               |       | —                               |       | —                               |        | (6,272     | )          | — |   | — |   | (6,272 | ) |
| Other                                                            |       | —                               |       | —                               |       | —                               |        | 2,383      |       | — |   | — |   | 2,383 |   |
| **Balance  at March 31, 2008**(c)                           | ** ** | **66,000**                           | ** ** | **$**                                | **76,332** | ** **                           | **530,357** | ** ** | **$**      | **648,401** | ** ** | **—** | ** ** | **$** | **—** | ** ** | **$** | **724,733** | ** ** |

 

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(a)                                  Total comprehensive income (loss) for thethree months ended March 31, 2008 and 2007, was $(60.6) million and$16.5 million, respectively.

 

(b)                                 Total other comprehensive income (loss) forthe three months ended March 31, 2008 and 2007, was $(36.1) millionand $6.0 million, respectively.

 

(c)                                  Accumulated other comprehensive income (loss)at March 31, 2008, and December 31, 2007, was $35.0 million and$71.1 million, respectively.

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

5

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***Notes to Unaudited QuarterlyConsolidated Financial Statements***

 

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

 

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 the Paper and Packaging &Newsprint assets and most of our Corporate and Other assets (the Sale), toBoise Inc. (formerly Aldabra 2 Acquisition Corp.) for cash and securitiesequal to $1.6 billion, plus working capital adjustments. With the Sale, weare now a focused wood products manufacturing and building productsdistribution company that remains headquartered in Boise, Idaho. Weproduce quality wood products and manage a nationwide building materialsdistribution network. After the Sale, we operate our business in thefollowing three reportable segments: Building Materials Distribution, WoodProducts, and Corporate and Other. See Note 19, Segment Information, foradditional information about our reportable segments.

 

As used in these consolidated financial statements,the terms “BC Holdings” and “we” refer to Boise Cascade Holdings, L.L.C., andits consolidated subsidiaries. In connection with the Sale, we received37.9 million, or 49%, of Boise Inc.’s shares. The 49%equity interest that we own in Boise Inc. represents a significant continuinginvolvement as defined in Statement of Financial Accounting Standards (SFAS) No. 144,*Accounting for the Impairment or Disposal ofLong-Lived Assets.*As a result, the financial data in thisreport includes the results of the Paper and Packaging & Newsprintsegments through February 21, 2008, and we did not define the sold assetsas discontinued operations.

 

The quarterly consolidated financial statements havenot been audited by an independent registered public accounting firm but, inthe opinion of management, include all adjustments, consisting only of normal,recurring adjustments, necessary to present fairly the results for the periodspresented. Net income for the three months ended March 31, 2008 and 2007,involved estimates and accruals. Actual results may vary from those estimates.Quarterly results are not necessarily indicative of results that may beexpected for the full year.

 

Certain amounts in prior periods’ consolidatedfinancial statements have been reclassified to conform with the current period’spresentation.

 

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

 

On February 22, 2008, Boise Cascade,L.L.C., completed the Sale for $1,277.2 million of cash consideration,$277.4 million of net stock consideration, and a $41.0 millionpromissory note receivable. After the Sale, the note receivable from Boise Inc.increased $16.8 million for preliminary working capital adjustments. Finalworking capital adjustments will be made in second quarter 2008. To the extentthat interest on the note is not paid in cash, the interest accumulates and isadded to the principal amount of the note. For more information, seeNote 4, Transactions With Related Parties. In connection with the Sale, wegenerated a $15.8 million gain, of which we recognized $8.1 millionin our Consolidated Statement of Loss, and in accordance with Emerging IssuesTask Force (EITF) No. 01-02, *Interpretations ofAccounting Principles Board (APB) Opinion No. 29,*we deferred$7.7 million of the gain as a reduction of our investment in Boise Inc.

 

Immediately following the Sale, BoiseCascade, L.L.C., distributed the securities received in the transaction to us.As a result, we are 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. We valued the stock consideration received based on the February 21,2008, closing Boise Inc. stock price of $8.56. We reduced the value of thestock consideration received by a 12% discount for a lack of marketabilitysince the stock delivered as consideration was not registered for resale and bya $7.7 million gain deferred in connection with the Sale. We will realizethe deferred gain when we reduce our investment in Boise Inc. See Note 12,Investment in Equity Affiliate, for more information.

 

6

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Any future disposition of the shares of Boise Inc. and the promissory notereceived as partial consideration for the Sale is governed by the terms of oursenior subordinated notes indenture, including the asset dispositionprovisions, which may require us to repay senior indebtedness, reinvest theproceeds in our business, or tender for all, or a portion of, the outstandingnotes at par.

 

*Useof Transaction Proceeds*

 

With the proceeds from the Sale, we repaid$925.6 million of our debt. In addition, we initiated a tender offer for$160 million of our 7.125% senior subordinated notes. At March 31,2008, the $160 million was recorded as “Restricted cash” on ourConsolidated Balance Sheet. On April 15, 2008, we redeemed the$160 million of notes. In addition to repaying a substantial amount of ourindebtedness, in first quarter 2008, we paid $11.9 million to unwind allof our interest rate swaps.

 

We make cash distributions to permit the members of BC Holdings andaffiliates to pay their taxes. On February 22, 2008, we accrued$200 million for estimated tax distributions payable to our equity holdersrelated to the estimated net taxable gain on the Sale. In connection with theSale, we distributed $120** **millionof tax distributions to our equity holders. We expect to make additionalgain-related tax distributions during the remainder of the year or firstquarter 2009.

 

In connection with thetransaction, approximately 75 participants in our Management Equity Planterminated employment with us. These employees collectively held6.6 million Series B and 16.1 million Series C units. Afterthe transaction, we paid $18.3 million to repurchase their equity units.In addition, we also currently expect to pay approximately $4.2 millionunder the deferred compensation agreements for employees terminated inconnection with the transaction. Of the $4.2 million, we recorded$2.6 million in “Accrued liabilities, Compensation and benefits” and$1.6 million in “Other, Compensation and benefits” on our ConsolidatedBalance Sheet at March 31, 2008.

 

*Pro Forma*

 

The following pro formafinancial information was derived from the unaudited quarterly financial statementsof BC Holdings. The pro forma financial information gives effect to the Sale asif it were consummated on January 1, 2007. The pro forma financialinformation is intended for informational purposes only and is not necessarilyindicative of the results of operations that may have actually occurred if theSale had been consummated on January 1, 2007, or the operating resultsthat may be obtained in the future.

** **
| ** **             | ** ** | **Three Months Ended  March 31** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|
| ** **             | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
| ** **             | ** ** | **(thousands)**                                 | ** ** |
|                   |       |                                            |       |   |   |
| Sales                  |       | $                                               | 630,032    |   | $ | 771,288 |   |
|                   |       |                                            |       |   |   |
| Net income  (loss) (a) |       | $                                               | (45,733    | ) | $ | 3,607 |   |

 

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(a)                                  The pro forma net loss for the three monthsended March 31, 2008, includes $13.2 million of pro forma lossesrelated to our 49% equity interest in Boise Inc.; $6.3 million of expense relatedto changes in the fair value of our interest rate swaps, which were terminatedin February 2008; and $4.8 million of expense related to the fairvalue of the contingent value rights that we and Terrapin Partners VenturePartnership granted to certain Boise Inc. investors.

 

***3.******                                     ******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 theassets and liabilities included in our Corporate and Other segment, to “Assetsheld for sale” and “Liabilities related to assets held for sale” on ourConsolidated Balance Sheet and stopped depreciating and amortizing thoseassets. As discussed above, we sold these assets to Boise Inc. on February 22,2008. The three months ended March 31, 2008, included approximately$16.7 million of lower depreciation and amortization expense as a resultof discontinuing depreciation and amortization on the assets recorded as heldfor sale. Of the $16.7 million of lower depreciation and amortizationexpense, $9.4 million

 

7

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related to our Paper segment,$6.9 million related to our Packaging & Newsprint segment, and$0.4 million related to our Corporate and Other segment.

 

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

 

*Sales*

 

During each of theperiods presented, we sold paper and paper products to OfficeMax at salesprices that were designed to approximate market prices. For the three monthsended March 31, 2008 and 2007, sales to OfficeMax were $90.1 millionand $157.8 million, respectively. These sales are included in “Sales,Related parties” in the Consolidated Statements of Income (Loss).

 

During the three months ended March 31, 2008, we sold$4.2 million and $1.5 million of fiber to Boise Inc. and LouisianaTimber Procurement Company L.L.C., an unconsolidated entity that is 50% ownedby Boise Cascade, L.L.C., and 50% owned by Boise Inc. at prices designedto approximate market. Most of these sales relate to chip sales from our WoodProducts segment. These sales are included in “Sales, Related parties” in theConsolidated Statement of Loss.

 

*Costs andExpenses*

 

During the three months ended March 31, 2008, we purchased$5.5 million of fiber from Louisiana Timber Procurement Company L.L.C. Inaddition, we purchased $0.5 million of transportation services fromBoise Inc. We purchased the fiber and transportation services at pricesthat approximated market prices. For the three months ended March 31,2008, these costs are recorded in “Materials, labor, and other operatingexpenses” in our Consolidated Statement 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 

 

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on an allocable basis over the initial three-year term of theagreement. During the three months ended March 31, 2008, we recognized$1.5 million of costs related to this agreement, which we recorded in “Generaland administrative expenses” in our Consolidated Statement of Loss.

 

*NoteReceivable*

 

In connection with the Sale, we received a $41.0 million promissorynote from Boise Inc. After the transaction, the note receivable increased$16.8 million for estimated working capital adjustments, the amount bywhich the working capital of our Paper and Packaging & Newsprintsegments exceeded $329.0 million. We will record final working capitaladjustments in second quarter 2008. The note bears interest at 15.75%,compounded quarterly. To the extent that interest is not paid in cash, theinterest is added to the principal amount of the note. The note matures on August 21,2015, provided that if such date is more than 181 days after the scheduledmaturity date of the indebtedness under Boise Inc.’s credit agreements, thenthe maturity date shall automatically be deemed to be 181 days after thelatest maturity date of any such indebtedness. Boise Inc. may prepay the noteat any time in whole or in part, subject to restrictions contained in itscredit agreements. During the three months ended March 31, 2008, werecorded approximately $1.0 million of interest income in our ConsolidatedStatement of Loss, and at March 31, 2008, we had $58.8 millionrecorded in “Note receivable from related party” on our Consolidated BalanceSheet.

 

*TaxDistributions*

 

The majority of ourbusinesses 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 three months ended March 31, 2008 and 2007,we made $127.3 million and $2.8 million of cash tax distributions, ofwhich $120.0 million of the 2008 tax distribution related to the nettaxable gain on the Sale. See Note 2, Sale of Our Paper and Packaging &Newsprint Assets, for more information. During the three months ended March 31,2008 and 2007, we paid $104.3 million and no distributions to ForestProducts Holdings (FPH), our majority owner. FPH in turn paid$93.9 million to Madison Dearborn Partners, our equity sponsor,$10.0 million to management investors, and $0.4 million tononmanagement affiliates. For the three months ended March 31, 2008 and2007, we paid $23.0 million and $2.8 million to OfficeMax to fundtheir tax obligations related to their investments in us.

 

***5.******                                      Vendorand Customer Rebates and Allowances***

 

We receive rebates and allowances from our vendorsunder a number of different programs, including vendor marketing programs. At March 31,2008, and December 31, 2007, we had $1.7 million and$2.2 million, respectively, of vendor rebates and allowances recorded in “Receivables,Other” on the Consolidated Balance Sheets. These rebates and allowances areaccounted for in accordance with EITF 02-16, *Accountingby a Customer (Including a Reseller) for Certain Consideration Received From aVendor*. Rebates and allowances received from our vendors arerecognized as a reduction of “Materials, labor, and other operating expenses”when the product is sold, unless the rebates and allowances are linked to aspecific incremental cost to sell a vendor’s product. Amounts received fromvendors that are linked to specific selling and distribution expenses arerecognized as a reduction of “Selling and distribution expenses” in the periodthe 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 March 31, 2008, and December 31,2007, we had $7.3 million and $12.7 million, respectively, of rebatespayable to our customers recorded in “Accrued liabilities, Other” on ourConsolidated Balance Sheets.

 

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***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:

 
| ** **            | ** ** | **Three Months Ended  March 31** | ** ** |
|-----------------------|------------|-------------------------------------------------|------------|
| ** **            | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
| ** **            | ** ** | **(thousands)**                                 | ** ** |
|                  |       |                                            |       |   |   |
| Sales of assets,  net |       | $                                               | (1,122     | ) | $ | 999 |   |
| Other, net            |       | 180                                             |       | 1,547 |   |
| ** **            | ** ** | **$**                                           | **(942**   | **)** | **$** | **2,546** | ** ** |

 

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

 

We lease a portion of ourdistribution centers as well as other property and equipment under operatingleases. For purposes of determining straight-line rent expense, the lease termis calculated from the date we first take possession of the facility, includingany periods of free rent and any option periods we are reasonably assured ofexercising. Straight-line rent expense is also adjusted to reflect anyallowances or reimbursements provided by the lessor. Rental expense foroperating leases was $5.4 million and $6.3 million for the threemonths ended March 31, 2008 and 2007. Sublease rental income was notmaterial in any of the periods presented.

 

For noncancelableoperating leases with remaining terms of more than one year, the minimum leasepayment requirements are $7.9 million for the remainder of 2008, $10.1 millionin 2009, $9.4 million in 2010, $7.9 million in 2011,$7.1 million in 2012, and $6.2 million in 2013, with total paymentsthereafter of $34.3 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 paymentterms based on the passage of time. Some lease agreements provide us with theoption to purchase the leased property. Additionally, some agreements containrenewal options averaging approximately four years, with fixed paymentterms similar to those in the original lease agreements.

 

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

 

*TaxDistributions*

 

The majority of our businesses and assets are held andoperated by limited liability companies, which are not subject to entity-levelfederal or state income taxation. The income taxes in respect to theseoperations are payable by our equity holders in accordance with theirrespective ownership percentages. We make cash distributions to permit themembers of BC Holdings and affiliates to pay these taxes. For the three monthsended March 31, 2008 and 2007, we made $127.3 million and$2.8 million of cash distributions, respectively, to permit our equityholders to pay these taxes. Relative to the three months ended March 31,2007, the increase in 2008 distributions related to the net taxable gain on theSale. See Note 2, Sale of Our Paper and Packaging & NewsprintAssets, for more information. Both our senior credit facilities and theindenture governing our notes permit these distributions.

 

*Income Tax (Provision) Benefit*

 

For each of the three months ended March 31, 2008and 2007, income tax expense was $1.2 million. During the three monthsended March 31, 2008 and 2007, our effective tax rates for our separatesubsidiaries that are taxed as corporations were 35.4% and 35.0%. At March 31,2008, and December 31, 2007, we had a zero and $0.6 million deferredtax liability related to our taxable 

 

10

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subsidiaries recorded on our Consolidated BalanceSheets. The deferred tax liability was reduced to zero at March 31, 2008,as the taxable subsidiaries that held the deferred tax liabilities were part ofthe Sale.

 

During the three months ended March 31, 2008, wereceived $0.4 million of tax refunds, net of income taxes paid. We paid$0.2 million of income taxes, net of refunds received during the threemonths ended March 31, 2007.

 

BC Holdings or one of our subsidiaries files federalincome tax returns in the U.S. and Canada and various state and foreign incometax returns in the major state jurisdictions of Alabama, Idaho, Louisiana,Oregon, Minnesota, Texas, and Washington. We are subject to tax examinationsfrom October 29, 2004 (our inception), to present. In December 2007,the United States Internal Revenue Service notified us that they will audit theBC Holdings returns for the 2005 and 2006 tax years. Additionally, in thirdquarter 2007, the Canadian Revenue Agency began an audit of Boise AllJoist fortax years 2005 and 2006.

 

***9.******                                      Inventories***

 

Inventories include the following:

 
| ** **                          | ** ** | **March 31,  2008** | ** **  | **December 31,  2007** | ** ** |
|-------------------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| ** **                          | ** ** | **(thousands)**          | ** **  |
|                                |       |                     |        |                        |       |
| Finished goods  and work in process |       | $                        | 272,408     |                        | $          | 266,033 |   |
| Logs                                |       | 43,024                   |        | 56,490                      |       |
| Other raw  materials and supplies   |       | 19,474                   |        | 19,492                      |       |
| ** **                          | ** ** | **$**                    | **334,906** | ** **                  | **$**      | **342,015** |   |

 

***10.******                               Propertyand Equipment, Net***

 

Property and equipmentconsisted of the following asset classes:

 
| ** **                     | ** ** | **March 31,  2008** | ** **  | **December 31,  2007** | ** ** |
|--------------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| ** **                     | ** ** | **(thousands)**          | ** **  |
|                           |       |                     |        |                        |       |
| Land and land  improvements    |       | $                        | 36,146      |                        | $          | 37,330 |   |
| Buildings and  improvements    |       | 106,396                  |        | 105,835                     |       |
| Machinery and  equipment       |       | 263,415                  |        | 258,333                     |       |
| Construction in  progress      |       | 12,759                   |        | 15,382                      |       |
|                           |       | 418,716                  |        | 416,880                     |       |
| Less accumulated  depreciation |       | (112,299                 | )           | (103,763                    | )          |
| ** **                     | ** ** | **$**                    | **306,417** | ** **                  | **$**      | **313,117** |   |

 

***11.******                               Goodwilland Intangible Assets***

 

Goodwill represents theexcess of purchase price and related costs over the value assigned to the nettangible and intangible assets of businesses acquired. We account for goodwillin accordance with the provisions of SFAS No. 142, *Goodwill andOther Intangible Assets*, which requires us to assess our acquiredgoodwill and intangible assets with indefinite lives for impairment at leastannually in the absence of an indicator of possible impairment and immediatelyupon an indicator of possible impairment. We assess goodwill and intangibleassets with indefinite lives in the fourth quarter of each year using afair-value-based approach. We also evaluate the remaining useful lives of ourfinite-lived purchased intangible assets to determine whether any adjustmentsto the useful lives are necessary. We completed our annual assessment inaccordance with SFAS No. 142 in fourth quarter 2007 and determined thatthere was no impairment.

 

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Changes in the carryingamount 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 March 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 thethird anniversary 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 as a result of the saleof our Paper and Packaging & Newsprint assets.

 

(b)                                 See Note 3, Assets and Liabilities Held for Sale, for moreinformation.

 

At March 31, 2008, and December 31, 2007, intangible assetsrepresent the values assigned to trade names and trademarks and customer relationships.The trade names and trademark assets have an indefinite life and are notamortized. Customer relationships are amortized over five years.

 

Intangible assets consisted of the following:

 
| ** **                  | ** ** | **March 31, 2008**    | ** ** |
|-----------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Amount** | ** ** |
| ** **                  | ** ** | **(thousands)**                 | ** ** |
|                        |       |                            |       |   |   |   |   |
| Trade names and  trademarks |       | $                               | 8,900      |   | $ | — |   | $ | 8,900 |   |
| Customer  relationships     |       | 2,100                           |       | (1,437 | ) | 663 |   |
| ** **                  | ** ** | **$**                           | **11,000** | ** ** | **$** | **(1,437** | **)** | **$** | **9,563** |   |

 
| ** **                  | ** ** | **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 $0.1 millionand $1.1 million for the three months ended March 31, 2008 and 2007,respectively. The estimated amortization expense is $0.3 million for theremainder of 2008 and $0.4 million in 2009. We estimate no amortizationexpense after 2009.

 

***12.******                               Investmentin Equity Affiliate***

 

In connection with theSale, we received 37.9 million, or 49%, of Boise Inc.’s shares. Werecorded our investment in “Investment in equity affiliate” on ourConsolidated Balance Sheet. This ownership interest and three seats we hold onBoise Inc.’s board does provide us with the ability to exercise significantinfluence. Accordingly, we account for our investment under the equity methodof accounting.

 

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We measured our 49% ownership in BoiseInc. based on Boise Inc.’s February 21, 2008, closing stock price,adjusted for a 12% discount for lack of marketability since the stock deliveredas consideration was not registered for resale. In addition, in accordance withEITF No. 01-02, *Interpretations of APBOpinion No. 29,*the value of the stock consideration receivedwas further reduced by the $7.7 million gain on the Sale that we deferredas a reduction of our investment. We will realize the deferred gain as wereduce our investment in Boise Inc. The investment is adjusted monthly for ourproportionate share of Boise Inc.’s net income or loss based on the mostrecently available financial statements. For the three months ended March 31,2008, we recorded an $8.6 million loss related to our investment in BoiseInc. in “Equity in net loss of affiliate” in our Consolidated Statement of Loss.

 

On the date of the Sale, thecarrying value of our investment in Boise Inc. was approximately$6.1 million less than our share of Boise Inc.’s underlying equity in netassets. The $6.1** **million represents negativeequity method goodwill. We periodically review the recoverability of our equitymethod investments.

 

***13.******                               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 are incurredif sufficient information is available to reasonably estimate the fair value ofthe obligation. When we record the liability, we capitalize the cost byincreasing the carrying amount of the related long-lived asset. Over time, theliability 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 March 31, 2008, and December 31, 2007, we had$0.6 million and $0.8 million of asset retirement obligationsrecorded in “Other, Other long-term liabilities” on our Consolidated BalanceSheets. At March 31, 2008, and December 31, 2007, these liabilitiesrelated primarily to landfill closure costs. The liabilities are based on thebest estimate of current costs and are updated periodically to reflect currenttechnology, laws and regulations, inflation, and other economic factors. We donot have any assets legally restricted for purposes of settling assetretirement obligations. The table below describes changes to our assetretirement obligations for the three months ended March 31, 2008, and theyear ended December 31, 2007:

 
| ** **                                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                              | ** ** | **2008**           | ** ** | **2007**              | ** ** |
|                                                                                                                    |       | **(thousands)**    |       |
|                                                                                                                    |       |               |       |                  |       |
| Asset retirement  obligation at beginning of period                                                                     |       | $                  | 782        |                  | $          | 11,544 |   |
| Liabilities  incurred                                                                                                   |       | —             |       | —                |       |
| Accretion  expense                                                                                                      |       | 166                |       | 926                   |       |
| Payments                                                                                                                |       | —             |       | (37                   | )          |
| Revisions in  estimated cash flows                                                                                      |       | —             |       | 1,652                 |       |
| Asset retirement  obligation reclassified to “Liabilities related to assets held for sale” (See  Note 3) |       | (380               | )          | (13,303               | )          |
| Asset retirement  obligation at end of period                                                                           | ** ** | **$**              | **568**    | ** **            | **$**      | **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.

 

13

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**14.****                               Debt**

 

At March 31, 2008,and December 31, 2007, our short- and long-term debt was as follows:

 
| ** **                                  | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|---------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                  | ** ** | **2008**           | ** **  | **2007**              | ** ** |
| ** **                                  | ** ** | **(thousands)**    | ** **  |
|                                        |       |               |        |                  |       |
| Revolving credit  facility, due 2013        |       | $                  | 64,224      |                  | $          | — |   |
| Tranche E  term loan, due 2014         |       | —             |        | 521,063               |       |
| 7.125% senior  subordinated notes, due 2014 |       | 400,000            |        | 400,000               |       |
| Delayed-draw  term loan, due 2014           |       | —             |        | 199,500               |       |
| Borrowings  secured by receivables          |       | —             |        | 40,000                |       |
| Current portion  of long-term debt          |       | (160,000           | )           | (47,250               | )          |
| Long-term debt,  less current portion       |       | 304,224            |        | 1,113,313             |       |
| Short-term  borrowings                      |       | —             |        | 10,500                |       |
| Current portion  of long-term debt          |       | 160,000            |        | 47,250                |       |
| Total debt                                  | ** ** | **$**              | **464,224** | ** **            | **$**      | **1,171,063** | ** ** |

 

As discussed in Note 2, Sale of Our Paper and Packaging &Newsprint Assets, with the proceeds from the Sale, we repaid$925.6 million of debt, including all of the borrowings under therevolving credit facility, Tranche E term loan, and delayed-draw term loanand the borrowings secured by our receivables. For more information related tothese borrowings prior to us repaying them, see Note 11, Debt, of theNotes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of our 2007 Annual Report on Form 10-K.In addition to these repayments, we initiated a tender offer for $160 millionof our 7.125% senior subordinated notes. See “Senior Notes” below for moreinformation.

 

*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 a new five-year $350 million senior secured asset-basedrevolving credit facility with Bank of America (the Original Agreement). As partof the syndication process, the agreement was amended in April 2008 torevise the pricing and incorporate additional covenants (the Amended Facility).At March 31, 2008, we had $64.2 million of borrowings outstandingunder the Original Agreement. Borrowings under the Amended Facility are basedon either the prime rate or the London Interbank Offered Rate (LIBOR). Pricingis subject to quarterly adjustment based on the average availability under theAmended Facility during the prior quarter. The range of borrowing costs underthe pricing grid is:  (i) prime plus1.00% to 1.50% or (ii) LIBOR plus 2.50% to 3.00%. For the period of February 22,2008, through March 31, 2008, the average interest rate for our borrowingsunder the Original Agreement was 5.5%. Letters of credit are subject to a0.125% fronting fee payable to the issuing bank and a fee payable to thelenders equal to the product of the interest rate spread applicableto LIBOR borrowings under the Amended Facility and the daily averageamount available for drawing under the outstanding letters of credit. Theminimum and maximum borrowings under the Original Agreement were$64.1 million and $64.2 million between February 22, 2008, and March 31,2008. The weighted average amount of borrowings outstanding under the OriginalAgreement during the period from February 22, 2008 through March 31,2008, was $64.2 million. The Amended Facility provides for a commitmentfee of 0.50% per annum payable to the lenders on the average daily unusedportion of the Amended 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. Borrowings under the Amended Facility require compliancewith a borrowing base formula, which sets advance rates against eligibleaccounts receivable and inventory. As of March 31,2008, we had availability of $234.2 million above the amount we hadborrowed. If excess availability under the Amended Facility falls below thegreater of $45 million or 15% of the borrowing base, we would be requiredto maintain a minimum fixed charge coverage ratio. The AmendedFacility also contains customary nonfinancial covenants, including a negativepledge covenant and restrictions on distributions to equity holders,acquisitions, and divestitures. These covenants will become more restrictive ifa minimum availability threshold is not maintained.

 

14

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*Letters of Credit*

 

At March 31, 2008, we had $23.3 million ofletters of credit outstanding supported by restricted cash investments. Theissuing bank for the letters of credit became a participating lender in theAmended Facility in April 2008 and released the $23.3 million of cashcollateral back to us.

 

*SeniorNotes*

 

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 unsecured floating-rate notes and seniorsubordinated notes were exchanged for registered securities with identicalterms (other than terms relating to registration rights) to the notes issued inOctober 2004. We may redeem all or part of the notes at any time atredemption prices set forth in the indenture. If we sell specific assets orexperience specific kinds of changes in control, we must offer to purchase thenotes.

 

In connection with the Sale, we made an asset disposition tender offer for$160 million of the $400 million 7.125% senior subordinated notes. AtMarch 31, 2008, the $160 million was held by the note trustee inrestricted cash investments and was recorded in “Restricted cash” on ourConsolidated Balance Sheet. Because of the outstanding tender offer, wereclassified the $160 million to “Current portion of long-term debt” onour Consolidated Balance Sheet at March 31, 2008. We redeemed$160 million of the notes on April 15, 2008.

 

*Other*

 

At March 31, 2008, and December 31, 2007, we had$11.7 million and $23.1 million of costs recorded in “Deferred financingcosts” on our Consolidated Balance Sheets. With the proceeds from the Sale, werepaid a significant portion of our debt. In connection with repaying the debt,we expensed approximately $14.5 million of deferred financing costs. Werecorded the charges in “Gain on sale of Paper and Packaging &Newsprint assets” in our Consolidated Statement of Loss for the three monthsended March 31, 2008. In addition, we incurred approximately $3.7** **million of financing costs related to our newasset-based revolving credit facility, which we recorded in “Deferred financingcosts” on our March 31, 2008, Consolidated Balance Sheet.

 

For the three months ended March 31, 2008 and 2007, cash payments forinterest, net of interest capitalized, were $8.8 million and $15.8 million,respectively.

 

***15.******                               FinancialInstruments***

 

We areexposed to risks such as changes in interest rates, energy prices, and foreigncurrency exchange rates. We employ a variety of practices to manage theserisks, including operating and financing activities and, where deemedappropriate, the use of derivative instruments. Derivative instruments are usedonly for risk management purposes and not for speculation or trading.Derivatives are such that a specific debt instrument, contract, or anticipatedpurchase determines the amount, maturity, and other specifics of the hedge. Ifa derivative contract is entered into, we either determine that it is aneconomic hedge or we designate the derivative as a cash flow or fair valuehedge. We formally document all relationships between hedging instruments andthe hedged items, as well as our risk management objectives and strategies forundertaking various hedged transactions. For those derivatives designated ascash flow or fair value hedges, we formally assess, both at the derivatives’inception and on an ongoing basis, whether the derivatives that are used inhedging transactions are highly effective in offsetting changes in the hedgeditems. The ineffective portion of hedging transactions is recognized in income(loss).

 

In accordance with SFAS No. 133,*Accounting for Derivative Instruments andHedging Activities*, as amended, we record all derivative instrumentsas assets or liabilities on our Consolidated Balance Sheets at fair value. Thefair value of these instruments is determined by third parties. Changes in thefair value of derivatives are recorded in either “Net income (loss)” or “Othercomprehensive income,” as appropriate. The gain or loss on derivativesdesignated as cash flow hedges is included in “Other 

 

15

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comprehensive income” in the period in which changes in fairvalue occur and is reclassified to income (loss) in the period in which thehedged 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*

 

After the Sale, our debt is predominantly fixed-rate.At March 31, 2008, the estimated current market value of our fixed-ratedebt, based on then-current interest rates for similar obligations with likematurities, was approximately $18.1 million less than the amount reportedon our Consolidated Balance Sheet.

 

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. The interest rate swapswere considered economic hedges. During the three months ended March 31,2008, 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.

 

*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 March 31, 2008, we had no material derivative instruments related toour forecasted natural gas purchases.

 

*Foreign Currency Risk*

 

At March 31, 2008, we had no material foreigncurrency hedges.

 

*Contingent Value Rights*

 

As part of the Sale, Terrapin Partners VenturePartnership (Boise Inc.’s majority owner prior to the Sale) and Boise Cascade,L.L.C. (collectively the Grantors), issued 21.2 million contingent valuerights (CVRs) to holders of Boise Inc.’s stock. The CVRs are governed by aContingent Value Rights Agreement (Agreement). The term of the Agreement isfrom February 5, 2008, through February 5, 2009, and allows investorsto receive payments in cash, shares of common stock, or a combination of cashand shares as elected by us, based upon the performance of Boise Inc.’s stock.If at any time during the year, Boise Inc.’s stock price is at least $10.50 for(1) any 20 days of any period of 30 consecutive days, or (2) any10 consecutive trading days, then the CVRs have no value. If neither ofthe preceding conditions is met over the one-year period, the holder receives avalue equal to the lesser of $1.00 or the amount by which the $10.50 exceedsthe average stock price for the 30-day period ending February 5, 2009 (the“Anniversary Price”). If we elect to settle our obligation under the Agreementusing Boise Inc. shares, the Agreement provides that our shares will be valuedat the greater of the Anniversary Price or $9.00 per share. As a result, themaximum number of Boise Inc. shares we would be required to deliver to therights holders would be 2.4 million assuming Terrapin Partners VenturePartnership failed to perform its obligations.

 

We recorded the fair value of the liability on the grant date based on asimulation analysis that considered the likelihood of Boise Inc. investorsreceiving payment under the Agreement. We update the simulation model eachquarter and revalue the liability based on its results. The Grantors arejointly and severally liable to the investors for the CVR payment, but betweenthe Grantors, each Grantor is individually liable for 50% of the CVR payment.Because we are jointly and severally liable to investors, at March 31,2008, we recorded a liability for 100% of the fair value of the CVRs, or $9.5 million,in “Accrued liabilities, Other” on our Consolidated Balance Sheet. We alsorecorded $4.8 million of expense in “Change in fair value of contingentvalue rights” on our Consolidated Statement of Loss and a $4.8 millionreceivable in “Receivables, Other” on our Consolidated Balance Sheet.

 

16

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*Financial Instrument Fair Value Reconciliation*

 

The following table reconciles the beginning andending balances of the instruments for which we measured the fair value usingunobservable inputs (Level 3 in the fair value hierarchy) as of March 31,2008:

 
| ** **                                                                                                                                  | ** ** | **Contingent  Value  Rights** | ** ** | **Interest  Rate  Swaps** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------|------------|------------|------------|
| ** **                                                                                                                                  | ** ** | **(thousands)**               | ** ** |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Beginning  balance                                                                                                                          |       | $                             | —     |                      | $          | 5,634      |       | $ | 5,634 |   |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Losses included  in earnings                                                                                                                |       | 4,773                         |       | 6,284                     |       | 11,057     |       |
| Receivable from  Terrapin Partners                                                                                                          |       | 4,773                         |       | —                    |       | 4,773      |       |
| Termination of  interest rate swaps                                                                                                         |       | —                        |       | (11,918                   | )          | (11,918    | )          |
| Ending balance                                                                                                                              | ** ** | **$**                         | **9,546**  | ** **                | **$**      | **—** | ** ** | **$** | **9,546** | ** ** |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Total losses  included in earnings attributable to the change in unrealized gains or losses  relating to assets held at March 31, 2008 |       | **$**                         | 4,773      |                      | **$**      | —     |       | **$** | 4,773 |   |

 

***16.******                               Newand Recently Adopted Accounting Standards***

 

In December 2007, the FASB issued SFAS No. 141(R), *Business Combinations,*and SFAS No. 160,*Accounting and Reporting of NoncontrollingInterest in Consolidated Financial Statements, an Amendment of ARB No. 51.*These new standards will significantly change the accounting for and reportingof business combination transactions and noncontrolling (minority) interests inconsolidated financial statements. SFAS Nos. 141(R) and 160 are requiredto be adopted simultaneously and are effective for the first annual reportingperiod beginning on or after December 15, 2008. Thus, we are required toadopt these standards on January 1, 2009. Earlier adoption is prohibited.The impact of adopting these standards will be limited to business combinationsoccurring on or after January 1, 2009.

 

In January 2008, weadopted SFAS No. 157,*Fair ValueMeasurements*. The adoption did not have a material impact on ourfinancial position of results of operations. The statement established aframework for measuring fair value and it enhanced the disclosures for fairvalue measurements. The statement applies when other accounting pronouncementsrequire or permit fair value measurements, but it does not require new fairvalue measurements. In accordance with the standard, in Note 15, FinancialInstruments, we expanded our disclosures about fair value measurements. In February 2008,the FASB issued Staff Position (FSP) No. 157-2, which delayed theeffective date of SFAS No. 157 for nonfinancial assets and liabilitiesthat are not remeasured at fair value on a recurring basis. We will adopt FSP No. 157-2in January 2009. We do not expect the adoption to have a material impacton our financial position or results of operations.

 

In March 2008, the FASB issued SFAS No. 161,*Disclosures About Derivative Instruments andHedging Activities*. SFAS No. 161 requires enhanced disclosuresabout derivative instruments and hedging activities to enable investors tobetter understand their effects on financial position, financial performance,and cash flows. These requirements include the disclosure of the fair values ofderivative instruments and their gains and losses in a tabular format. SFAS No. 161is effective for fiscal years beginning after November 15, 2008, whichwill require us to adopt these provisions in 2009. Early adoption of SFAS No. 161is permitted. We are currently evaluating the impact SFAS No. 161will have on our consolidated financial statements.

 

***17.******                               Retirementand Benefit Plans***

 

Effective January 1, 2008, we spunoff the portion of each benefit plan attributable to employees or retirees ofthe 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 spun-off plans to Boise Paper Holdings, L.L.C.,a subsidiary of Boise Inc., and only those employees, terminated 

 

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vested participants, and retirees whose employment was with our WoodProducts, Building Materials Distribution, and some corporate and discontinuedoperations continue to be covered under the plans remaining with us.

 

The following tablepresents the pension and postretirement benefit costs as follows:

 
| ** **                                     | ** ** | **Pension Benefits**                       | ** ** | **Other Benefits**                         | ** ** |
|------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                     | ** ** | **Three Months Ended  March 31** | ** ** | **Three Months Ended  March 31** | ** ** |
| ** **                                     | ** ** | **2008**                                        | ** ** | **2007**                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                     | ** ** | **(thousands)**                                 | ** ** |
|                                           |       |                                            |       |                                            |       |   |   |   |   |
| Service cost                                   |       | $                                               | 4,316      |                                            | $          | 5,747 |   | $ | 1 |   | $ | 54 |   |
| Interest cost                                  |       | 8,069                                           |       | 9,506                                           |       | 20 |   | 105 |   |
| Expected return  on plan assets                |       | (7,994                                          | )          | (9,597                                          | )          | — |   | — |   |
| Recognized  actuarial (gain) loss              |       | (112                                            | )          | 130                                             |       | — |   | — |   |
| Amortization of  prior service costs and other |       | 226                                             |       | 174                                             |       | (13 | ) | — |   |
| Curtailment  (gain) loss                       |       | 404                                             |       | (181                                            | )          | — |   | — |   |
| Company-sponsored  plans                       |       | 4,909                                           |       | 5,779                                           |       | 8 |   | 159 |   |
| Multiemployer  pension plans                   |       | 90                                              |       | 128                                             |       | — |   | — |   |
| Net periodic  benefit cost                     | ** ** | **$**                                           | **4,999**  | ** **                                      | **$**      | **5,907** | ** ** | **$** | **8** | ** ** | **$** | **159** | ** ** |

 

In February 2008, wemade a $20 million contribution to our pension plans, which was includedin the pension assets for purposes of determining the spin-off amounts. Duringthe remainder of 2008, we are not required to make any additional minimumcontributions to our pension plans; however, we may elect to make additionalvoluntary contributions.

 

***18.******                               RedeemableEquity Units***

 

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.

 

During the three monthsended March 31, 2008, we recorded $3.1 million of expense to adjustthe value of the immature equity units (units that have not been at risk for atleast six months) to redemption value and $1.9 million of expense relatedto nonrefundable tax distributions paid to management investors in connectionwith their investments in us that will not vest. We recorded the charges in “Gainon sale of Paper and Packaging & Newsprint Assets” in our ConsolidatedStatement of Loss. In addition, we recorded a $6.3 million adjustment tothe value of the mature equity units (vested units and units that had been atrisk for at least six months) to reflect redemption value in the capitalsection of our Consolidated Balance Sheet and Consolidated Statement ofCapital. For more information related to the Management Equity Plan, seeNote 14, Redeemable Equity Units, of the Notes to Consolidated FinancialStatements in “Item 8. Consolidated Financial Statements” in our 2007 AnnualReport on Form 10-K.

 

18

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***19.******                        ******Segment Information***

 

Prior to the Sale, weoperated our business using five reportable segments:  Building Materials Distribution, WoodProducts, Paper, Packaging & Newsprint, and Corporate and Other.Following the Sale, we now operate our business using three reportablesegments:  Building MaterialsDistribution, Wood Products, and Corporate and Other. There are no differencesin our basis of measurement of segment profit or loss from those disclosed inNote 16, Segment Information, of the Notes to Consolidated FinancialStatements and Supplementary Data in “Item 8. Consolidated FinancialStatements and Supplementary Data” in our 2007 Annual Report on Form 10-K.The 49% equity interest we own in Boise Inc. after the Sale represents asignificant continuing involvement as defined in SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets.*Asa result, we continue to show the results of the Paper and Packaging &Newsprint segments through February 21, 2008, and we do not define thesold assets as discontinued operations.

 

An analysis of ouroperations by segment is as follows:

 
| ** **                                            | ** ** | ** **     | ** ** | ** **  | ** ** | **Depre-**  | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|----------------|------------|-------------|------------|-------------|------------|------------|------------|
| ** **                                            | ** ** | ** **     | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | **ciation,** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | ** **     | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | **Income** | ** ** | **Amorti-** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **Sales**      | ** ** | **(Loss)**  | ** ** | **zation,** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | ** **     | ** ** | **Related** | ** ** | **Inter-**  | ** ** | ** ** | ** ** | **Before** | ** ** | **and** | ** ** | **EBITDA** | ** ** |
| ** **                                            | ** ** | **Trade**      | ** ** | **Parties** | ** ** | **segment** | ** ** | **Total**  | ** ** | **Taxes** | ** ** | **Depletion** | ** ** | **(e)** | ** ** |
| ** **                                            | ** ** | **(millions)** | ** ** |
| **Three  Months Ended March 31, 2008**           | ** ** | ** **     | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building  Materials Distribution                      |       | $              | 503.7      |        | $          | —      |       | $          | 0.2        |   | $ | 503.9 |   | $ | (1.2 | ) | $ | 1.9 |   | $ | 0.7 |   |
| Wood Products                                         |       | 118.7          |       | 5.7         |       | 74.3        |       | 198.7      |       | (17.1 | ) | 7.5 |   | (9.6 | ) |
| Paper (a)                                             |       | 154.4          |       | 90.1        |       | 9.0         |       | 253.5      |       | 20.7 |   | 0.3 |   | 21.1 |   |
| Packaging &  Newsprint (a)              |       | 102.2          |       | —      |       | 11.3        |       | 113.5      |       | 5.7 |   | 0.1 |   | 5.7 |   |
| Corporate and  Other (b)                         |       | 1.8            |       | —      |       | 6.8         |       | 8.6        |       | 1.0 |   | 0.2 |   | 1.2 |   |
|                                                  |       | 880.8          |       | 95.8        |       | 101.6       |       | 1,078.2    |       | 9.1 |   | 10.0 |   | 19.1 |   |
| Intersegment  eliminations                            |       | —         |       | —      |       | (101.6      | )          | (101.6     | )          | — |   | — |   | — |   |
| Equity in net  loss of affiliate (c)             |       | —         |       | —      |       | —      |       | —     |       | (8.6 | ) | — |   | (8.6 | ) |
| Change in fair  value of contingent value rights (d)  |       | —         |       | —      |       | —      |       | —     |       | (4.8 | ) | — |   | — |   |
| Change in fair  value of interest rate swaps (d) |       | —         |       | —      |       | —      |       | —     |       | (6.3 | ) | — |   | — |   |
| Interest expense                                      |       | —         |       | —      |       | —      |       | —     |       | (15.4 | ) | — |   | — |   |
| Interest income                                       |       | —         |       | —      |       | —      |       | —     |       | 2.6 |   | — |   | — |   |
| ** **                                            | ** ** | **$**          | **880.8**  | ** **  | **$**      | **95.8**    | ** ** | **$**      | **—** | ** ** | **$** | **976.6** | ** ** | **$** | **(23.3** | **)** | **$** | **10.0** | ** ** | **$** | **10.6** | ** ** |

 
| ** **                                  | ** ** | ** **     | ** **  | ** **  | ** ** | **Depre-**  | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|----------------|-------------|-------------|------------|-------------|------------|------------|------------|
| ** **                                  | ** ** | ** **     | ** **  | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | **ciation,** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | ** **     | ** **  | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | **Income** | ** ** | **Amorti-** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | **Sales**      | ** **  | **(Loss)**  | ** ** | **zation,** | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | ** **     | ** **  | **Related** | ** ** | **Inter-**  | ** ** | ** ** | ** ** | **Before** | ** ** | **and** | ** ** | **EBITDA** | ** ** |
| ** **                                  | ** ** | **Trade**      | ** **  | **Parties** | ** ** | **segment** | ** ** | **Total**  | ** ** | **Taxes** | ** ** | **Depletion** | ** ** | **(e)** | ** ** |
| ** **                                  | ** ** | **(millions)** | ** **  |
| **Three  Months Ended March 31, 2007** | ** ** | ** **     | ** **  | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building  Materials Distribution            |       | $              | 608.7       |        | $          | —      |       | $          | —     |   | $ | 608.7 |   | $ | 10.5 |   | $ | 1.9 |   | $ | 12.3 |   |
| Wood Products                               |       | 151.6          |        | —      |       | 102.3       |       | 253.9      |       | 3.7 |   | 7.3 |   | 11.0 |   |
| Paper                                       |       | 222.9          |        | 157.8       |       | 14.3        |       | 395.0      |       | 18.0 |   | 16.6 |   | 34.6 |   |
| Packaging &  Newsprint             |       | 176.7          |        | —      |       | 17.3        |       | 194.0      |       | 8.1 |   | 13.4 |   | 21.5 |   |
| Corporate and  Other                        |       | 3.3            |        | —      |       | 10.6        |       | 13.9       |       | (6.8 | ) | 1.2 |   | (5.5 | ) |
|                                        |       | 1,163.2        |        | 157.8       |       | 144.5       |       | 1,465.5    |       | 33.5 |   | 40.4 |   | 73.9 |   |
| Intersegment  eliminations                  |       | —         |        | —      |       | (144.5      | )          | (144.5     | )          | — |   | — |   | — |   |
| Interest expense                            |       | —         |        | —      |       | —      |       | —     |       | (22.3 | ) | — |   | — |   |
| Interest income                             |       | —         |        | —      |       | —      |       | —     |       | 0.6 |   | — |   | — |   |
| ** **                                  | ** ** | **$**          | **1,163.2** | ** **  | **$**      | **157.8**   | ** ** | **$**      | **—** | ** ** | **$** | **1,321.0** | ** ** | **$** | **11.8** | ** ** | **$** | **40.4** | ** ** | **$** | **73.9** | ** ** |

 

19

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(a)                                  As a result of the Sale, the three monthsended March 31, 2008, include the results of the Paper andPackaging & Newsprint segments through February 21, 2008.

 

(b)                                 Included an $8.1 million gain on theSale. See Note 2, Sale of Our Paper and Packaging & NewsprintAssets, for more information.

 

(c)                                  Included an $8.6 million loss related toour 49% equity investment in Boise Inc. See Note 12, Investment in EquityAffiliate, for more information related to our investment in Boise Inc.

 

(d)                                 Included approximately $6.3 million of expenserelated to the change in the fair value of our interest rate swaps, which weterminated in February 2008, and $4.8 million of expense related tothe fair value of the CVRs that we and Terrapin Partners Venture Partnershipgranted to certain Boise Inc. investors. See Note 15, FinancialInstruments, for more information.

 

(e)                                  EBITDA represents income (loss) beforeinterest (interest expense, interest income, and change in fair value ofinterest rate swaps and contingent value rights), income tax provision, anddepreciation, amortization, and depletion. EBITDA is the primary measure usedby our chief operating decision makers to evaluate segment operatingperformance and to decide how to allocate resources to segments. We believeEBITDA is useful to investors because it provides a means to evaluate theoperating performance of our segments and our company on an ongoing basis usingcriteria that are used by our internal decision makers and because it isfrequently used by investors and other interested parties in the evaluation ofcompanies with substantial financial leverage. We believe EBITDA is ameaningful 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, and change in fair value of interest rateswaps and contingent value rights, and associated significant cashrequirements; and the exclusion of depreciation, amortization, and depletion,which represent significant and unavoidable operating costs, given the level ofour indebtedness and the capital expenditures needed to maintain ourbusinesses. Management compensates for these limitations by relying on our GAAPresults. Our measures of EBITDA are not necessarily comparable to othersimilarly titled captions of other companies due to potential inconsistenciesin the methods of calculation.

 

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

 
| ** **                                       | ** ** | **Three Months Ended  March 31** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                       | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
|                                             |       | **(millions)**                                  |       |
|                                             |       |                                            |       |   |   |
| Net income  (loss)                               |       | $                                               | (24.4      | ) | $ | 10.5 |   |
| Change in fair  value of contingent value rights |       | 4.8                                             |       | — |   |
| Change in fair  value of interest rate swaps     |       | 6.3                                             |       | — |   |
| Interest expense                                 |       | 15.4                                            |       | 22.3 |   |
| Interest income                                  |       | (2.6                                            | )          | (0.6 | ) |
| Income tax  provision                            |       | 1.2                                             |       | 1.2 |   |
| Depreciation,  amortization, and depletion       |       | 10.0                                            |       | 40.4 |   |
| EBITDA                                           | ** ** | **$**                                           | **10.6**   | ** ** | **$** | **73.9** | ** ** |

 

***20.******                               Commitmentsand Guarantees***

 

*Commitments*

 

We have commitments for leases and long-term debt thatare discussed further in Note 7, Leases, and Note 14, 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 March 31, 2008, our total obligation for log andfiber purchases under contracts with third parties was approximately 

 

20

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$599.6 million.Under most of the log and fiber supply agreements, we have the right to cancelor reduce our commitments in the event of a mill curtailment or shutdown. Theprices under most of these agreements are set quarterly or semiannually basedon regional market prices, and the estimate is based on contract terms or currentquarter pricing. Our log and fiber obligations are subject to change based on,among other things, the effect of governmental laws and regulations, ourmanufacturing operations not operating in the normal course of business, logand fiber availability, and the status of environmental appeals. Except fordeposits required pursuant to wood supply contracts, these obligations are notrecorded in our consolidated financial statements until contract payment termstake 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 March 31, 2008,we had approximately $8.0 million of utility purchase commitments. Thesepayment obligations were valued at prices in effect on December 31, 2007,or contract language, if available. 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 FINNo. 45, *Guarantor’s Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness ofOthers*. Note 17, Commitments and Guarantees, of the Notesto Consolidated Financial Statements in “Item 8. Consolidated FinancialStatements” in our 2007 Annual Report on Form 10-K describes the nature ofour guarantees, 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. Except as noted below and as describedin Note 14, Debt, there have been no material changes to the guaranteesdisclosed in our 2007 Annual Report on Form 10-K.

 

Our new Loan and SecurityAgreement described in Note 14, Debt, is guaranteed by each of ourdomestic subsidiaries (except those which act as co-borrowers).

 

The proceeds of theinitial borrowing under the Loan and Security Agreement, along with proceedsfrom the sale of our Paper and Packaging & Newsprint assets,were used to repay the Bank Credit Agreement referred to in Note 17 of“Item 8. Financial Statements and Supplementary Data” of our 2007 Annual Reporton Form 10-K. The Bank Credit Agreement was terminated, and all guaranteesassociated with it 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 ourdomestic subsidiaries, other than Boise Cascade, L.L.C., and Boise CascadeFinance Corporation. We redeemed $160 million of the notes onApril 15, 2008. This repurchase reduced, but did not eliminate, our domesticsubsidiaries’ exposure under the guarantees extended in respect of thesubordinated notes. See Note 14, Debt, for more information.

 

In connection with the sale of our Paper andPackaging & Newsprint businesses, we amended the lease of ourheadquarters facility to eliminate all but one floor of the building from thelease. The portion of the building eliminated from the lease is the subject ofa new lease entered into by a subsidiary of Boise Inc. (Boise Paper Holdings,L.L.C.). As a condition to the amendment, we extended to the landlord ourguaranty of the obligations of Boise Paper Holdings, L.L.C., under the newlease for the first two years of its term. At March 31, 2008, our exposureunder the guarantee was $6.1 million, and it decreases on a pro rata basisover the lease term as rent 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 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., in respect to present and futuretimber sale agreements and several facility and rolling stock leases enteredinto by such subsidiaries. Boise Cascade, L.L.C., also guarantees the performanceand payment obligations of Boise Building Solutions Distribution, L.L.C., inrespect to several facility leases. Our exposure under these agreements islimited to future timber purchases and 

 

21

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the minimum lease paymentrequirements under the agreements. We also enterinto guarantees of various raw material or energy supply agreements arising inthe ordinary course of business. Under the terms of the Purchase and SaleAgreement governing our sale of our Paper and Packaging & Newsprintassets, 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. Efforts are underway to obtain suchreleases but are not complete at this time.

 

All letters of credit and most surety bonds supporting obligations ofsubsidiaries sold or liabilities assumed by the purchaser in connection withour sale of our Paper and Packaging & Newsprint assets have beenreplaced by new letters of credit or surety bonds issued without our creditsupport. The principal exception is letters of credit supporting workers' compensationobligations assumed by the purchaser, which as a matter of state law mustremain in our name even though the underlying liabilities and exposures havebeen assumed by the purchaser. Again, we are entitled to an indemnificationfrom the purchaser for liabilities in respect of such letters of credit arisingfrom workers' compensation claims assumed by the purchaser and for our costs ofmaintaining the purchaser's share of any such letter of credit. 

 

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

 

The following consolidating financialinformation presents the Statements of Income (Loss), Balance Sheets, and CashFlows related to our business. The senior notes are guaranteed on a seniorbasis jointly and severally by Boise Cascade, L.L.C., and each of its existingand future subsidiaries (other than the co-issuers, Boise Cascade, L.L.C.,and Boise Cascade Finance Corporation). The nonguarantors include our foreignsubsidiaries and Birch Creek Investments, L.L.C., that was dissolved on March 31,2008. Other than the consolidated financial statements and footnotes for BoiseCascade Holdings, L.L.C., financial statements and other disclosures concerningthe guarantors have not been presented because management believes that suchinformation is not material to investors. 

 

22

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

**ConsolidatingStatements of Income (Loss)**

**For the Three Months Ended March 31, 2008**

 
| ** **                                                                           | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,  L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                 | ** **  |
| **Sales**                                                                            |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                               | —      |                        | $          | —                      |       | $                                 | 875,552    |             | $          | 5,248            |       | $ | — |   | $ | 880,800 |   |
| Intercompany                                                                         |       | —                                          |        | —                      |       | 2                           |       | 10,868                            |       | (10,870          | )          | —           |       |
| Related parties                                                                      |       | —                                          |        | —                      |       | 95,782                      |       | —                            |       | —           |       | 95,782           |       |
|                                                                                 |       | —                                          |        | —                      |       | 971,336                     |       | 16,116                            |       | (10,870          | )          | 976,582          |       |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| **Costs  and expenses**                                                              |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| Materials,  labor, and other operating expenses                                      |       | —                                          |        | 1,386                       |       | 876,728                     |       | 14,668                            |       | (5,944           | )          | 886,838          |       |
| Depreciation,  amortization, and depletion                                           |       | —                                          |        | 177                         |       | 9,095                       |       | 763                               |       | —           |       | 10,035           |       |
| Selling and  distribution expenses                                                   |       | —                                          |        | —                      |       | 62,751                      |       | 614                               |       | —           |       | 63,365           |       |
| General and  administrative expenses                                            |       | 1                                               |        | 5,170                       |       | 15,179                      |       | 206                               |       | (4,926           | )          | 15,630           |       |
| Gain on sale of  Paper and Packaging & Newsprint assets                          |       | —                                          |        | (8,063                      | )          | —                      |       | —                            |       | —           |       | (8,063           | )          |
| Other (income)  expense, net                                                         |       | —                                          |        | 220                         |       | (1,559                      | )          | 397                               |       | —           |       | (942             | )          |
|                                                                                 |       | 1                                               |        | (1,110                      | )          | 962,194                     |       | 16,648                            |       | (10,870          | )          | 966,863          |       |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) from operations**                                                   |       | (1                                              | )           | 1,110                       |       | 9,142                       |       | (532                              | )          | —           |       | 9,719            |       |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| Equity in net  loss of affiliate (Boise Inc.)                                        |       | (8,552                                          | )           | —                      |       | —                      |       | —                            |       | —           |       | (8,552           | )          |
| Foreign exchange  gain (loss)                                                        |       | —                                          |        | (443                        | )          | (3                          | )          | (167                              | )          | —           |       | (613             | )          |
| Change in fair  value of contingent value rights                                     |       | —                                          |        | (4,773                      | )          | —                      |       | —                            |       | —           |       | (4,773           | )          |
| Change in fair  value of interest rate swaps                                         |       | —                                          |        | (6,284                      | )          | —                      |       | —                            |       | —           |       | (6,284           | )          |
| Interest expense                                                                     |       | —                                          |        | (14,536                     | )          | —                      |       | (845                              | )          | —           |       | (15,381          | )          |
| Interest  expense—intercompany                                                  |       | —                                          |        | (158                        | )          | (2                          | )          | (1,399                            | )          | 1,559            |       | —           |       |
| Interest income                                                                      |       | 986                                             |        | 1,546                       |       | 62                          |       | 7                                 |       | —           |       | 2,601            |       |
| Interest  income—intercompany                                                   |       | —                                          |        | 32                          |       | 1,527                       |       | —                            |       | (1,559           | )          | —           |       |
|                                                                                 |       | (7,566                                          | )           | (24,616                     | )          | 1,584                       |       | (2,404                            | )          | —           |       | (33,002          | )          |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) before income taxes and equity in net income (loss) of affiliates** |       | (7,567                                          | )           | (23,506                     | )          | 10,726                      |       | (2,936                            | )          | —           |       | (23,283          | )          |
| Income tax  provision                                                                |       | —                                          |        | (915                        | )          | (235                        | )          | (5                                | )          | —           |       | (1,155           | )          |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) before equity in net income (loss) of affiliates**                  |       | (7,567                                          | )           | (24,421                     | )          | 10,491                      |       | (2,941                            | )          | —           |       | (24,438          | )          |
|                                                                                 |       |                                            |        |                        |       |                        |       |                              |       |             |       |             |       |
| **Equity  in net income (loss) of affiliates**                                       |       | (16,871                                         | )           | 7,550                       |       | —                      |       | —                            |       | 9,321            |       | —           |       |
| **Net  income (loss)**                                                               | ** ** | **$**                                           | **(24,438** | **)**                       | **$**      | **(16,871**                 | **)**      | **$**                             | **10,491** | ** **       | **$**      | **(2,941**       | **)**      | **$** | **9,321** | ** ** | **$** | **(24,438** | **)** |

 

23

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

**ConsolidatingStatements of Income (Loss)**

**For the Three Months Ended March 31, 2007**

 
| ** **                                                                           | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** ** | **Boise  Cascade,  L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                 | ** ** |
| **Sales**                                                                            |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                               | —     |                        | $          | —                      |       | $                                 | 1,156,357  |             | $          | 6,816            |       | $ | — |   | $ | 1,163,173 |   |
| Intercompany                                                                         |       | —                                          |       | 855                         |       | —                      |       | 22,640                            |       | (23,495          | )          | —           |       |
| Related parties                                                                      |       | —                                          |       | —                      |       | 157,795                     |       | —                            |       | —           |       | 157,795          |       |
|                                                                                 |       | —                                          |       | 855                         |       | 1,314,152                   |       | 29,456                            |       | (23,495          | )          | 1,320,968        |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Costs  and expenses**                                                              |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Materials,  labor, and other operating expenses                                      |       | —                                          |       | 418                         |       | 1,151,658                   |       | 19,426                            |       | (14,603          | )          | 1,156,899        |       |
| Depreciation,  amortization, and depletion                                           |       | —                                          |       | 906                         |       | 38,394                      |       | 1,060                             |       | —           |       | 40,360           |       |
| Selling and  distribution expenses                                                   |       | —                                          |       | —                      |       | 67,725                      |       | 683                               |       | —           |       | 68,408           |       |
| General and  administrative expenses                                            |       | —                                          |       | 6,858                       |       | 20,912                      |       | 617                               |       | (8,892           | )          | 19,495           |       |
| Other (income)  expense, net                                                         |       | —                                          |       | 405                         |       | 1,333                       |       | 808                               |       | —           |       | 2,546            |       |
|                                                                                 |       | —                                          |       | 8,587                       |       | 1,280,022                   |       | 22,594                            |       | (23,495          | )          | 1,287,708        |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) from operations**                                                   |       | —                                          |       | (7,732                      | )          | 34,130                      |       | 6,862                             |       | —           |       | 33,260           |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Foreign exchange  gain (loss)                                                        |       | —                                          |       | 1,570                       |       | 83                          |       | (1,411                            | )          | —           |       | 242              |       |
| Interest expense                                                                     |       | —                                          |       | (20,677                     | )          | —                      |       | (1,666                            | )          | —           |       | (22,343          | )          |
| Interest  expense—intercompany                                                  |       | —                                          |       | (127                        | )          | —                      |       | (4,892                            | )          | 5,019            |       | —           |       |
| Interest income                                                                      |       | —                                          |       | 540                         |       | 42                          |       | 19                                |       | —           |       | 601              |       |
| Interest  income—intercompany                                                   |       | —                                          |       | 15                          |       | 5,004                       |       | —                            |       | (5,019           | )          | —           |       |
|                                                                                 |       | —                                          |       | (18,679                     | )          | 5,129                       |       | (7,950                            | )          | —           |       | (21,500          | )          |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) before income taxes and equity in net income (loss) of affiliates** |       | —                                          |       | (26,411                     | )          | 39,259                      |       | (1,088                            | )          | —           |       | 11,760           |       |
| Income tax  provision                                                                |       | —                                          |       | (496                        | )          | (727                        | )          | —                            |       | —           |       | (1,223           | )          |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Income  (loss) before equity in net income (loss) of affiliates**                  |       | —                                          |       | (26,907                     | )          | 38,532                      |       | (1,088                            | )          | —           |       | 10,537           |       |
|                                                                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Equity  in net income (loss) of affiliates**                                       |       | 10,537                                          |       | 37,444                      |       | —                      |       | —                            |       | (47,981          | )          | —           |       |
| **Net  income (loss)**                                                               | ** ** | **$**                                           | **10,537** | ** **                  | **$**      | **10,537**                  | ** ** | **$**                             | **38,532** | ** **       | **$**      | **(1,088**       | **)**      | **$** | **(47,981** | **)** | **$** | **10,537** | ** ** |

 

24

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

**ConsolidatingBalance Sheets at March 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                       |       | $                                               | —      |                        | $          | 149,427                     |       | $                                 | 21          |             | $          | 1,652            |       | $ | — |   | $ | 151,100 |   |
| Restricted cash                                  |       | —                                          |        | 183,290                     |       | —                      |       | —                            |        | —           |       | 183,290          |       |
| Receivables                                      |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Trade, less  allowances                          |       | —                                          |        | —                      |       | 159,029                     |       | 2,735                             |        | —           |       | 161,764          |       |
| Intercompany                                     |       | —                                          |        | —                      |       | 56                          |       | —                            |        | (56              | )          | —           |       |
| Related parties                                  |       | —                                          |        | 2,324                       |       | 4,848                       |       | —                            |        | —           |       | 7,172            |       |
| Other                                            |       | —                                          |        | 4,643                       |       | 2,466                       |       | 1,998                             |        | —           |       | 9,107            |       |
| Inventories                                      |       | —                                          |        | —                      |       | 319,133                     |       | 15,773                            |        | —           |       | 334,906          |       |
| Other                                            |       | —                                          |        | 6,172                       |       | 1,233                       |       | 398                               |        | —           |       | 7,803            |       |
|                                             |       | —                                          |        | 345,856                     |       | 486,786                     |       | 22,556                            |        | (56              | )          | 855,142          |       |
|                                             |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Property**                                     |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Property and  equipment, net                     |       | —                                          |        | 2,442                       |       | 274,664                     |       | 29,311                            |        | —           |       | 306,417          |       |
| Fiber farms and  deposits                        |       | —                                          |        | —                      |       | 9,231                       |       | 16,659                            |        | —           |       | 25,890           |       |
|                                             |       | —                                          |        | 2,442                       |       | 283,895                     |       | 45,970                            |        | —           |       | 332,307          |       |
|                                             |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Investment  in equity affiliate (Boise Inc.)** |       | 268,873                                         |        | —                      |       | —                      |       | —                            |        | —           |       | 268,873          |       |
| **Note  receivable from related party**          |       | 58,793                                          |        | —                      |       | —                      |       | —                            |        | —           |       | 58,793           |       |
| **Deferred  financing costs**                    |       | —                                          |        | 11,703                      |       | —                      |       | —                            |        | —           |       | 11,703           |       |
| **Goodwill**                                     |       | —                                          |        | —                      |       | 12,170                      |       | —                            |        | —           |       | 12,170           |       |
| **Intangible  assets, net**                      |       | —                                          |        | —                      |       | 9,563                       |       | —                            |        | —           |       | 9,563            |       |
| **Other  assets**                                |       | —                                          |        | 190                         |       | 8,723                       |       | 144                               |        | —           |       | 9,057            |       |
| **Investments  in affiliates**                   |       | 413,275                                         |        | 935,220                     |       | —                      |       | —                            |        | (1,348,495       | )          | —           |       |
| **Total  assets**                                | ** ** | **$**                                           | **740,941** | ** **                  | **$**      | **1,295,411**               | ** ** | **$**                             | **801,137** | ** **       | **$**      | **68,670**       | ** ** | **$** | **(1,348,551** | **)** | **$** | **1,557,608** | ** ** |

 

25

----

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at March 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**                                 |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Current portion  of long-term debt          |       | $                                               | —      |                        | $          | 160,000                     |       | $                                 | —      |             | $          | —           |       | $ | — |   | $ | 160,000 |   |
| Accounts payable                            |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Trade                                       |       | —                                          |        | 9,694                       |       | 142,496                     |       | 2,712                             |        | —           |       | 154,902          |       |
| Intercompany                                |       | —                                          |        | —                      |       | —                      |       | 56                                |        | (56              | )          | —           |       |
| Related parties                             |       | —                                          |        | 1,907                       |       | 7,680                       |       | —                            |        | —           |       | 9,587            |       |
| Accrued  liabilities                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Compensation and  benefits                  |       | —                                          |        | 16,955                      |       | 18,743                      |       | 766                               |        | —           |       | 36,464           |       |
| Interest payable                            |       | —                                          |        | 13,418                      |       | —                      |       | —                            |        | —           |       | 13,418           |       |
| Other                                       |       | —                                          |        | 69,853                      |       | 13,464                      |       | 660                               |        | —           |       | 83,977           |       |
|                                        |       | —                                          |        | 271,827                     |       | 182,383                     |       | 4,194                             |        | (56              | )          | 458,348          |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Debt**                                    |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Long-term debt,  less current portion       |       | —                                          |        | 304,224                     |       | —                      |       | —                            |        | —           |       | 304,224          |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Other**                                   | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **  | ** **       | ** ** | ** **       | ** ** |
| Compensation and  benefits                  |       | —                                          |        | 43,508                      |       | —                      |       | —                            |        | —           |       | 43,508           |       |
| Other long-term  liabilities                |       | —                                          |        | 6,472                       |       | 4,115                       |       | —                            |        | —           |       | 10,587           |       |
|                                        |       | —                                          |        | 49,980                      |       | 4,115                       |       | —                            |        | —           |       | 54,095           |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Due to  (from) affiliates**               |       | —                                          |        | 256,105                     |       | (238,826                    | )          | (17,279                           | )           | —           |       | —           |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Redeemable  equity units**                |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| Series B  equity units                 |       | 9,891                                           |        | —                      |       | —                      |       | —                            |        | —           |       | 9,891            |       |
| Series C  equity units                 |       | 6,317                                           |        | —                      |       | —                      |       | —                            |        | —           |       | 6,317            |       |
| Redeemable  equity units                    |       | —                                          |        | 16,208                      |       | —                      |       | —                            |        | (16,208          | )          | —           |       |
|                                        |       | 16,208                                          |        | 16,208                      |       | —                      |       | —                            |        | (16,208          | )          | 16,208           |       |
|                                        |       |                                            |        |                        |       |                        |       |                              |        |             |       |             |       |
| **Commitments  and contingent liabilities** | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                  | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                 | ** ** | ** **                                      | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A  equity units                 |       | 76,332                                          |        | —                      |       | —                      |       | —                            |        | —           |       | 76,332           |       |
| Series B  equity units                 |       | 648,401                                         |        | —                      |       | —                      |       | —                            |        | —           |       | 648,401          |       |
| Series C  equity units                 |       | —                                          |        | —                      |       | —                      |       | —                            |        | —           |       | —           |       |
| Subsidiary  equity                          |       | —                                          |        | 397,067                     |       | 853,465                     |       | 81,755                            |        | (1,332,287       | )          | —           |       |
| **Total  capital**                          |       | 724,733                                         |        | 397,067                     |       | 853,465                     |       | 81,755                            |        | (1,332,287       | )          | 724,733          |       |
| **Total  liabilities and capital**          | ** ** | **$**                                           | **740,941** | ** **                  | **$**      | **1,295,411**               | ** ** | **$**                             | **801,137** | ** **       | **$**      | **68,670**       | ** ** | **$** | **(1,348,551** | **)** | **$** | **1,557,608** | ** ** |

 

26

----

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Balance 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        |       |
| 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            |       |
| **Investments  in affiliates** |       | 991,904                                         |        | 927,670                     |       | —                      |       | —                            |          | (1,919,574       | )          | —           |       |
| **Other  assets**              |       | —                                          |        | 5,014                       |       | 3,261                       |       | 3,099                             |          | —           |       | 11,374           |       |
| **Total  assets**              | ** ** | **$**                                           | **991,905** | ** **                  | **$**      | **1,032,683**               | ** ** | **$**                             | **2,281,004** | ** **       | **$**      | **388,230**      | ** ** | **$** | **(1,919,630** | **)** | **$** | **2,774,192** | ** ** |

 

27

----

 

**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 parties                                         |       | —                                          |        | 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** | ** ** |

 

28

----

 

**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Three Months ended March 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)                                                               |       | $                                               | (24,438    | )                           | $          | (16,871                     | )          | $                                 | 10,491     |             | $          | (2,941           | )          | $ | 9,321 |   | $ | (24,438 | ) |
| Items in net  income (loss) not using (providing) cash                           |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Equity in net  loss of affiliate (Boise Inc.)                                    |       | 8,552                                           |       | —                      |       | —                      |       | —                            |       | —           |       | 8,552            |       |
| Equity in net  (income) loss of affiliates                                       |       | 16,871                                          |       | (7,550                      | )          | —                      |       | —                            |       | (9,321           | )          | —           |       |
| Depreciation,  depletion, and amortization of deferred financing costs and other |       | —                                          |       | 506                         |       | 9,095                       |       | 777                               |       | —           |       | 10,378           |       |
| Related-party  interest expense                                                  |       | —                                          |       | 158                         |       | 2                           |       | 1,399                             |       | (1,559           | )          | —           |       |
| Related-party  interest income                                                   |       | (986                                            | )          | (32                         | )          | (1,527                      | )          | —                            |       | 1,559            |       | (986             | )          |
| Deferred income  taxes                                                           |       | —                                          |       | 43                          |       | 11                          |       | —                            |       | —           |       | 54               |       |
| Pension and  other postretirement benefit expense                                |       | —                                          |       | 5,007                       |       | —                      |       | —                            |       | —           |       | 5,007            |       |
| Change in fair  value of contingent rights                                       |       | —                                          |       | 4,773                       |       | —                      |       | —                            |       | —           |       | 4,773            |       |
| Change in fair  value of interest rate swaps                                     |       | —                                          |       | 6,284                       |       | —                      |       | —                            |       | —           |       | 6,284            |       |
| Management  equity units expense                                            |       | —                                          |       | 347                         |       | —                      |       | —                            |       | —           |       | 347              |       |
| (Gain) loss on  sale of assets, net                                              |       | —                                          |       | (8,063                      | )          | (2,909                      | )          | —                            |       | —           |       | (10,972          | )          |
| Other                                                                            |       | —                                          |       | 443                         |       | (31                         | )          | 167                               |       | —           |       | 579              |       |
| Decrease  (increase) in working capital, net of dispositions                     |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Receivables                                                                      |       | —                                          |       | (9,269                      | )          | (382,295                    | )          | 316,372                           |       | —           |       | (75,192          | )          |
| Inventories                                                                      |       | —                                          |       | 5,611                       |       | 6,726                       |       | 428                               |       | —           |       | 12,765           |       |
| Prepaid expenses                                                                 |       | —                                          |       | (3,790                      | )          | 1,820                       |       | 324                               |       | —           |       | (1,646           | )          |
| Accounts payable  and accrued liabilities                                   |       | —                                          |       | (208                        | )          | 27,348                      |       | (5,997                            | )          | —           |       | 21,143           |       |
| Pension and  other postretirement benefit     payments       |       | —                                          |       | (20,716                     | )          | —                      |       | —                            |       | —           |       | (20,716          | )          |
| Current and  deferred income taxes                                               |       | —                                          |       | 348                         |       | (1,919                      | )          | 2,974                             |       | —           |       | 1,403            |       |
| Other                                                                            |       | —                                          |       | 3,640                       |       | (3,776                      | )          | (19                               | )          | —           |       | (155             | )          |
| Cash provided by  (used for) operations                                          |       | (1                                              | )          | (39,339                     | )          | (336,964                    | )          | 313,484                           |       | —           |       | (62,820          | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) investment**                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Proceeds from  sale of assets, net of cash contributed                           |       | —                                          |       | 1,205,391                   |       | 21,936                      |       | —                            |       | —           |       | 1,227,327        |       |
| Expenditures for  property and equipment                                    |       | —                                          |       | (638                        | )          | (16,539                     | )          | (1,042                            | )          | —           |       | (18,219          | )          |
| Increase in  restricted cash                                                     |       | —                                          |       | (183,290                    | )          | —                      |       | —                            |       | —           |       | (183,290         | )          |
| Investments in  affiliates                                                       |       | 145,960                                         |       | 7,550                       |       | —                      |       | —                            |       | (153,510         | )          | —           |       |
| Other                                                                            |       | —                                          |       | 217                         |       | (812                        | )          | (424                              | )          | —           |       | (1,019           | )          |
| Cash provided by  (used for) investment                                     |       | 145,960                                         |       | 1,029,230                   |       | 4,585                       |       | (1,466                            | )          | (153,510         | )          | 1,024,799        |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) financing**                                       | ** ** | ** **                                      | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of  long-term debt                                                     |       | —                                          |       | 64,224                      |       | —                      |       | 165,000                           |       | —           |       | 229,224          |       |
| Payments of  long-term debt                                                      |       | —                                          |       | (720,563                    | )          | —                      |       | (205,000                          | )          | —           |       | (925,563         | )          |
| Short-term  borrowings                                                           |       | —                                          |       | (10,500                     | )          | —                      |       | —                            |       | —           |       | (10,500          | )          |
| Tax  distributions to members                                                    |       | (127,342                                        | )          | —                      |       | —                      |       | —                            |       | —           |       | (127,342         | )          |
| Tax  distributions to Boise Cascade Holdings, L.L.C.                        |       | —                                          |       | (127,342                    | )          | —                      |       | —                            |       | 127,342          |       | —           |       |
| Repurchase of  management equity units                                           |       | (18,289                                         | )          | (18,289                     | )          | —                      |       | —                            |       | 18,289           |       | (18,289          | )          |
| Cash paid for  termination of interest rate swaps                                |       | —                                          |       | (11,918                     | )          | —                      |       | —                            |       | —           |       | (11,918          | )          |
| Other                                                                            |       | (329                                            | )          | (4,114                      | )          | —                      |       | —                            |       | 329              |       | (4,114           | )          |
| Cash provided by  (used for) financing                                           |       | (145,960                                        | )          | (828,502                    | )          | —                      |       | (40,000                           | )          | 145,960          |       | (868,502         | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Due to (from)  affiliates                                                        |       | —                                          |       | (68,550                     | )          | 332,379                     |       | (271,379                          | )          | 7,550            |       | —           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Increase  (decrease) in cash and cash equivalents**                       |       | (1                                              | )          | 92,839                      |       | —                      |       | 639                               |       | —           |       | 93,477           |       |
| **Balance  at beginning of the period**                                          |       | 1                                               |       | 56,588                      |       | 21                          |       | 1,013                             |       | —           |       | 57,623           |       |
| **Balance  at end of the period**                                                | ** ** | **$**                                           | **—** | ** **                  | **$**      | **149,427**                 | ** ** | **$**                             | **21**     | ** **       | **$**      | **1,652**        | ** ** | **$** | **—** | ** ** | **$** | **151,100** | ** ** |

 

29

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**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Three Months Ended March 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)                                                               |       | $                                               | 10,537     |                        | $          | 10,537                      |       | $                                 | 38,532     |             | $          | (1,088           | )          | $ | (47,981 | ) | $ | 10,537 |   |
| Items in net  income (loss) not using (providing) cash                           |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Equity in net  (income) loss of affiliates                                       |       | (10,537                                         | )          | (37,444                     | )          | —                      |       | —                            |       | 47,981           |       | —           |       |
| Depreciation,  depletion, and amortization of deferred financing costs and other |       | —                                          |       | 586                         |       | 38,394                      |       | 1,104                             |       | —           |       | 40,084           |       |
| Related-party  interest expense                                                  |       | —                                          |       | 127                         |       | —                      |       | 4,892                             |       | (5,019           | )          | —           |       |
| Related-party  interest income                                                   |       | —                                          |       | (15                         | )          | (5,004                      | )          | —                            |       | 5,019            |       | —           |       |
| Deferred income  taxes                                                           |       | —                                          |       | 472                         |       | 21                          |       | —                            |       | —           |       | 493              |       |
| Pension and  other postretirement benefit expense                                |       | —                                          |       | 6,066                       |       | —                      |       | —                            |       | —           |       | 6,066            |       |
| Management  equity units expense                                            |       | —                                          |       | 822                         |       | —                      |       | —                            |       | —           |       | 822              |       |
| (Gain) loss on  sales of assets, net                                             |       | —                                          |       | (1                          | )          | 940                         |       | 60                                |       | —           |       | 999              |       |
| Other                                                                            |       | —                                          |       | (1,570                      | )          | 353                         |       | 1,411                             |       | —           |       | 194              |       |
| Decrease  (increase) in working capital                                          |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Receivables                                                                      |       | —                                          |       | (3,205                      | )          | (6,707                      | )          | (46,750                           | )          | —           |       | (56,662          | )          |
| Inventories                                                                      |       | —                                          |       | 5                           |       | (20,209                     | )          | (105                              | )          | —           |       | (20,309          | )          |
| Prepaid expenses                                                                 |       | —                                          |       | (581                        | )          | 4,761                       |       | 54                                |       | —           |       | 4,234            |       |
| Accounts payable  and accrued liabilities                                   |       | —                                          |       | 1,979                       |       | 18,771                      |       | (1,284                            | )          | —           |       | 19,466           |       |
| Pension and  other postretirement benefit payments                               |       | —                                          |       | (339                        | )          | —                      |       | —                            |       | —           |       | (339             | )          |
| Current and  deferred income taxes                                               |       | —                                          |       | 304                         |       | 467                         |       | —                            |       | —           |       | 771              |       |
| Other                                                                            |       | —                                          |       | 2,255                       |       | 2,139                       |       | 3                                 |       | —           |       | 4,397            |       |
| Cash provided by  (used for) operations                                          |       | —                                          |       | (20,002                     | )          | 72,458                      |       | (41,703                           | )          | —           |       | 10,753           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) investment**                                 |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Expenditures for  property and equipment                                    |       | —                                          |       | (1,483                      | )          | (44,972                     | )          | (787                              | )          | —           |       | (47,242          | )          |
| Sales of assets                                                                  |       | —                                          |       | 2                           |       | 3,375                       |       | 7                                 |       | —           |       | 3,384            |       |
| Investments in  affiliates                                                       |       | 2,855                                           |       | 37,344                      |       | —                      |       | —                            |       | (40,199          | )          | —           |       |
| Other                                                                            |       | —                                          |       | 1,587                       |       | (167                        | )          | (1,254                            | )          | —           |       | 166              |       |
| Cash provided by  (used for) investment                                          |       | 2,855                                           |       | 37,450                      |       | (41,764                     | )          | (2,034                            | )          | (40,199          | )          | (43,692          | )          |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Cash  provided by (used for) financing**                                       | ** ** | ** **                                      | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of long-term  debt                                                     |       | —                                          |       | —                      |       | —                      |       | 100,000                           |       | —           |       | 100,000          |       |
| Payments of  long-term debt                                                      |       | —                                          |       | —                      |       | —                      |       | (40,000                           | )          | —           |       | (40,000          | )          |
| Short-term  borrowings                                                           |       |                                            |       | (3,200                      | )          |                        |       |                              |       |             |       | (3,200           | )          |
| 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                                           |       | (94                                             | )          | (94                         | )          | —                      |       | —                            |       | 94               |       | (94              | )          |
| Other                                                                            |       | (6                                              | )          | (7                          | )          | —                      |       | —                            |       | 6                |       | (7               | )          |
| Cash provided by  (used for) financing                                           |       | (2,853                                          | )          | (6,054                      | )          | —                      |       | 60,000                            |       | 2,853            |       | 53,946           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| Due to (from)  affiliates                                                        |       | —                                          |       | 10,230                      |       | (30,697                     | )          | (16,879                           | )          | 37,346           |       | —           |       |
|                                                                             |       |                                            |       |                        |       |                        |       |                              |       |             |       |             |       |
| **Increase  (decrease) in cash and cash equivalents**                       |       | 2                                               |       | 21,624                      |       | (3                          | )          | (616                              | )          | —           |       | 21,007           |       |
| **Balance  at beginning of the year**                                            |       | —                                          |       | 42,962                      |       | 32                          |       | 2,175                             |       | —           |       | 45,169           |       |
| **Balance  at end of the year**                                                  | ** ** | **$**                                           | **2**      | ** **                  | **$**      | **64,586**                  | ** ** | **$**                             | **29**     | ** **       | **$**      | **1,559**        | ** ** | **$** | **—** | ** ** | **$** | **66,176** | ** ** |

 

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***22.******        Legal Proceedings andContingencies***

 

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

** **

***ITEM2.******      ******MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS***

 

***Understanding Our FinancialInformation***

 

The following discussion and analysisprovides information management believes to be relevant to understanding ourfinancial condition and results of operations. We begin this discussion and analysis with a general background relatedto our company and an overview of the effects of the recent “Sale of Our Paperand Packaging & Newsprint Assets.” “Recent Trends and OperationalOutlook” and “Factors That Affect Our Operating Results” are intended to givethe reader context that may be helpful in understanding the opportunities and challenges our businesses face as we compete inthe marketplace. The analysis thenreviews “Our Operating Results” for the three months ended March 31, 2008,compared with the same period in 2007. Following the analysis of our results, relevant merger activityin our industry is discussed in “Industry Mergers and Acquisitions,” as well asin “Acquisitions” and “Divestitures.”

 

We discuss our balance sheet, cash flows, and financial commitments inthe section entitled “Liquidity andCapital Resources.” The analysisthen addresses our “Contractual Obligations” and is followed by a discussion ofthe “Critical Accounting Estimates” that our management believes are importantto understanding the assumptions and judgments incorporated in our reportedfinancial results.

 

This discussion and analysis includes statements regarding our expectationswith respect to our future performance, liquidity, and capital resources. Suchstatements, along with any other nonhistorical statements in the discussion,are forward-looking. These forward-looking statements are subject to numerousrisks and uncertainties, including, but not limited to, the risks anduncertainties described in “Part II, Item 1A. Risk Factors” of this Form 10-Q.

 

We do not assume an obligation to update any forward-looking statement. Ourfuture actual results may differ materially from those contained in or impliedby any of the forward-looking statements in this Form 10-Q.

 

***Background and Executive Overview***

 

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.Immediately following the Sale, Boise Cascade, L.L.C., distributed thesecurities received in the transaction to us. As a result, we are a 49% ownerof Boise Inc. and continue to have a significant indirect financial interest inthe results of the sold businesses. We account for our interest inBoise Inc. using the equity method of accounting. BoiseCascade, L.L.C., is now solely focused on wood products manufacturing andbuilding products distribution and remains headquartered in Boise, Idaho.After the Sale, we operate our business in the following three reportablesegments: Building Materials Distribution, Wood Products, and Corporate andOther. See Note 19, Segment Information, of the Notes to UnauditedQuarterly Consolidated Financial Statements in “Item 1. ConsolidatedFinancial Statements” of this Form 10-Q, for additional information aboutour reportable segments.

 

Recent results for ourbusiness segments remain weak, compared with those we achieved in the periodsof 2004 through the first half of 2007, when single-family housing starts weremore robust. We do not expect housing starts to return to more normalizedlevels during 2008. As weather improves seasonally over the next few months, wewill gain a better sense of the impact of the mortgage market 

 

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dislocations, housing pricing trends, housing vacancy rates, andconsumer confidence on housing construction demand; however, at this point, ouroutlook is for relatively weak end-product demand in the near term. Seeadditional comments below in “Recent Trends and Operational Outlook.”

 

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

 

On February 22, 2008, Boise Cascade,L.L.C., completed the Sale for $1,277.2 million of cash consideration,$277.4 million of net stock consideration, and a $41.0 millionpromissory note receivable. After the Sale, the note receivable from Boise Inc.increased $16.8 million for preliminary working capital adjustments. Finalworking capital adjustments will be made in second quarter 2008. To the extentthat interest on the note is not paid in cash, the interest accumulates and isadded to the principal amount of the note. See Note 4, Transactions WithRelated Parties, in “Item 1. Consolidated Financial Statements” of this Form 10-Qfor more information. In connection with the Sale, we generated a$15.8 million gain, of which we recognized $8.1 million in ourConsolidated Statement of Loss, and in accordance with Emerging Issues TaskForce (EITF) No. 01-02, *Interpretations ofAccounting Principles Board (APB) Opinion No. 29,*we deferred$7.7 million of the gain as a reduction of our investment in Boise Inc.

 

Immediately following the Sale, BoiseCascade, L.L.C., distributed the securities received in the transaction to us.As a result, we are 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. We valued the stock consideration received based on the February 21,2008, closing Boise Inc. stock price of $8.56. We reduced the value of thestock consideration received by a 12% discount for a lack of marketabilitysince the stock delivered as consideration was not registered for resale and bya $7.7 million gain deferred in connection with the Sale. We will realizethe deferred gain when we reduce our investment in Boise Inc. See Note 12,Investment in Equity Affiliate, in “Item 1. Consolidated FinancialStatements” of this Form 10-Q for more information.

 

Any future disposition of the shares ofBoise Inc. and the promissory note received as partial consideration for theSale is governed by the terms of our senior subordinated notes indenture,including the asset disposition provisions, which may require us to eitherreinvest the proceeds in our business or tender for all or a portion of theoutstanding notes at par.

 

*Useof Transaction Proceeds*

 

With the proceeds from the Sale, we repaid$925.6 million of our debt. In addition, we initiated a tender offer for$160 million of our 7.125% senior subordinated notes. At March 31, 2008,the $160 million was recorded as “Restricted cash” on our ConsolidatedBalance Sheet. On April 15, 2008, we redeemed the $160 million ofnotes. In addition to repaying a substantial amount of our indebtedness, infirst quarter 2008, we paid $11.9 million to unwind all of our interestrate swaps related to the floating-rate debt repaid.

 

We make cash distributions to permit the members of Boise Cascade Holdings,L.L.C. (BC Holdings) and affiliates to pay their taxes. On February 22,2008, we accrued $200 million for estimated tax distributions payable toour equity holders related to the estimated net taxable gain on the Sale. Inconnection with the Sale, we distributed $120** **millionof tax distributions to our equity holders. We expect to make additionalgain-related tax distributions during the remainder of the year or firstquarter 2009.

 

In connection with thetransaction, approximately 75 participants in our Management Equity Planterminated employment with us. These employees collectively held6.6 million Series B and 16.1 million Series C units. Afterthe transaction, we paid $18.3 million to repurchase their equity units. Inaddition, we also currently expect to pay approximately $4.2 million underthe deferred compensation agreements for employees terminated in connectionwith the transaction. Of the $4.2 million, we recorded $2.6 millionin “Accrued liabilities, Compensation and benefits” and $1.6 million in “Other,Compensation and benefits” on our Consolidated Balance Sheet at March 31,2008.

 

32

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*Pro Forma*

 

The following pro forma financial information wasderived from the unaudited quarterly financial statements of BC Holdings. Thepro forma financial information gives effect to the Sale as if it wereconsummated on January 1, 2007. The pro forma financial information isintended for informational purposes only and is not necessarily indicative ofthe results of operations that may have actually occurred if the Sale had beenconsummated on January 1, 2007, or the operating results that may beobtained in the future.

 
| ** **             | ** ** | **Three Months Ended  March 31** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|
| ** **             | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
| ** **             | ** ** | **(millions)**                                  | ** ** |
| Sales                  |       | $                                               | 630.0      |   | $ | 771.3 |   |
|                   |       |                                            |       |   |   |
| Net income  (loss) (a) |       | $                                               | (45.7      | ) | $ | 3.6 |   |

 

----

(a)           The pro forma net loss for the three monthsended March 31, 2008, includes $13.2 million of pro forma lossesrelated to our 49% equity interest in Boise Inc.; $6.3 million of expenserelated to changes in the fair value of our interest rate swaps, which wereterminated in February 2008; and $4.8 million of expense related tothe fair value of the contingent value rights that we and Terrapin PartnersVenture Partnership granted to certain Boise Inc. investors.

 

***Effects of the Sale***

 

*OutsourcingAgreement*

 

In connection with the Sale, weentered into an Outsourcing Services Agreement under which Boise Inc. providesa number of corporate staff services to us at cost. These services includeinformation technology, accounting, and human resource services. The initialterm of the agreement is for three years. It will automatically renew forone-year terms unless either party provides notice of termination to the otherparty at least 12 months in advance of the applicable term. The OutsourcingServices Agreement also gives us (but not Boise Inc.) the right to terminateall or any portion of the services provided to us on 30 days notice,subject to payment of an absorption fee. The absorption fee of$5.0 million is allocated among the services provided under the contractand declines to zero in total and on an allocable basis over the initialthree-year term of the agreement. During the three months ended March 31,2008, we recognized $1.5 million of costs related to this agreement, whichwe recorded in “General and administrative expenses” in our ConsolidatedStatement of Loss.

 

*DecreasedLeverage*

 

In connection with the Sale, we repaid $925.6 million of long-termdebt, including all of the borrowings under the revolving credit facility,Tranche E term loan, and delayed-draw term loan and the borrowings securedby our receivables. We repaid the amounts primarily with the proceeds from theSale and, to a lesser extent, with borrowings under our new $350 millionsenior secured asset-based revolving credit facility. After these repaymentsand completion of the tender of our 7.125% senior subordinated notes on April 15,2008, we had $304.0 million of debt outstanding. For moreinformation, see “Financing Activities” under Liquidity and Capital Resourcesin this Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.

 

*Segments*

 

Prior to the Sale, weoperated our business using five reportable segments:  Building Materials Distribution, WoodProducts, Paper, Packaging & Newsprint, and Corporate and Other.Following the Sale, we now operate our business using three reportablesegments:  Building MaterialsDistribution, Wood Products, and Corporate and Other. There are no differencesin our basis of measurement of segment profit or loss from those disclosed inNote 16, Segment Information, of the Notes to Consolidated FinancialStatements in “Item 8. Consolidated Financial Statements and SupplementaryData” in our 2007 Annual Report on Form 10-K. The 49% equity interest weown in Boise Inc. after the Sale represents a significant continuinginvolvement as defined in Statement of Financial Accounting 

 

33

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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 do not define the sold assetsas discontinued operations.

 

*Pensionand Benefit Plans*

 

Effective January 1, 2008, we spunoff the portion of each benefit plan attributable to employees or retirees ofthe 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 spun-off plans to Boise Paper Holdings, L.L.C.,a subsidiary 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 the amounts included in prior periods.

 

***Recent Trends and OperationalOutlook***

 

As of April 2008, the Blue Chip Economicconsensus forecast for 2008 housing starts in the U.S. was approximately1.0 million units, which is significantly below historical trends ofapproximately 1.7 million units over the prior ten years. Housing startsin 2004 and 2005 were approximately 2.0 million per year, with 2006 comingin around 1.8 million. This above-trend period was fueled by low mortgagerates, a strong economy with low unemployment, and the growth of the subprimemortgage market and the various mortgage securitization mechanisms developed byfinancial institutions. In the second half of 2007, turbulence in the mortgagemarket and a significant oversupply of homes for sale led to a sharp drop-offin housing construction and demand for our products. The inventory of unsoldhomes is elevated relative to the number of homes being sold, and foreclosurerates have increased as home prices have declined in many parts of the UnitedStates. Housing markets across the country have been affected negatively byrecent events. As a general rule, those markets that experienced the highestgrowth and price appreciation are now experiencing the biggest declines inprice and resulting declines in housing starts.

 

While our products areused 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 — the Southeast, Midwest, andCalifornia — demand for building products continues to be weak and there isongoing pricing pressure as suppliers compete for the limited businessavailable. In other markets, such as Texas and the Pacific Northwest, businesshas slowed, but not as dramatically as in the areas mentioned above.

 

Input costs are anotherkey factor of our recent results. Energy costs, including natural gas anddiesel fuel, continue to be higher than historical norms. This raises ourfreight and manufacturing costs both directly and indirectly by raising keyvariable cost inputs, such as glues and resins. Global supply and demandfactors, as well as the weak U.S. dollar, appear to be contributing to thepersistence of the recent higher energy price trends. Our log costs havestarted to decline, but have not fallen as sharply as we have experienced inprior periods of weak industry manufacturing output. Some of this is a resultof higher cutting and hauling costs due to the energy issues mentioned above.

 

We expect 2008 to be a difficultyear, but we are fortunate to have an excellent workforce and management teamthat produced relatively strong results in 2007 against a challenging backdrop.During first quarter 2008, we took rolling curtailments at a number of our WoodProducts operations to maintain appropriate inventory levels, while trying tominimize the negative impact of the curtailments on our employees and ouroperating results. We decided to permanently close our White City, Oregon,lumber operation in January 2008 and our Guaiba, Brazil, veneer operationin April 2008. We are pursuing a sale of our Brazilian assets. It islikely that we will need to continue our practice of rolling curtailments at anumber of our facilities, doing so in a manner that allows us to retain ourskilled workforce and keep our inventories in balance with demand. We willcontinue to focus on supporting our customers, vendors, and employees duringthese difficult times. This has allowed us to modestly grow market share inthis downturn and will prepare us to take full advantage of a recovery in demandwhen it arrives.

 

34

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***Factors That Affect Our OperatingResults***

 

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

 

·      General economic conditions,including but not limited to housing starts, repair-and-remodel activity andnonresidential construction, and relative currency values;

 

·      Mortgage pricing andavailability, as well as other consumer financing mechanisms, that ultimatelyimpact demand for our products;

 

·      Volatility in raw materialcosts, including energy prices and log costs;

 

·      The commodity nature of ourproducts and their price movements, which are driven largely by supply anddemand;

 

·      Pricing volatility in ourdistribution business;

 

·      Industry cycles and capacityutilization rates;

 

·      The cost and ability toobtain necessary financing;

 

·      Continued compliance withgovernment regulations;

 

·      Legislative or regulatoryenvironments, requirements, or changes affecting the businesses in which we areengaged;

 

·      Labor and personnelrelations and shortages of skilled and technical labor;

 

·      Credit or currency risksaffecting our revenue and profitability;

 

·      Major equipment failure;

 

·      Severe weather phenomena suchas drought, hurricanes, tornadoes, and fire;

 

·      Our ability to implement ourstrategies;

 

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

 

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

 

·      Boise Inc.’s performanceunder the administrative services outsourcing agreement; and

 

·      The other factors describedin “Part II, Item 1A. Risk Factors.”

 

*Commodityand Differentiated Products and Services*

 

Manyof the products we manufacture and distribute are widely available and can bereadily produced or distributed by our competitors. Because commodity productshave few distinguishing qualities from producer to producer, competition forthese products is primarily based on price, which is determined by supplyrelative to demand. Generally, market conditions beyond our control determinethe price for our commodity products, and the price for any one or more ofthese products may fall below our cash production costs or our cost ofprocurement. Therefore, our profitability with respect to these productsdepends on managing our cost structure, particularly raw material and energycosts, which also exhibit commodity characteristics.

 

Not all of our productsare viewed as commodities in the marketplace. Our engineered wood products(EWP) are differentiated from competing products based on quality and productdesign, as well as related customer service. In the case of EWP products, weare generally able to influence price based on the strength of differentiationand levels of customer service and are generally able to sell these 

 

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products at higher margins than our commodity products. In order toreduce our sensitivity to price cyclicality and improve our margins, afundamental component of our strategy is to increase production of EWP as ashare of our total Wood Products segment sales. We believe this product is lesssusceptible to commodity pricing dynamics.

 

Comparing first quarter2008 with the same period in 2007, sales of EWP from our Wood Products segmentdecreased from approximately 43% of segment sales in 2007 to 34% of sales in2008. The ongoing weakness in new residential construction has impeded ourability to grow our EWP sales. Comparing the three months ended March 31,2008, with the same period in 2007, our laminated veneer lumber (LVL) andI-joist sales volumes decreased 29% and 38%, respectively.

 

Our Building MaterialsDistribution segment distributes a significant number of commodity and brandedbuilding materials. While we must be competitive on price, our associates andmanagement team understand the positive impact excellent customer service,process innovation, and local market adaptation can have on differentiating ourfunction in the marketplace and generating superior returns on investedcapital.

 

*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. Demand for new residential construction is influenced byseasonal weather factors, mortgage availability and rates, unemployment levels,immigration rates, demand for second homes, existing home prices, consumer confidence,and other general economic factors. Industry supply is influenced primarily byoperating rates of existing facilities, but is also influenced over time by theintroduction of new product technologies and capacity additions. The balance ofsupply and demand in the U.S. is also heavily influenced by imported products,principally from Canada.

 

U.S. housing starts havefallen dramatically over the last 24 months, 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 impacted by commodity prices since the cost ofproducing EWP is impacted 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.

 

Demand for buildingproducts also depends on light commercial construction and residentialrepair-and-remodeling activity, which are affected by demographic trends,interest rate levels, weather, and general economic conditions.

 

*Supply*

 

Industrysupply of commodity wood products is affected by the number of operational oridled facilities, the building of new capacity, and the shutting down ofexisting capacity. 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 new capacityadditions are constrained by the high capital investment and long lead timesrequired to plan, obtain regulatory approvals for, and build a new mill, afavorable pricing environment may prompt manufacturers to initiate expansionprojects.

 

Some major OSB producershave announced indefinite shutdowns of existing facilities, and others haveannounced delays in previously announced capacity additions. A number of OSBproducers have announced the intention to produce a strand lumber product thatis intended to be a substitute for EWP in some applications. Some of the strandlumber mills have announced that production will commence in 2008. Theirability to produce such a product and its impact on the EWP market areuncertain.

 

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Industry supply ofcommodity wood products is also influenced by the level of imports and overseasproduction capacity, which has grown in recent years. The weakening of the U.S.dollar has mitigated the level of imports in recent years.

 

*OperatingCosts*

 

Ourmajor costs of production are labor, wood fiber, energy, and chemicals. Therelative importance of these costs varies by segment. Given the significance ofraw material and energy costs to our total operating expenses and our limitedability to control these costs, volatility in these costs can materially affectour margins. In addition, the timing and degree of price cycles of rawmaterials and energy differ with respect to each type of raw material andenergy we use.

 

*Labor.*  Ourlabor costs tend to increase steadily due to inflation in healthcare and wagecosts. Labor costs are not as volatile as our energy and wood fiber costs.

 

As of March 31, 2008, we had approximately 5,200employees. Approximately 1,900, or 37%, of these employees work pursuant tocollective bargaining agreements. The labor agreement at our St. Jacques,New Brunswick, Canada, I-joist plant that covers approximately 120 workersexpired December 31, 2006. The contract remains in place while the partiescontinue negotiations. Our Northwest wood products facilities will be openingnegotiations on May 9, 2008, to bargain eight contracts coveringapproximately 950 employees at the following locations:  St. Helens, Oregon, veneer, LaGrande,Oregon, sawmill, LaGrande, Oregon, particleboard, Elgin, Oregon, plywood plantand stud mill, Emmett, Idaho, specialties, Kettle Falls, Washington, plywoodand small log mill, and Woodinville, Washington, building materialsdistribution center. We are also in negotiations at our Billings, Montana,building materials distribution center with the Teamsters covering27 drivers and material handlers. We do not expect material workinterruptions or increases in our costs during the course of the negotiationswith our collective bargaining units. Nevertheless, if our expectations are notaccurate, we could experience a material labor disruption or significantlyincreased labor costs at one or more of our facilities, any of which couldprevent us from meeting customer demand or reduce our sales and profitability.

 

*Woodfiber.*  Our primary raw material is wood fiber. Forthe three months ended March 31, 2008 and 2007, wood fiber accounted for43% of materials, labor, and other operating expenses in our Wood Productssegment.

 

Our primary sources oflogs and wood fiber are timber and byproducts of timber, such as wood chips,wood 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 than commodityproducts, such as lumber and plywood. While log costs are still a significantcomponent of costs, as we continue to produce more EWP relative to commodityproducts, direct-log costs decline as a percentage of the total cost ofmaterials, labor, and other operating expenses. We also convert residual woodfiber from our operations, as well as from third parties, into particleboard.

 

Logs and wood fiber arecommodities, and prices for logs and wood fiber have historically been cyclicaldue to changing levels of demand. Log and fiber supply may be limited by publicpolicy or government regulation as well as fire, insect infestation, disease,ice storms, windstorms, hurricanes, flooding, other weather conditions, andother natural and man-made causes. Residual fiber supply may be limited due toreduction in primary manufacturing at sawmills and plywood plants. Declines inlog and fiber supply, driven primarily by changes in public policy andgovernment regulation, have been severe enough to cause the closure of numerousfacilities in some of the regions in which we operate. Any sustainedundersupply and resulting increase in wood fiber prices could decrease ourproduction volumes and/or increase our operating costs. Prices for our productsmight not reflect increases or decreases in log and wood fiber prices, and as aresult, our operating margins could fluctuate. Further curtailments of solidwood manufacturing in the Northwest industry has led to limited availabilityand higher prices for residual fiber in 2008.

 

*Other rawmaterials and energy purchasing and pricing. *We purchase other raw materials and energy used tomanufacture our products in both the open market and through long-termcontracts. 

 

37

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These contracts aregenerally with regional suppliers who agree to supply all of our needs for acertain raw material or energy at one of our facilities. These contractsnormally contain minimum purchase requirements and are for terms of variouslengths. They also contain price adjustment mechanisms that take into accountchanges in market prices. Therefore, although our long-term contracts provideus with supplies of raw materials and energy that are more stable thanopen-market purchases, in many cases, they may not alleviate fluctuations inmarket prices.

 

Our costs for raw materials are influenced by increases in energycosts. Specifically, some of our key chemicals, including glues and resinsconsumed in our Wood Products segment, are heavily influenced by energy costs.A number of our major suppliers have obtained price increases tied to theirincreased energy costs. For our commodity products, the relationship betweenindustry supply and demand, rather than changes in the cost of raw materials,determines our ability to increase prices. Consequently, we may be unable topass increases in our operating costs to our customers in the short term.

 

*Energy. *Prices for energy,particularly electricity, natural gas, and fuel oil, have been volatile inrecent years and currently exceed historical averages. In addition, we havelimited flexibility to switch between fuel sources in the short term;accordingly, we have significant exposure to natural gas price changes. For thethree months ended March 31, 2008 and 2007, energy costs representedapproximately 5% and 4% of materials, labor, and other operating expenses inour Wood Products segment. Relative to the prior year, fuel costs increased inour Building Materials Distribution segment.

 

*Chemicals.*Important chemicals weuse in the production of our products are resins and glues. For the threemonths ended March 31, 2008 and 2007, purchases of chemicals represented7% and 6% of materials, labor, and other operating expenses in our WoodProducts segment. Weexperienced higher chemical costs during first quarter 2008, compared with thesame period a year ago, due primarily to chemical market supply-demanddynamics.

 

*Inflationary and seasonal influences. *Our major costs of production are labor, wood fiber, energy, andchemicals. Fiber markets in the Pacific Northwest are still relatively high byhistorical standards. Energy costs, particularly for electricity, natural gas,and fuel oil, have been volatile in recent years and currently exceedhistorical standards. We have also seen higher chemical costs in the currentyear, compared with historical standards, due primarily to chemical marketsupply and demand dynamics. Seasonal changes in levels of buildingactivity affect our building products businesses. We typically have highersales and working capital in the second and third quarters because of warmerweather. In addition, seasonally cold weather increases costs, especiallyenergy consumption, at our manufacturing facilities.

 

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***OurOperating Results***

 

Thefollowing tables set forth our operating results in dollars and as a percentageof sales for the three months ended March 31, 2008 and 2007:

 
| ** **                                                       | ** ** | **Three Months Ended  March 31** | ** ** |
|------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                       | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
| ** **                                                       | ** ** | **(millions)**                                  | ** ** |
| **Sales**                                                        |       |                                            |       |   |   |
| Trade                                                            |       | $                                               | 880.8      |   | $ | 1,163.2 |   |
| Related parties                                                  |       | 95.8                                            |       | 157.8 |   |
|                                                             |       | 976.6                                           |       | 1,321.0 |   |
|                                                             |       |                                            |       |   |   |
| **Costs  and expenses**                                          |       |                                            |       |   |   |
| Materials,  labor, and other operating expenses                  |       | 886.9                                           |       | 1,156.9 |   |
| Depreciation,  amortization, and depletion                       |       | 10.0                                            |       | 40.4 |   |
| Selling and  distribution expenses                               |       | 63.4                                            |       | 68.4 |   |
| General and  administrative expenses                             |       | 15.6                                            |       | 19.5 |   |
| Gain on sale of  Paper and Packaging & Newsprint assets |       | (8.1                                            | )          | — |   |
| Other (income)  expense, net                                     |       | (0.9                                            | )          | 2.5 |   |
| * *                                                         |       | 966.9                                           |       | 1,287.7 |   |
| * *                                                         |       |                                            |       |   |   |
| ***Income  from operations***                                    | ** ** | **$**                                           | **9.7**    | ** ** | **$** | **33.3** | ** ** |
| * *                                                         |       |                                            |       |   |   |
| ** **                                                       | ** ** | **(percentage of sales)**             | ** ** |
| **Sales**                                                        |       |                                            |       |   |   |
| Trade                                                            |       | 90.2                                            | %          | 88.1 | % |
| Related parties                                                  |       | 9.8                                             |       | 11.9 |   |
|                                                             |       | 100.0                                           | %          | 100.0 | % |
|                                                             |       |                                            |       |   |   |
| **Costs  and expenses**                                          |       |                                            |       |   |   |
| Materials,  labor, and other operating expenses                  |       | 90.8                                            | %          | 87.6 | % |
| Depreciation,  amortization, and depletion                       |       | 1.0                                             |       | 3.0 |   |
| Selling and  distribution expenses                               |       | 6.5                                             |       | 5.2 |   |
| General and  administrative expenses                             |       | 1.6                                             |       | 1.5 |   |
| Gain on sale of  Paper and Packaging & Newsprint assets |       | (0.8                                            | )          | — |   |
| Other (income)  expense, net                                     |       | (0.1                                            | )          | 0.2 |   |
|                                                             |       | 99.0                                            | %          | 97.5 | % |
|                                                             |       |                                            |       |   |   |
| **Income  from operations**                                      | ** ** | **1.0**                                         | **%**      | **2.5** | **%** |

 

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***Sales Volumes and Prices***

 

Set forth below are our segment sales volumes and averagenet selling prices for our principal products for the three months ended March 31,2008 and 2007.

 
| ** **                                       | ** ** | **Three Months  Ended March 31**                                | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2008**                                                                       | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **(millions)**                                                                 | ** ** |
| **Building  Materials Distribution**             |       |                                                                           |       |   |   |
| Sales dollars                                    |       | $                                                                              | 503.9      |   | $ | 608.7 |   |
|                                             |       |                                                                           |       |   |   |
| ** **                                       | ** ** | **(percentage of Building Materials  Distribution sales)** | ** ** |
| **Product  Line Sales**                          |       |                                                                           |       |   |   |
| Commodity                                        |       | 44.5                                                                           | %          | 43.8 | % |
| Engineered wood  products                        |       | 12.0                                                                           |       | 14.7 |   |
| General line  items                              |       | 43.5                                                                           |       | 41.5 |   |
|                                             |       |                                                                           |       |   |   |
|                                             |       | **(millions)**                                                                 |       |
| **Sales  Volumes**                               |       |                                                                           |       |   |   |
| **Wood  Products**                               |       |                                                                           |       |   |   |
| Laminated veneer  lumber (LVL) (cubic feet)      |       | 1.9                                                                            |       | 2.7 |   |
| I-joists  (equivalent lineal feet)               |       | 29                                                                             |       | 47 |   |
| Plywood (sq.  ft.) (3/8” basis)             |       | 313                                                                            |       | 310 |   |
| Lumber (board  feet)                             |       | 50                                                                             |       | 56 |   |
| Particleboard  (sq. ft.) (3/4” basis)       |       | 27                                                                             |       | 37 |   |
|                                             |       |                                                                           |       |   |   |
| ** **                                       | ** ** | **(dollars per unit)**                                               | ** ** |
| **Average  Net Selling Prices**                  | ** ** | ** **                                                                     | ** ** | ** ** | ** ** |
| **Wood  Products**                               | ** ** | ** **                                                                     | ** ** | ** ** | ** ** |
| Laminated veneer  lumber (LVL) (100 cubic feet)  |       | $                                                                              | 1,619      |   | $ | 1,749 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 970                                                                            |       | 1,044 |   |
| Plywood (1,000  sq. ft.) (3/8” basis)       |       | 242                                                                            |       | 244 |   |
| Lumber (1,000  board feet)                       |       | 387                                                                            |       | 448 |   |
| Particleboard  (1,000 sq. ft.) (3/4” basis) |       | 343                                                                            |       | 321 |   |

 

Set forth below are our segment sales volumes andaverage net selling prices for the Paper and Packaging & Newsprintsegments we sold on February 22, 2008.

 
| ** **                                | ** ** | **(thousands of short tons, except  corrugated containers)** | ** ** |
|-------------------------------------------|------------|---------------------------------------------------------------------------------------|------------|
| **Sales  Volumes**                        |       |                                                                                  |       |   |   |
| **Paper**(a)                              |       |                                                                                  |       |   |   |
| Uncoated free  sheet                      |       | 236                                                                                   |       | 380 |   |
| Containerboard  (medium)                  |       | 19                                                                                    |       | 32 |   |
| Market pulp                               |       | 20                                                                                    |       | 23 |   |
| ** **                                | ** ** | **275**                                                                               | ** ** | **435** | ** ** |
|                                      |       |                                                                                  |       |   |   |
| **Packaging &  Newsprint** (a)   |       |                                                                                  |       |   |   |
| Containerboard  (linerboard)              |       | 36                                                                                    |       | 65 |   |
| Newsprint                                 |       | 56                                                                                    |       | 107 |   |
| Corrugated  containers and sheets (mmsf)  |       | 914                                                                                   |       | 1,634 |   |
|                                      |       |                                                                                  |       |   |   |
| ** **                                | ** ** | **(dollars per short ton, except**                                | ** ** |
| ** **                                | ** ** | **corrugated containers and sheets)**                                  | ** ** |
| **Average  Net Selling Prices**           |       |                                                                                  |       |   |   |
| **Paper**(a)                              |       |                                                                                  |       |   |   |
| Uncoated free  sheet                      |       | $                                                                                     | 868        |   | $ | 846 |   |
| Containerboard  (medium)                  |       | 454                                                                                   |       | 423 |   |
| Market pulp                               |       | 535                                                                                   |       | 516 |   |
|                                      |       |                                                                                  |       |   |   |
| **Packaging &  Newsprint** (a)   |       |                                                                                  |       |   |   |
| Containerboard  (linerboard)              |       | $                                                                                     | 399        |   | $ | 375 |   |
| Newsprint                                 |       | 494                                                                                   |       | 524 |   |
| Corrugated  containers and sheets ($/msf) |       | 55                                                                                    |       | 51 |   |

 

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(a)                                  As a result of the Sale, the three months ended March 31,2008, includes the results of the Paper and Packaging & Newsprintsegments through February 21, 2008.

 

40

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***Operating Results***

 

# ***Sales***

# * *

For the three months ended March 31, 2008, totalsales decreased $344.4 million, or 26%, to $1.0 billion from$1.3 billion during the three months ended March 31, 2007. Thedecrease reflects the fact that we operated our Paper and Packaging &Newsprint segments from January 1 through February 21 of the currentyear prior to selling them to Boise Inc. (formerly Aldabra 2Acquisition Corp.), whereas those segments were operated and had sales for thefull quarter of the prior year. In addition, sales decreased in our BuildingMaterials Distribution and Wood Products segments due to weaker product demandand prices as U.S. new residential housing demand declined.

 

*Building Materials Distribution.*  Sales decreased $104.8 million, or 17%,to $503.9 million for thethree months ended March 31, 2008, from $608.7 million for the threemonths ended March 31, 2007. The decrease in saleswas the result of a 12% decline in the volume of product sold in combinationwith sale prices falling about 6%. The reduced volumes and prices were theresult of decreased demand in new residential construction markets.

 

*WoodProducts.* Sales decreased $55.2 million, or 22%, to$198.7 million for thethree months ended March 31, 2008, from $253.9 million for the threemonths ended March 31, 2007. Lower sales were the result of lower salesvolumes and prices for most of our products. The largest contributor to thedecrease in sales was the decline in sales volumes and prices for our EWPproducts. Relative to the three months ended March 31, 2007, sales volumesfor LVL and I-joists declined 29% and 38%, respectively, while sales prices forboth LVL and I-joists decreased 7%. The reduction in sales volumes and salesprices was the result of lower demand in new residential construction markets.

 

*Paper.*  Sales decreased $141.5 million, or 36%,to $253.5 million for the three months ended March 31, 2008, from$395.0 million for the three months ended March 31, 2007. Relative tothe three months ended March 31, 2007, sales prices improved.  Despite the increase in prices, segment salesdecreased as a result of the sale of the business on February 22, 2008.

 

*Packaging &Newsprint. *Sales decreased $80.5 million, or 41%, to$113.5 million for thethree months ended March 31, 2008, from $194.0 million for the threemonths ended March 31, 2007. The decrease from the same quarter a year ago was driven primarily by thesale of this segment on February 22, 2008.

 

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

##### *** ***

Materials,labor, and other operating expenses decreased$270.0 million, or 23%, to $0.9 billion for the three months ended March 31, 2008, compared with$1.2 billion during the same period in the prior year. The decrease wasdriven primarily by operating our Paper and Packaging & Newsprintsegments fewer days in the current quarter versus the same quarter a year ago.The decrease also resulted from lower purchased materials costs in our BuildingMaterials Distribution segment due to lower sales volumes. In addition,relative to the three months ended March 31, 2007, energy costs decreased$34.7 million in our manufacturing businesses. The decrease in energycosts was attributable to fewer operating days in our Paper and Packaging &Newsprint segments, partially offset by higher costs per ton for energy in thePaper segment. Compared with the three months ended March 31, 2007, fibercosts decreased approximately $39.2 million, $11.8 million, and$14.8 million in our Paper, Packaging & Newsprint, and WoodProducts segments, respectively. The decrease in fiber costs for Paper andPackaging & Newsprint was primarily attributable to fewer operatingdays, partially offset by higher costs per ton in both of these segments. Fibercosts in our Wood Products segment declined primarily due to lower log pricesand lower log consumption. Relative to the three months ended March 31,2007, chemical costs decreased $16.7 million and $0.3 million in ourPaper and Packaging & Newsprint segments. The decreases were primarilythe result of fewer operating days, partially offset by higher per ton costs.Chemical costs in Wood Products declined $1.8 million primarily due tolower production volumes for EWP and plywood.

 

Depreciation, amortization, and depletionexpenses decreased $30.4 million, or 75%, to $10.0 million for thethree months ended March 31, 2008, compared with $40.4 million forthe same period in the prior year. The three months ended March 31, 2007,included $30.8 million of depreciation expense related to the Paper,Packaging & Newsprint, and Corporate and Other segments that was not 

 

41

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included in the three months ended March 31, 2008, because the assetswere sold on February 22, 2008, and because, prior to the Sale, we haddiscontinued depreciation on the assets as a result of classifying them as heldfor sale.

 

Sellingand distribution expenses decreased $5.0 million,or 7%, to $63.4 million forthe three months ended March 31, 2008, compared with $68.4 millionfor the same period in the prior year. The primary reason for the decline wasfewer operating days for our Paper and Packaging & Newsprint segments.Selling and distribution expenses were essentially flat in our BuildingMaterials Distribution and Wood Products segments.

 

Generaland administrative expenses decreased$3.9 million, or 20%, to $15.6 million for the three months ended March 31, 2008, compared with$19.5 million for the same period in the prior year. The decrease relatedprimarily to lower compensation costs and professional fees.

 

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

 
| ** **            | ** ** | **Three Months Ended  March 31** | ** ** |
|-----------------------|------------|-------------------------------------------------|------------|
| ** **            | ** ** | **2008**                                        | ** ** | **2007** | ** ** |
| ** **            | ** ** | **(millions)**                                  | ** ** |
|                  |       |                                            |       |   |   |
| Sales of assets,  net |       | $                                               | (1.1       | ) | $ | 1.0 |   |
| Other, net            |       | 0.2                                             |       | 1.5 |   |
| ** **            | ** ** | **$**                                           | **(0.9**   | **)** | **$** | **2.5** | ** ** |

 

***Income(Loss) From Operations***

 

Income from operations decreased $23.6 million, or 71%, to $9.7 million for the three months ended March 31,2008, from $33.3 million in the same period a year ago. The decrease wasprimarily the result of lower income in the Building MaterialsDistribution and Wood Products segments.

 

*BuildingMaterials Distribution.* Segment income decreased $11.7 million, or 112%, toa loss of $1.2 million forthe three months ended March 31, 2008, from income of $10.5 millionfor the three months ended March 31, 2007. The decrease was drivenby lower gross margin dollars available to cover relatively fixed expenses suchas occupancy, payroll, and distribution costs, as sales volumes declined fromthe same quarter a year ago. The lower gross margin dollars resulted primarilyfrom lower wood product prices.

 

*WoodProducts. *Segment income decreased $20.8 million, or 561%, toa loss of $17.1 million forthe three months ended March 31, 2008, compared with income of $3.7 million for the three monthsended March 31, 2007. Thedecrease was driven primarily by lower sales volumes and prices for most of ourproducts, coupled with higher conversion costs. These negatives were slightlyoffset by lower log costs and higher log byproducts income.

 

*Paper.*  Segmentincome increased $2.7 millionto $20.7 million for thethree months ended March 31, 2008, compared with $18.0 million ofincome for the three months ended March 31, 2007. The increase was drivenprimarily by the fact that we did not record depreciation and amortizationexpense for the period we owned this segment in first quarter 2008, as theassets were recorded as “held for sale.”

 

*Packaging &Newsprint. *Segment income decreased $2.4 million to$5.7 million for the threemonths ended March 31, 2008,compared with $8.1 million for the three months ended March 31,2007. The decrease in segment incomewas driven by lower newsprint pricing and higher per-ton manufacturing costs,partially offset by higher linerboard prices and the fact that we did notrecord depreciation and amortization expense for the period we owned thissegment in first quarter 2008, as the assets were recorded as “held for sale.”

 

*Other*

 

*Equityin net income (loss) of affiliate.*In connection with theSale, we received 37.9 million, or 49%, of Boise Inc.’s shares. Werecorded the investment in “Investment in equity affiliate” on our 

 

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Consolidated Balance Sheet. This ownershipinterest and the three seats we hold on Boise Inc.’s. board provide uswith the ability to exercise significant influence. Accordingly, we account forour investment under the equity method of accounting.

 

We measured our 49% ownership in Boise Inc. based on Boise Inc.’s February 21,2008, closing stock price, adjusted for a 12% discount for lack ofmarketability since the stock delivered as consideration was not registered forresale. In addition, in accordance with EITF No. 01-2, *Interpretations of APB Opinion No. 29,*the value of thestock consideration received was further reduced by the $7.7 million gainon the Sale that we deferred as a reduction of our investment. We will realizethe deferred gain as we reduce our investment in Boise Inc. The investment isadjusted monthly for our proportionate share of Boise Inc.’s net income or lossbased on the most recently available financial statements. For the three monthsended March 31, 2008, we recorded an $8.6 million loss related to ourinvestment in Boise Inc. in “Equity in net loss of affiliate” in ourConsolidated Statement of Loss.

 

*Changein fair value of contingent value rights. *The three months ended March 31, 2008, included $4.8 millionof expense related to the fair value of the contingent value rights (CVRs) thatwe and Terrapin Partners Venture Partnership granted to certain Boise Inc.investors. For more information related to the CVRs, see Note 15,Financial Instruments, in “Item 1. Consolidated Financial Statements” ofthis Form 10-Q.

 

*Changein fair value of interest rate swaps.*The three months ended March 31,2008, included $6.3 million of expense related to changes in the fairvalue of our interest rate swaps, which were terminated in February 2008.

 

*Interest expense. *For the three months ended March 31,2008, interest expense was $15.4 million, compared with $22.3 millionin the same period a year ago. The decrease in interest expense is primarilyattributable to the significant reduction in our long-term debt. At March 31,2008, our long-term debt was $464.2 million, compared with$1.3 billion a year ago. The decrease in long-term debt isprimarily attributable to the use of the majority of the proceeds from the saleof the Paper and Packaging & Newsprint assets 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.*  Income tax expense was $1.2 million foreach of the three months ended March 31, 2008 and 2007. For the threemonths ended March 31, 2008, our effective tax rate for our separatesubsidiaries that are taxed as corporations was 35.4%, compared with 35.0% forthe same period in 2007.

 

***Industry Mergers and Acquisitions***

 

We have not seen significant merger and acquisitionactivity in the building products area other than the acquisition ofInternational Paper’s wood products facilities by Georgia-Pacific in 2007.However, with continued weakness in the U.S. housing markets and the difficultcredit environment for leveraged borrowers, we expect merger and acquisitionactivity to increase during 2008, as a number of companies face liquiditypressures and find additional credit resources uneconomic or unavailable.

 

The value of our investment in Boise Inc. will likelybe influenced by the individual performance of that company, as well as thepricing environment for its products, many of which are commodities. The mergerof Abitibi-Consolidated, Inc. and Bowater Incorporated in 2007 resulted inAbitibiBowater Inc. becoming by far the largest newsprint producer in NorthAmerica. This may lead to further consolidation in the newsprint industry. Therecent announcement from International Paper that it will purchase Weyerhaeuser’spackaging-related paper mills and conversion facilities will likewise make themby far the largest packaging player in North America and may trigger furtherindustry consolidation in packaging-related grades.

 

***Acquisitions***

 

Weaccount for acquisitions using the purchase method of accounting. Accordingly,the purchase price is allocated to the tangible and intangible assets acquiredand liabilities assumed based on their respective fair values as of the date ofthe acquisition.

 

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***Divestitures***

 

We mayengage in divestiture discussions, including those entered into during theyear, as discussed in “Sale of Our Paper and Packaging & NewsprintAssets” in this Management’s Discussion and Analysis of Financial Condition andResults of Operations, with other companies and make divestitures from time totime. We review our operations and dispose of assets that fail to meet ourcriteria for return on investment or cease to warrant retention for otherreasons. We decided to permanently close our White City, Oregon, lumberoperation in January 2008 and our Guaiba, Brazil, veneer operation in April 2008.We are pursuing a sale of our Brazilian assets.

 

***Liquidity and Capital Resources***

 

We believe that funds generated from operations andavailable borrowing capacity will be adequate to fund debt servicerequirements, capital expenditures, and working capital requirements for thenext 12 months. However, our ability to continue to fund these items may beaffected by general economic, financial, competitive, legislative, andregulatory factors and as a result, we cannot assure that our business willgenerate sufficient cash flow from operations or that future borrowings will beavailable for use under our revolving credit facility in an amount sufficientto enable us to pay our indebtedness or to fund our other liquidity needs.

 

***OperatingActivities***

 

We operate in a cyclical industry, and ouroperating cash flows vary accordingly. Our principal operating cashexpenditures are for purchased inventories, compensation, fiber, energy, andinterest. For the three months ended March 31, 2008 and 2007, ouroperating activities used $62.8 million and provided $10.8 million ofcash, respectively. Relative to the three months ended March 31,2007, the decrease in cash provided by operations relates primarily to thefollowing:

 

·                  *Reporting a $24.4 million net loss during the three months ended March 31,2008, compared with $10.5 million of income during the same period in 2007*.  As discussed under “Operating Results” above, the lossreported for the three months ended March 31, 2008, was the result oflower income in our Building Materials Distribution and Wood Products segments.This lower income was driven primarily by lower sales activity, resulting infewer gross margin dollars being generated to cover cash operating costs, inour Building Materials Distribution segment and by pricing and sales volumedeclines in our Wood Products segment.

 

·                  *Changes in working capital*. Unfavorable changes in working capital used $42.9 million of cash fromoperations. Working capital is subject to cyclical operating needs, the timingof the collection of receivables, the payment of payables and expenses, and toa lesser extent, seasonal fluctuations in our operations. In first quarter2008, the increase in working capital was attributable to higher receivables inBuilding Materials Distribution, partially offset by higher overall accountspayable and accrued liabilities and, to a lesser extent, a decrease in overallinventory levels. Higher receivables in Building Materials Distribution reflectincreased sales of approximately 25%, comparing March 2008 sales with December 2007sales.

 

·                  *More cash contributions to our pension and postretirement benefitplans.*  During thethree months ended March 31, 2008, we used $20.7 million of cash tomake pension contributions and other postretirement benefit payments, comparedwith $0.3 million during the three months ended March 31, 2007. The2008 contribution was included in the pension assets prior to the Sale.

 

For the three months ended March 31, 2007, our operating activitiesprovided $10.8 million of cash. In 2007, unfavorable changes in workingcapital used $53.3 million of cash from operations. In first quarter 2007,the increase in working capital was primarily attributable to higherreceivables in Building Materials Distribution and, to a lesser extent,increased inventory levels in that segment. These increases were partiallyoffset by higher overall accounts payable and accrued liabilities. Higherreceivables in Building Materials Distribution reflect increased sales ofapproximately 34%, comparing March 2007 sales with December 2006sales. The increase in inventories primarily reflects seasonal inventorychanges.

 

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***InvestmentActivities***

 

During the three monthsended March 31, 2008, we received approximately $1,227.3 million ofnet cash from the sale of assets as follows:

 
| ** **                                                             | ** ** | **(millions)** | ** ** |
|------------------------------------------------------------------------|------------|----------------|------------|
|                                                                   |       |           |       |
| Proceeds from  sale of Paper and Packaging & Newsprint assets |       | $              | 1,277.2    |   |
| Selling expenses                                                       |       | (33.8          | )          |
| Cash contributed  to Boise Inc.                                        |       | (38.0          | )          |
| Sales proceeds,  net of selling expenses and cash contributed          |       | 1,205.4        |       |
| Net proceeds  from other asset sales                                   |       | 21.9           |       |
| ** **                                                             |       | **$**          | 1,227.3    |   |

 

In connection with the sale of our Paper and Packaging &Newsprint assets, we received approximately $1,205.4 million, which is netof $38.0 million of cash contributed to Boise Inc. and $33.8 millionof selling expenses, which included $24.9 million of financing costs thatwe agreed to pay for Boise Inc. We also received approximately$21.9 million of cash for the sale of our Vancouver, Washington, andIndependence, Oregon, mill sites, and other miscellaneous assets.

 

During the three monthsended March 31, 2008, cash investing activities also included a$183.3 million increase in restricted cash, of which $160 million wasinvested in preparation for the repayment of $160 million of our$400 million 7.125% senior subordinated notes in April 2008 and$23.3 million related to letters of credit outstanding that were supportedby restricted cash investments. In April 2008, the issuing bank for theletters of credit became a participating lender in our revolving creditfacility and released the $23.3 million of cash collateral back to us.Cash investing activities also used $18.2 million of cash forpurchases of property, plant, and equipment ($10.2 million of which wasinvested in the Paper and Packaging & Newsprint businesses we sold on February 22,2008).

 

In 2007, investing activities wereprimarily for purchases of property, plant, and equipment, which used$47.2 million of cash. Approximately $33.0 million of theseexpenditures related to the Paper and Packaging & Newsprint businesseswe sold on February 22, 2008.

 

We expect capital investments for the remainder of2008 to total approximately $25 million to $35 million, excludingacquisitions. This level of capital expenditures could increase or decrease asa result of a number of factors, including our financial results and futureeconomic conditions. Our capital spending in 2008 will be for expansion,business improvement and quality/efficiency projects, replacement projects, andongoing environmental compliance. During 2007, we spent $9 million onenvironmental compliance and expect to spend approximately the same amount in2008.

 

***FinancingActivities***

 

Cash used for financing activities was$868.5 million for the three months ended March 31, 2008, comparedwith $53.9 million of cash provided from financing activities during thesame period in 2007. In 2008, cash used for financing activities relatedprimarily to 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 revolving credit facility to make$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. On February 22, 2008, we repaid all of theborrowings under the revolving credit facility, Tranche E term loan,delayed-draw term loan, and the borrowings secured by our receivables, whichtotaled $925.6 million, and we terminated those credit facilities. Thedebt repayments were funded with proceeds from the Sale and an initialborrowing of $64.1 million under our new $350.0 million seniorsecured asset-based revolving credit facility.

 

As a result of the significant decrease in ourvariable-rate debt, we terminated all of our interest rate swap agreements forapproximately $11.9 million. Late in the quarter, we also made$120.0 million of tax distributions to our equity holder, and paid $18.3 millionto repurchase the equity units of employees terminated in connection with theSale. On April 15, 2008, we used $160.0 million of cash proceeds ofthe Sale set aside in a restricted account to redeem, at par,$160.0 million of our 7.125% senior subordinated notes. Our seniorsubordinated note indenture limits our ability to make certain restrictedpayments as 

 

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defined in the agreement. As of March 31, 2008,we had the ability to make restricted payments of $83.2 million under thegeneral restricted payment basket calculated based on cumulative net income(loss) since the date the notes were issued.

 

In 2007, the cash provided by financingactivities was primarily the result of a net $60.0 million of borrowingsunder our accounts receivable securitization program, which was partiallyoffset by $2.8 million of cash tax distributions to our equity holders andthe repayment of $3.2 million of short-term borrowings.

 

The followingdiscussion describes our debt transactions in more detail.

 

*DebtTransactions*

 

At March 31, 2008, and December 31, 2007,our short- and long-term debt was as follows:

 
| ** **                                  | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| ** **                                  | ** ** | **(millions)**     | ** ** |
|                                        |       |               |       |                  |       |
| Revolving credit  facility, due 2013        |       | $                  | 64.2       |                  | $          | — |   |
| Tranche E  term loan, due 2014         |       | —             |       | 521.1                 |       |
| 7.125% senior  subordinated notes, due 2014 |       | 400.0              |       | 400.0                 |       |
| Delayed-draw  term loan, due 2014           |       | —             |       | 199.5                 |       |
| Borrowings  secured by receivables          |       | —             |       | 40.0                  |       |
| Current portion  of long-term debt          |       | (160.0             | )          | (47.3                 | )          |
| Long-term debt,  less current portion       |       | 304.2              |       | 1,113.3               |       |
| Short-term  borrowings                      |       | —             |       | 10.5                  |       |
| Current portion  of long-term debt          |       | 160.0              |       | 47.3                  |       |
| Total debt                                  | ** ** | **$**              | **464.2**  | ** **            | **$**      | **1,171.1** | ** ** |

 

As discussed in “Sale of Our Paper andPackaging & Newsprint Assets” above, with the proceeds from the Sale,we repaid $925.6 million of debt, including all of the borrowings underthe revolving credit facility, Tranche E term loan, and delayed-draw term loanand the borrowings secured by our receivables. For more information related tothese borrowings prior to us repaying them, see Note 11, Debt, of theNotes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” of our 2007 Annual Report on Form 10-K.In addition to these repayments, we initiated a tender offer for$160 million of our 7.125% senior subordinated notes. See “Senior Notes”below for more information.

 

*Asset-BasedRevolving Credit Facility*

 

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 a new five-year $350 million senior secured asset-basedrevolving credit facility with Bank of America (the Original Agreement). Aspart of the syndication process, the agreement was amended in April 2008to revise the pricing and incorporate additional covenants (the AmendedFacility). At March 31, 2008, we had $64.2 million of borrowingsoutstanding under the Original Agreement. Borrowings under the Amended Facilityare based on either the prime rate or the London Interbank Offered Rate(LIBOR). Pricing is subject to quarterly adjustment based on the averageavailability under the Amended Facility during the prior quarter. The range ofborrowing costs under the pricing grid is: (i) prime plus 1.00% to 1.50% or (ii) LIBOR plus 2.50% to3.00%. For the period of February 22, 2008, through March 31, 2008,the average interest rate for our borrowings under the Original Agreement was5.5%. Letters of credit are subject to a 0.125% fronting fee payable to theissuing bank and a fee payable to the lenders equal to the product of theinterest rate spread applicable to LIBOR borrowings under the AmendedFacility and the daily average amount available for drawing under theoutstanding letters of credit. The minimum and maximum borrowings under theOriginal Agreement were $64.1 million and $64.2 million between February 22,2008, and March 31, 2008. The weighted average amount of borrowings outstandingunder the Original Agreement during the period from February 22, 2008through March 31, 2008, was $64.2 million. The Amended Facilityprovides for a commitment fee of 0.50% per annum payable to the lenders on theaverage daily unused portion of the Amended 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 foreign 

 

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subsidiaries and substantially all of our domesticassets, except for property, plant, and equipment. Borrowings under the AmendedFacility require compliance with a borrowing base formula, which sets advancerates against eligible accounts receivable and inventory. As of March 31, 2008, we had availability of $234.2 millionabove the amount we had borrowed. If excess availability under the AmendedFacility falls below the greater of $45 million or 15% of the borrowingbase, we would be required to maintain a minimum fixed charge coverage ratio. TheAmended Facility also contains customary nonfinancial covenants, including anegative pledge covenant and restrictions on distributions to equity holders,acquisitions, and divestitures. These covenants will become more restrictive ifa minimum availability threshold is not maintained.

 

*Lettersof Credit*

 

At March 31, 2008, we had $23.3 million ofletters of credit outstanding supported by restricted cash investments. Theissuing bank for the letters of credit became a participating lender in theAmended Facility in April 2008 and released the $23.3 million of cashcollateral back to us.

 

*SeniorNotes*

 

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 unsecured floating-rate notes and seniorsubordinated notes were exchanged for registered securities with identicalterms (other than terms relating to registration rights) to the notes issued inOctober 2004. We may redeem all or part of the notes at any time atredemption prices set forth in the indenture. If we sell specific assets orexperience specific kinds of changes in control, we must offer to purchase thenotes.

 

In connection with the Sale, we made an asset disposition tender offer for$160 million of the $400 million 7.125% senior subordinated notes. AtMarch 31, 2008, the $160 million was held by the note trustee inrestricted cash investments and was recorded in “Restricted cash” on ourConsolidated Balance Sheet. Because of the outstanding tender offer, wereclassified the $160 million to “Current portion of long-term debt” onour Consolidated Balance Sheet at March 31, 2008. We redeemed$160 million of the notes on April 15, 2008.

 

*Other*

 

At March 31, 2008, and December 31, 2007, we had$11.7 million and $23.1 million of costs recorded in “Deferred financingcosts” on our Consolidated Balance Sheets. With the proceeds from the Sale, werepaid a significant portion of our debt. In connection with repaying the debt,we expensed approximately $14.5 million of deferred financing costs. Werecorded the charges in “Gain on sale of Paper and Packaging &Newsprint assets” in our Consolidated Statement of Loss for the three monthsended March 31, 2008. In addition, we incurred approximately$3.7 million of financing costs related to our new asset-based revolvingcredit facility, which we recorded in “Deferred financing costs” on our March 31,2008, Consolidated Balance Sheet.

 

Forthe three months ended March 31, 2008 and 2007, cash payments forinterest, net of interest capitalized, were $8.8 million and $15.8 million,respectively.

 

***Contractual Obligations***

 

In the table below, we set forth our enforceable andlegally binding obligations as of March 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** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                  | ** ** | **Remainder  of 2008**               | ** ** | **2009-2010** | ** ** | **2011-2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
| ** **                                                  | ** ** | **(millions)**                            | ** ** |
|                                                        |       |                                      |       |   |   |   |   |   |   |   |   |
| Long-term debt  (a)                                         |       | $                                         | 160.0      |   | $ | — |   | $ | — |   | $ | 304.2 |   | $ | 464.2 |   |
| Interest (b)                                                |       | 12.1                                      |       | 40.5 |   | 40.6 |   | 34.7 |   | 127.9 |   |
| Operating leases  (c)                                       |       | 7.9                                       |       | 19.5 |   | 15.0 |   | 40.5 |   | 82.9 |   |
| Purchase  obligations                                       |       |                                      |       |   |   |   |   |   |   |   |   |
| Raw materials  and finished goods   inventory (d)           |       | 80.9                                      |       | 195.5 |   | 172.9 |   | 157.4 |   | 606.7 |   |
| Utilities (e)                                               |       | 6.0                                       |       | 2.0 |   | — |   | — |   | 8.0 |   |
| Other                                                       |       | 1.2                                       |       | 0.4 |   | — |   | — |   | 1.6 |   |
| Other long-term  liabilities reflected on our Balance Sheet |       |                                      |       |   |   |   |   |   |   |   |   |
| Compensation and  benefits (f)                              |       | 0.1                                       |       | 17.5 |   | 19.3 |   | 9.7 |   | 46.6 |   |
| Other (g)                                                   |       | 0.8                                       |       | 11.5 |   | 1.7 |   | 8.3 |   | 22.3 |   |
| ** **                                                  | ** ** | **$**                                     | **269.0**  | ** ** | **$** | **286.9** | ** ** | **$** | **249.5** | ** ** | **$** | **554.8** | ** ** | **$** | **1,360.2** |   |

 

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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 and includes the currentportion of long-term debt and short-term borrowings.

 

(b)                                 Amounts represent estimated interest paymentsas of March 31, 2008, and assume our long-term debt is held to maturity.

 

(c)                                  We enter into operating leases in the normalcourse of business. We lease a portion of our distribution centers as well asother property and equipment under operating leases. Some lease agreementsprovide us with the option to renew the lease or purchase the leased property.Our operating lease obligations would change if we exercised these renewaloptions and/or we entered into additional operating lease agreements. For moreinformation, see Note 7, Leases, of the Notes to Unaudited QuarterlyConsolidated Financial Statements in “Item 1. Financial Statements” ofthis Form 10-Q.

 

(d)                                 Included among our raw materials purchaseobligations are contracts to purchase approximately $599.6 million of woodfiber. 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. The prices under most of these agreements are set quarterly orsemiannually based on regional market prices, and the estimate is based oncontract terms or current quarter pricing. 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.

 

(e)                                  We enter into utility contracts for thepurchase of electricity and natural gas. We also purchase these services underutility tariffs. The contractual and tariff arrangements include multiple-yearcommitments and minimum annual purchase requirements. Our payment obligationswere based upon prices in effect on December 31, 2007, or upon contract language,if available. Because we consume the energy in the manufacture of our products,these obligations represent the face value of the contracts, not resale value.

 

(f)            Amounts consist primarily of pension and otherpostretirement benefit obligations, including current portion.

 

(g)                                 Includes a $9.5 million liability for 100% of the fair market value of theliability related to the contingent value rights (CVRs) we and TerrapinPartners Venture Partnership (collectively the Grantors) issued in connectionwith the Sale. We are jointly and severally liable to investors for the CVRpayment, but between the Grantors, each Grantor is individually liable for 50%of the CVR payment. In addition to the liability, we also recorded a $4.8 millionreceivable in “Receivables, Other” on our Consolidated Balance Sheet. SeeNote 15, Financial Instruments, of the Notes to Unaudited QuarterlyConsolidated Financial Statements in “Item 1. Consolidated Financial Statements”of this Form 10-Q for more information related to the CVRs.

 

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.

 

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The Series A equityunits issued to OfficeMax in connection with the Forest Products Acquisitionaccrue dividends daily at a rate of 8% per annum on OfficeMax’s capitalcontribution (net of any distributions previously received) plus anyaccumulated dividends. Accrued and unpaid dividends accumulate on the Series Aequity units on June 30 and December 31 of each year. At March 31,2008, and December 31, 2007, $14.5 million and $12.9 million,respectively, of dividends were accrued on our Consolidated Balance Sheets asan increase in the value of the Series A equity units.

 

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

 

At March 31,2008, and December 31, 2007, we had no material off-balance-sheet arrangementswith unconsolidated entities.

 

***Guarantees***

 

Note 20, Commitments and Guarantees, of the Notes to UnauditedQuarterly Consolidated Financial Statements in “Item 1. ConsolidatedFinancial Statements” of this Form 10-Q describes the nature of our guarantees,including the approximate terms of the guarantees, how the guarantees arose,the events or circumstances that would require us to perform under theguarantees, and the maximum potential undiscounted amounts of future paymentswe could be required to make.

 

***Environmental***

 

For information on environmental issues, seeEnvironmental in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in our 2007 Annual Report on Form 10-K.

 

***Critical Accounting Estimates***

 

Critical accounting estimates are thosethat are most important to the portrayal of our financial condition andresults. These estimates require management’s most difficult, subjective, orcomplex judgments, 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. For information about critical accounting estimates, see CriticalAccounting Estimates in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in our 2007 Annual Report on Form 10-K.

 

As of March 31,2008, there have been no changes to our critical accounting estimates, exceptfor the amounts disclosed for our 2008 expected pension expense and relatedsensitivities. As a result of the Sale, our expected annual pension expensedecreased, and a 0.25% change in either direction to the discount rate, theexpected rate of return on plan assets, or the rate of compensation increaseswould have the following effect on 2008 pension expense:

 
| ** **                              | ** ** | ** **        | ** ** | **Increase (Decrease)  in Pension Expense** | ** ** |
|-----------------------------------------|------------|-------------------|------------|------------------------------------------------------------|------------|
| ** **                              | ** ** | **Base  Expense** | ** ** | **0.25 %  Increase**                                  | ** ** | **0.25%  Decrease** | ** ** |
| ** **                              | ** ** | ** **        | ** ** | **(millions)**                                             | ** ** | ** ** | ** ** |
|                                    |       |              |       |                                                       |       |   |   |
| **2008  Expense**                       |       |              |       |                                                       |       |   |   |
| Discount rate                           |       | $                 | 12.8       |                                                       | $          | (1.9 | ) | $ | 1.0 |   |
| Expected rate of  return on plan assets |       | 12.8              |       | (0.7                                                       | )          | 0.7 |   |
| Rate of  compensation increases         |       | 12.8              |       | 0.2                                                        |       | (0.4 | ) |
|                                         |            |                   |            |                                                            |            |  |  |  |  |  |

 

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

 

In December 2007, the FASB issued SFAS No. 141(R), *Business Combinations,*and SFAS No. 160,*Accounting and Reporting of NoncontrollingInterest in Consolidated Financial Statements, an Amendment of ARB No. 51.*These new standards will significantly change the accounting for and reportingof business combination transactions and noncontrolling (minority) interests inconsolidated 

 

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financial statements. SFAS Nos. 141(R) and 160 are required to beadopted simultaneously and are effective for the first annual reporting periodbeginning on or after December 15, 2008. Thus, we are required to adoptthese standards on January 1, 2009. Earlier adoption is prohibited. Theimpact of adopting these standards will be limited to business combinationsoccurring on or after January 1, 2009.

 

In January 2008, weadopted SFAS No. 157,*Fair ValueMeasurements*. The adoption did not have a material impact on ourfinancial position or results of operations. The statement established aframework for measuring fair value, and it enhanced the disclosures for fairvalue measurements. The statement applies when other accounting pronouncementsrequire or permit fair value measurements, but it does not require new fairvalue measurements. In accordance with the standard, in Note 15, FinancialInstruments, of the Notes to Unaudited Quarterly Consolidated FinancialStatements in “Item 1. Financial Statements” of this Form 10-Q, weexpanded our disclosures about fair value measurements. In February 2008,the FASB issued Staff Position (FSP) No. 157-2, which delayed theeffective date of SFAS No. 157 for nonfinancial assets and liabilitiesthat are not remeasured at fair value on a recurring basis. We will adopt FSP No. 157-2in January 2009. We do not expect the adoption to have a material impacton our financial position or results of operations.

 

In March 2008, the FASB issued SFAS No. 161,*Disclosures About Derivative Instruments andHedging Activities*. SFAS No. 161 requires enhanced disclosuresabout derivative instruments and hedging activities to enable investors tobetter understand their effects on financial position, financial performance,and cash flows. These requirements include the disclosure of the fair values ofderivative instruments and their gains and losses in a tabular format. SFAS No. 161is effective for fiscal years beginning after November 15, 2008, whichwill require us to adopt these provisions in 2009. Early adoption of SFAS No. 161is permitted. We are currently evaluating the impact SFAS No. 161will have on our consolidated financial statements.

 
| ***ITEM  3.*** | ***QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*** |
|----------------|------------------------------------------------------------------|

 

We are exposed to risks such aschanges in interest rates, energy prices, and foreign currency exchange rates.We employ a variety of practices to manage these risks, including operating andfinancing activities and, where deemed appropriate, the use of derivativeinstruments. Derivative instruments are used only for risk management purposesand not for speculation or trading. Derivatives are such that a specific debtinstrument, contract, or anticipated purchase determines the amount, maturity,and other specifics of the hedge. If a derivative contract is entered into, weeither determine that it is an economic hedge or we designate the derivative asa cash flow 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 hedging transactionsis recognized in income (loss).

 

In accordance with SFAS No. 133,*Accounting for Derivative Instruments andHedging Activities*, as amended, we record all derivative instrumentsas assets or liabilities on our Consolidated Balance Sheets at fair value. Thefair value of these instruments is determined by third parties. Changes in thefair value of derivatives are recorded in either “Net income (loss)” or “Othercomprehensive income,” as appropriate. The gain or loss on derivativesdesignated as cash flow hedges is included in “Other comprehensive income” inthe period in which changes in fair value occur and is reclassified to income(loss) in the period in which the hedged item affects income (loss), and anyineffectiveness is recognized currently in our Consolidated Statements ofIncome (Loss). The gain or loss on derivatives designated as fair value hedgesand the offsetting gain or loss on the hedged item attributable to the hedgedrisk are included in income (loss) in the period in which changes in fair valueoccur. The gain or loss on derivatives that have not been designated as hedginginstruments is included in income (loss) in the period in which changes in fairvalue occur.

 

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*Interest Rate Risk*

 

After the Sale, our debt is predominantly fixed-rate.At March 31, 2008, the estimated current market value of our fixed-ratedebt, based on then-current interest rates for similar obligations with likematurities, was approximately $18.1 million less than the amount reportedon our Consolidated Balance Sheet.

 

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. The interest rate swapswere considered economic hedges. During the three months ended March 31,2008, 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.

 

*Energy Risk*

 

Occasionally, we enterinto natural gas swaps, options, or a combination of these instruments to hedgethe variable cash flow risk of natural gas purchases at index prices. As of March 31,2008, we had no material derivative instruments related to our forecastednatural gas purchases.

 

*Foreign Currency Risk*

 

At March 31, 2008, we had no material foreigncurrency hedges.

 

*Contingent Value Rights*

 

As part of the Sale, Terrapin Partners VenturePartnership (Boise Inc.’s majority owner prior to the Sale) and Boise Cascade,L.L.C. (collectively the Grantors), issued 21.2 million contingent valuerights (CVRs) to holders of Boise Inc.’s stock. The CVRs are governed by aContingent Value Rights Agreement (Agreement). The term of the Agreement isfrom February 5, 2008, through February 5, 2009, and allows investorsto receive payments in cash, shares of common stock, or a combination of cashand shares as elected by us, based upon the performance of Boise Inc.’s stock.If at any time during the year, Boise Inc.’s stock price is at least $10.50 for(1) any 20 days of any period of 30 consecutive days, or (2) any10 consecutive trading days, then the CVRs have no value. If neither ofthe preceding conditions are met over the one-year period, the holder receivesa value equal to the lesser of $1.00 or the amount by which the $10.50 exceedsthe average stock price for the 30-day period ending February 5, 2009 (the“Anniversary Price”). If we elect to settle our obligation under the Agreementusing Boise Inc. shares, the Agreement provides that our shares will be valuedat the greater of the Anniversary Price or $9.00 per share. As a result, themaximum number of Boise Inc. shares we would be required to deliver to therights holders would be 2.4 million assuming Terrapin Partners VenturePartnership failed to perform its obligations.

 

We recorded the fair value of the liability on the grant date based on asimulation analysis that considered the likelihood of Boise Inc. investorsreceiving payment under the Agreement. We update the simulation model eachquarter and revalue the liability based on its results. The Grantors arejointly and severally liable to the investors for the CVR payment, but betweenthe Grantors, each Grantor is individually liable for 50% of the CVR payment.Because we are jointly and severally liable to investors, at March 31,2008, we recorded a liability for 100% of the fair value of the CVRs, or $9.5 million,in Accrued liabilities, Other” on our Consolidated Balance Sheets. We alsorecorded $4.8 million of expense in “Change in fair value of contingentvalue rights” on our Consolidated Statement of Loss and a $4.8 millionreceivable in “Receivables, Other” on our Consolidated Balance Sheet.

 

*Financial Instrument Fair Value Reconciliation*

 

The following table reconciles the beginning andending balances of the instruments for which we measured the fair value usingunobservable inputs (Level 3 in the fair value hierarchy) as of March 31,2008:

 

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| ** **                                                                                                                                  | ** ** | **Contingent  Value  Rights** | ** ** | **Interest  Rate  Swaps** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------|------------|------------|------------|
| ** **                                                                                                                                  | ** ** | ** **                    | ** ** | **(millions)**            | ** ** | ** ** | ** ** |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Beginning  balance                                                                                                                          |       | $                             | —     |                      | $          | 5.6        |       | $ | 5.6 |   |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Losses included  in earnings                                                                                                                |       | 4.8                           |       | 6.3                       |       | 11.1       |       |
| Receivable from  Terrapin Partners                                                                                                          |       | 4.8                           |       | —                    |       | 4.8        |       |
| Termination of  interest rate swaps                                                                                                         |       | —                        |       | (11.9                     | )          | (11.9      | )          |
| Ending balance                                                                                                                              | ** ** | **$**                         | **9.5**    | ** **                | **$**      | **—** | ** ** | **$** | **9.5** | ** ** |
|                                                                                                                                        |       |                          |       |                      |       |       |       |
| Total losses  included in earnings attributable to the change in unrealized gains or losses  relating to assets held at March 31, 2008 | ** ** | **$**                         | **4.8**    | ** **                | **$**      | **—** | ** ** | **$** | **4.8** | ** ** |

 
| ***ITEM 4T.*** | ***CONTROLS  AND PROCEDURES*** |
|----------------|--------------------------------|

 

Attached asexhibits to this Form 10-Q 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 of Disclosure Controls and Procedures*

 

We maintain “disclosure controls andprocedures,” as Rule 13a-15(e) under the Securities Exchange Act of1934, as amended, defines such term. We have designed these controls andprocedures to reasonably assure that information required to be disclosed inour reports filed under the Exchange Act, such as this Form 10-Q, isrecorded, processed, summarized, and reported within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. We have alsodesigned our disclosure controls to provide reasonable assurance that suchinformation is accumulated and communicated to our senior management, includingthe chief executive officer (CEO) and chief financial officer (CFO), asappropriate, to allow them to make timely decisions regarding our requireddisclosures.

 

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

 

During the three months ended March 31, 2008, there were nomaterial changes in our internal controls over financial reporting, except thatin conjunction with the sale of our Paper and Packaging & Newsprintassets, we entered into an Outsourcing Agreement under whichBoise Inc. provides a number of corporate staff services to us at cost. Theseservices 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 Agreement, as of the end of the quarter covered by thequarterly report on this Form 10-Q. Based on that evaluation, the CEO andCFO have concluded that, as of such date, our disclosure controls andprocedures were effective in meeting the objectives for which they weredesigned and were operating at a reasonable assurance level.

 

*Limitations on the Effectiveness of Controls andProcedures*

 

In designing and evaluating our disclosure controls andprocedures, we recognized that disclosure controls and procedures, no matterhow well-conceived and operated, can provide only 

 

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reasonable, not absolute, assurance that the objectives of thedisclosure controls and procedures are met. Additionally, in designingdisclosure controls and procedures, our management necessarily was required toapply its judgment in evaluating the cost-benefit relationship of possibledisclosure controls and procedures. We have also designed our disclosurecontrols and procedures based in part upon assumptions about the likelihood offuture events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions.

 

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**PART II—OTHER INFORMATION**

 
| ***ITEM  1.*** | ***LEGAL  PROCEEDINGS*** |
|----------------|--------------------------|

 

We are a party to routinelegal proceedings that arise in the ordinary course of our business. We are notcurrently a party to any legal proceedings or environmental claims that webelieve would have a material adverse effect on our financial position, resultsof operations, or cash flows.

 
| ***ITEM  1A.*** | ***RISK FACTORS*** |
|-----------------|--------------------|

 

This Report on Form 10-Qcontains forward-looking statements. Statements that are not historical orcurrent facts, including statements about our expectations, anticipatedfinancial results, projected capital expenditures, and future businessprospects, are forward-looking statements. You can identify these statements byour use of words such as “may,” “will,” “expect,” “believe,” “should,” “plan,” “anticipate,”and other similar expressions. You can find examples of these statementsthroughout this report, including “Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations.” We cannot guarantee that ouractual results will be consistent with the forward-looking statements we makein this report. You should review carefully the risk factors listed below, aswell as those factors listed in other documents we file with the Securities andExchange Commission (SEC). We do not assume an obligation to update anyforward-looking statement.

 

***The markets in which we operate arecyclical. Fluctuations in the prices of and the demand for our products couldresult in smaller profit margins and lower sales volumes****.  *Historically, demand for theproducts we manufacture, as well as the products we purchase and distribute,has been closely correlated with new residential construction in the UnitedStates. Demand for new residential construction is influenced by seasonalweather factors, mortgage availability and rates, unemployment levels,immigration rates, 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 influencedover time by the introduction of new product technologies and capacityadditions. The balance of supply and demand in the U.S. is also heavilyinfluenced by imported products, principally from Canada. While the weak U.S.dollar is mitigating the pressure from imports, there can be no assurance thatthe current situation will not reverse in the future.

 

U.S.housing starts have fallen dramatically over the last 24 months, resultingin much lower building products shipments and pricing for us and many others inthe industry. The length and magnitude of industry cycles have varied overtime, and we are uncertain as to how long the current supply-demand imbalanceswill persist. Many of the wood products we produce or distribute, includingoriented strand board, plywood, lumber, and particleboard, are commodities thatare widely available from other producers or distributors. Even ournoncommodity products, such as engineered wood products (EWP), are impacted bycommodity prices since the cost of producing EWP is impacted by veneer and OSBprices. Commodity products have few distinguishing qualities from producer toproducer, and as a result, competition for these products is based primarily onprice, which is determined by supply relative to demand.

 

Demand for buildingproducts also depends on light commercial construction and residentialrepair-and-remodeling activity, which are impacted by demographic trends,interest rate levels, weather, and general economic conditions.

 

Prices for all of ourproducts are driven by many factors outside our control, and we have littleinfluence over the timing and extent of price changes, which are oftenvolatile. Market conditions beyond our control determine the prices for ourcommodity products, and as a result, the price for any one or more of theseproducts may fall below our cash production costs, requiring us to either incurshort-term losses on product sales or cease production at one or more of ourmanufacturing facilities. Therefore, our profitability with respect to theseproducts depends on managing our cost structure, particularly raw materials andenergy prices, which represent the largest components of our operating costsand can fluctuate based upon factors beyond our control, as described below. Ifthe prices for our products 

 

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decline, or if our rawmaterials or energy costs increase, or both, demand for our products maydecline and our sales and profitability could be materially and adverselyaffected.

 

***Ourbusiness is vulnerable to the recent volatility in the credit markets.* **Credit markets have recently experienceddifficult conditions and volatility, including the concerns in thewell-publicized subprime mortgage market as well as related financings. Marketuncertainty has increased dramatically and expanded into other credit markets.The lack of credit has dampened the housing market, reducing the demand for thebuilding products we manufacture and distribute. It is difficult to predict howlong these conditions will exist; however, these factors have and will continueto adversely affect our financial performance in our Building MaterialsDistribution and Wood Products segments.

 

***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 impact 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 43% of the aggregate amount ofmaterials, labor, and other operating expenses for our Wood Products segment in2007 and 43% in the first quarter of 2008. Wood fiber is a commodity, andprices have historically been cyclical. Availability of residual wood fiber forour particleboard operation has been negatively affected by significant millclosures and curtailments that have occurred among solid-wood product producers.

 

Future domestic orforeign legislation and litigation concerning the use of timberlands, theprotection of endangered species, the promotion of forest health, and theresponse to and prevention of catastrophic wildfires can also affect log and fibersupply. Availability of harvested logs and fiber may be further limited byfire, insect infestation, disease, ice storms, windstorms, hurricanes,flooding, and other natural and man-made causes, thereby reducing supply andincreasing prices. In addition, since a number of our manufacturing facilitiesuse wood-based biomass as an alternative energy source, an increase in woodfiber costs or a reduction in availability can increase the price of or reducethe total usage of biomass, which could result 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 impact 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;

 

·                  Prolongedpower failures;

 

·                  Anequipment failure, particularly a press at one of our major EWP productionfacilities;

 

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

 

·                  Achemical spill or release;

 

·                  Closurebecause of environmental-related concerns;

 

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·                  Disruptions in the transportationinfrastructure, including roads, bridges, railroad tracks, and tunnels;

 

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

 

·                  Terrorism or threats of terrorism;

 

·                  Labor difficulties; or

 

·                  Other operational 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 our products and/or requireus to make unplanned capital expenditures. If our machines or facilities wereto incur significant downtime, our ability to meet our production capacity targetsand satisfy customer requirements would be impaired, resulting in lower salesand 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 2007, our total capital expenditures,excluding acquisitions, were approximately $188 million, includingapproximately $142 million related to the Paper and Packaging &Newsprint businesses we sold on February 22, 2008. We expect to spendapproximately $25 million to $35 million, excluding acquisitions, oncapital expenditures during the remainder of 2008.

 

***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 $9 million in 2007 and 2006 andapproximately $17 million in 2005, and we expect to incur approximately$9 million in 2008. We expect to continue to incur significant capital andoperating expenditures in order to maintain compliance with applicable environmentallaws and regulations. If we fail to comply with applicable environmental lawsand regulations, we may face civil or criminal fines, penalties, or enforcementactions, including orders limiting our operations or requiring correctivemeasures, installation of pollution control equipment, or other remedialactions.

 

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 lawswhether or not we knew of, or were responsible for, the presence of thesesubstances on our property, and in some cases, our liability may not be limitedto the value of the property.

 

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 disruptions or increased labor costs could adverselyaffect our business.  ***We could experience amaterial labor disruption or significantly increased labor costs at one or moreof our facilities, either in the course of negotiations of a labor agreement orotherwise, any of which could prevent us from meeting customer demand or increasecosts, thereby reducing our sales and profitability. As of March 31, 2008,we had approximately 5,200 employees. Approximately 1,900, or 37**%**, of these employees work pursuant to collective bargainingagreements. The labor agreement at our St. Jacques, New Brunswick, Canada,I-joist plant that covers approximately 120 workers expired December 31,2006. The contract remains in place while the parties continue negotiations.Our Northwest wood products facilities will be opening negotiations on May 9,2008, to bargain eight contracts covering approximately 950 employees atthe following locations:  St. Helens,Oregon, veneer, LaGrande, Oregon, sawmill, LaGrande, Oregon, particleboard,Elgin, Oregon, plywood plant and stud mill, Emmett, Idaho, specialties, KettleFalls, Washington, plywood and small log mill, and Woodinville, Washington,building materials distribution center. We are also in negotiations at ourBillings, Montana, building materials distribution center with the 

 

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Teamsters covering 27 drivers and materialhandlers. We do not expect material work interruptions or increases in ourcosts during the course of the negotiations with our collective bargainingunits. Nevertheless, if our expectations are not accurate, we could experiencea material labor disruption or significantly increased labor costs at one ormore of our facilities, any of which could prevent us from meeting customerdemand or reduce our sales and profitability.

 

***Further increases in the cost of our purchased energy orchemicals would lead to higher manufacturing costs, thereby reducing ourmargins.**** *Energyaccounted for approximately 4% of the aggregate amount of materials, labor, andother operating expenses for our Wood Products segment in 2007 and 5% in thefirst quarter of 2008. Prices for energy, particularly natural gas, dieselfuel, and electricity, have been volatile in recent years and currently exceedhistorical averages. These fluctuations affect our manufacturing costs andcontribute to earnings volatility. Increaseddemand (which could be driven by cold weather) or further supply constraintscould drive prices higher. The rates we are charged are affected by theincrease in natural gas prices, although the degree of impact depends on eachutility’s mix of energy resources and regulatory situation.

 

Other raw materials weuse include various chemical compounds, primarily resins and glues. Purchasesof chemicals accounted for approximately 6% of the aggregate amount of materials,labor, and other operating expenses for our Wood Products segment in 2007 and7% in the first quarter of 2008. The costs of these chemicals have beenvolatile historically and are influenced by capacity utilization, energyprices, and other factors beyond 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.

 

***The terms of our new asset-based lending facility (CreditAgreement) and the indenture governing our notes restrict our ability tooperate our business and to pursue our business strategies. ***Our CreditAgreement and the indenture governing our notes contain, and any future indebtednessof ours would likely contain, a number of restrictive covenants that imposecustomary operating and financial restrictions on us. Our Credit Agreement andthe indenture governing our notes limit our ability, among other things, to:

 

·                  Makematerial acquisitions;

 

·                  Incuradditional indebtedness;

 

·                  Makedistributions to our equity holders;

 

·                  Enterinto transactions with our affiliates;

 

·                  Incurliens;

 

·                  Enterinto new lines of business; and

 

·                  Engagein consolidations, mergers, or sales of substantially all of our assets.

 

Our indebtedness alsorequires periodic interest payments, which reduces the cash we have availableto fund our operations or make capital expenditures. While we do not anticipateany liquidity issues at this time, our ability to meet future cash interestrequirements will depend on our results of operations, as well as maintainingsufficient borrowing availability under our Credit Agreement. A portion of theinterest on our indebtedness is based on floating interest rates. An increasein the London Interbank Offered Rate (LIBOR) or the prime rate may increase ourinterest expense.

 

***The value of the Boise Inc. common stock and the note wereceived in the Sale will depend on the future financial performance of Boise Inc.and on conditions in the capital markets generally and may differ from thevalues recorded on our balance sheet. ***Wehold a 49% equity interest in Boise Inc., which we account for using the equitymethod. The future value of this common stock will depend upon Boise Inc.’sfuture financial performance as well as conditions in the capital 

 

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markets. Although we have registration rights thatallow us to require Boise Inc. to register our common stock, the common stockis not currently registered, which impacts the liquidity of this investment. Inaddition, Boise Inc. has no obligation to pay us cash dividends. Protractedweakness in Boise Inc.’s common stock share price due to its financialperformance or to weakness in the capital markets generally could result in asubstantial reduction in the value of our investment in its securities. Thisinvestment is recorded on our balance sheet based upon the closing price at thetime of the Sale, less a 12% discount for a lack of marketability and a$7.7 million deferred gain, and is adjusted monthly based upon ourproportionate share of Boise Inc.’s net income or loss. Although weperiodically review the recoverability of this investment, the value of theinvestment on our balance sheet is not marked to market and does not reflectthe amount for which we could sell the common stock in the market at any giventime.

 

In addition, in connection with the Sale,Boise Inc. issued us a structurally subordinated paid-in-kind note valued at$58.8 million as of March 31, 2008. We do not expect to receive cashinterest payments on the note. The future value of the note and our ability toobtain liquidity from the note prior to its maturity in 2015 will depend onBoise Inc.’s financial performance. There is currently no market for the note;it has not been registered with the Securities and Exchange Commission; and wedo not have registration rights with regard to the note. There can be noassurance that the note will become marketable prior to maturity.

 

***Because we account for our investment in Boise Inc. underthe equity method, Boise Inc.’s reported earnings will materially impact ourreported financial results. ***Ourreported earnings may be impacted materially by recording a proportionate shareof Boise Inc.’s net income or loss in our income statement. Although Boise Inc.has no obligation to pay us dividends, a proportionate share of Boise Inc.’snet income or loss will flow through our income statement. Boise Inc. hassignificant financial leverage and its operating earnings have been cyclicalhistorically. This may result in volatility in our reported results ofoperations.

 

***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 Agreement under whichBoise Inc. provides a number of corporate staff services to us at cost. Theseservices include information technology, accounting, and human resourceservices. Most of the Boise Inc. staff who provide these services are providingthe same services they provided when they were our employees. Nevertheless, wecannot be assured that these employees will remain with Boise Inc. or thatthere will not be a disruption in the continuity or level of service provided.If Boise Inc. is unwilling or unable to provide services at the same qualitylevels as those services have been provided in the past, our business andcompliance activities and results of operations could be substantially and negativelyimpacted.

 
| ***ITEM  2.*** | ***UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS*** |
|----------------|-------------------------------------------------------------------|

 

None.

 
| ***ITEM  3.*** | ***DEFAULTS UPON SENIOR SECURITIES*** |
|----------------|---------------------------------------|

 

None.

 
| ***ITEM  4.*** | ***SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS*** |
|----------------|----------------------------------------------------------|

 

Not applicable.

 
| ***ITEM  5.*** | ***OTHER INFORMATION*** |
|----------------|-------------------------|

 

None.

 
| ***ITEM  6.*** | ***EXHIBITS*** |
|----------------|----------------|

 

Required exhibits arelisted in the Index to Exhibits and are incorporated by reference.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   |   | BOISE  CASCADE HOLDINGS, L.L.C.                              |
|--------|--------|--------------------------------------------------------------|
|   |   |                                                         |
|   |   |                                                         |
|   |   | /s/ Bernadette  Madarieta                                    |
|   |   | Bernadette Madarieta   Vice President and Controller         |
|   |   | (As Duly Authorized  Officer and Chief   Accounting Officer) |

 

Date:  May 8, 2008

 

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**BOISE CASCADE HOLDINGS, L.L.C.**

 

**INDEX TO EXHIBITS**

 

FiledWith the Quarterly Report on Form 10-Q for the Quarter Ended March 31,2008

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10         |       | 2008 Annual Incentive  Award Notifications with respect to Boise Cascade, L.L.C., Incentive and  Performance Plan                                                                                                                                                                                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1*      |       | 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                                                                                                                                           |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.2*      |       | 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 the other  shareholders party thereto                                                                                                                                                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3*      |       | 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.                                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4*      |       | Outsourcing Agreement, dated as of  February 22, 2008, by and between Boise Cascade, L.L.C. and Boise Paper  Holdings, L.L.C.                                                                                                                                                                                                                                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5*      |       | 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 Transportation Holdings Corp.,  Aldabra 2 Acquisition Corp. and Aldabra Sub LLC                                                                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.6*      |       | Loan and Security Agreement, dated as of  February 22, 2008, by and among Boise Cascade, L.L.C., Boise Building  Solutions Distribution, L.L.C. and Boise Building Solutions Manufacturing,  L.L.C., as borrowers, Boise Building Solutions Manufacturing Holdings Corp.,  BC Chile Investment Corporation and BC Brazil Investment Corporation, as  guarantors, the Lenders from time to time party thereto and Bank of America,  NA., as Agent |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.7*      |       | First Amendment to Employment Agreement, dated  February 22, 2008, by and between Boise Cascade, L.L.C. and W. Thomas  Stephens                                                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.8*      |       | Form of Officer Severance Agreement (with  all elected officers excluding the Chief Executive Officer)                                                                                                                                                                                                                                                                                                                                           |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.9*      |       | Subordinated Guaranty, dated as of  February 22, 2008, by the subsidiary guarantors of Boise Inc. party  thereto                                                                                                                                                                                                                                                                                                                                 |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.10**    |       | Second Amendment to Employment Agreement between  Boise Cascade, L.L.C. and W. Thomas Stephens dated March 12, 2008.                                                                                                                                                                                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.11***   |       | First Amendment to Loan and Security Agreement  dated April 17, 2008                                                                                                                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.1       |       | CEO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                          |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.2       |       | CFO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                          |

 

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| *      |   | Incorporated by reference to Current Report on Form 8-K dated February  28, 2008. |
|--------|--------|-----------------------------------------------------------------------------------|
|   |   |                                                                              |
| **     |   | Incorporated by  reference to Current Report on Form 8-K dated March 18, 2008.    |
|   |   |                                                                              |
| ***    |   | Incorporated by  reference to Current Report on Form 8-K dated April 21, 2008.    |

 

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