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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION****Washington, 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  September 30, 2010**                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                             |                                                                                                    |
| **o**                                                                                                                                                                                                                                                                                                            | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                             | ** **                                                                                              |
| **For the transition period from                         to                       ** |

 

**CommissionFile Number:  333-122770**

 

**BoiseCascade 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 300Boise, Idaho 83702-5389**(Address of principal executive offices) (ZipCode)

** **

**(208) 384-6161**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.     Yes o     No x

 

Weare a voluntary filer of reports required of companies with public securitiesunder Sections 13 or 15(d) of the Securities Exchange Act of 1934,and we have filed all reports which would have been required of us during thepast 12 months had we been subject to such provisions.

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files).     Yes o     No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

Largeaccelerated filer o    Accelerated filer o    Non-accelerated filer x    Smaller reporting company o

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).      Yes o     No x

 

Theregistrant, a limited liability company, has no voting or nonvoting equity heldby nonaffiliates.

 

 

 

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**Tableof Contents**

 
| **PART I—FINANCIAL  INFORMATION** |
|---------------------------------------------|
|                                        |   |   |   |   |
| Item 1.                                     | Financial Statements | 1 |
|                                        | Notes to Unaudited Quarterly Consolidated Financial  Statements | 7 |
|                                        |   |   1. | Nature of  Operations and Basis of Presentation | 7 |
|                                        |   |   2. | Investment in  Equity Affiliate | 7 |
|                                        |   |   3. | Transactions  With Related Parties | 8 |
|                                        |   |   4. | Vendor and  Customer Rebates and Allowances | 9 |
|                                        |   |   5. | Other (Income)  Expense, Net | 10 |
|                                        |   |   6. | Leases | 10 |
|                                        |   |   7. | Income Taxes | 11 |
|                                        |   |   8. | Inventories | 12 |
|                                        |   |   9. | Property and  Equipment, Net | 12 |
|                                        |   | 10. | Goodwill and  Intangible Assets | 12 |
|                                        |   | 11. | Debt | 13 |
|                                        |   | 12. | Financial  Instrument Risk | 15 |
|                                        |   | 13. | New and  Recently Adopted Accounting Standards | 15 |
|                                        |   | 14. | Retirement and  Benefit Plans | 16 |
|                                        |   | 15. | Segment Information | 16 |
|                                        |   | 16. | Commitments and  Guarantees | 19 |
|                                        |   | 17. | Legal  Proceedings and Contingencies | 19 |
|                                        |   | 18. | Consolidating  Guarantor and Nonguarantor Financial Information | 19 |
|                                        |   |   |   |   |
| Item 2.                                | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 30 |
|                                        |   | Understanding Our Financial Information | 30 |
|                                        |   | Executive  Overview | 30 |
|                                        |   | Factors That Affect Our Operating Results | 31 |
|                                        |   | Our  Operating Results | 32 |
|                                        |   | Liquidity and Capital Resources | 36 |
|                                        |   | Contractual  Obligations | 39 |
|                                        |   | Off-Balance-Sheet Activities | 39 |
|                                        |   | Guarantees | 39 |
|                                        |   | Seasonal and Inflationary Influences | 39 |
|                                        |   | Employees | 39 |
|                                        |   | Environmental | 39 |
|                                        |   | Critical Accounting Estimates | 39 |
|                                        |   | New and Recently Adopted Accounting Standards | 40 |
|                                        |   |   |   |   |
| Item 3.                                | Quantitative  and Qualitative Disclosures About Market Risk | 40 |
|                                        |   |   |
| Item 4.                                | Controls and  Procedures | 40 |
|                                        |   |   |   |   |
| **PART II—OTHER  INFORMATION**    |
| ** **                                  |
| Item 1.                                | Legal Proceedings | 42 |
|                                        |   |   |
| Item 1A.                               | Risk Factors | 42 |
|                                        |   |   |
| Item 2.                                     | Unregistered  Sales of Equity Securities and Use of Proceeds | 42 |
|                                        |   |   |
| Item 3.                                     | Defaults  Upon Senior Securities | 42 |
|                                        |   |   |
| Item 4.                                     | (Removed and  Reserved) | 42 |
|                                        |   |   |
| Item 5.                                     | Other Information | 42 |
|                                        |   |   |
| Item 6.                                | Exhibits | 42 |

 

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Allreports we file with the Securities and Exchange Commission (SEC) are availablefree of charge via Electronic Data Gathering Analysis and Retrieval (EDGAR)through the SEC website at www.sec.gov. We also provide copies of our SECfilings at no charge upon request and make electronic copies of our reportsavailable through our website at www.bc.com as soon as reasonably practicableafter filing such material with the SEC.

 

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**PART 1—FINANCIAL INFORMATION**

 

***ITEM 1.          FINANCIAL STATEMENTS***

 

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

(unaudited)

 
| ** **                                                           | ** ** | **Three Months Ended  September 30** | ** **       |
|----------------------------------------------------------------------|------------|-----------------------------------------------------|------------------|
| ** **                                                           | ** ** | **2010**                                            | ** **       | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                                     | ** **       |
| **Sales**                                                            |       |                                                | ** **       |   |   |
| Trade                                                                |       | $                                                   |  588,605    |   | $ |  567,643 |   |
| Related parties                                                      |       | 4,892                                               |             | 11,364 |   |
|                                                                 |       | 593,497                                             |             | 579,007 |   |
|                                                                 |       |                                                |             |   |   |
| **Costs and expenses**                                               |       | ** **                                          | ** **       |   |   |
| Materials, labor, and other operating expenses                       |       | 514,514                                             |             | 501,886 |   |
| Materials, labor, and other operating expenses  from related parties |       | 10,549                                              |             | 6,094 |   |
| Depreciation and amortization                                        |       | 8,759                                               |             | 9,627 |   |
| Selling and  distribution expenses                                   |       | 54,197                                              |             | 50,714 |   |
| General and administrative expenses                                  |       | 11,412                                              |             | 6,841 |   |
| General and administrative expenses from related  party              |       | —                                              |             | 2,682 |   |
| Other (income) expense, net                                          |       | (4,565                                              | )                | (575 | ) |
|                                                                 |       | 594,866                                             |             | 577,269 |   |
|                                                                 |       | ** **                                          | ** **       |   |   |
| **Income (loss) from operations**                                    |       | (1,369                                              | )                | 1,738 |   |
|                                                                 |       |                                                |             |   |   |
| Equity in net income of affiliate                                    |       | —                                              |             | 28,225 |   |
| Gain on sale of shares of equity affiliate                           |       | —                                              |             | 997 |   |
| Foreign exchange gain                                                |       | 321                                                 |             | 521 |   |
| Interest expense                                                     |       | (4,721                                              | )                | (5,389 | ) |
| Interest income                                                      |       | 249                                                 |             | 185 |   |
|                                                                 |       | (4,151                                              | )                | 24,539 |   |
| ** **                                                           |       |                                                |             |   |   |
| **Income (loss) before income  taxes**                               |       | (5,520                                              | )                | 26,277 |   |
| Income tax provision                                                 |       | (95                                                 | )                | (72 | ) |
| **Net income (loss)**                                                |       | **$**                                               | ** (5,615** | **)** | **$** | ** 26,205** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

(unaudited)

 
| ** **                                                           | ** ** | **Nine Months Ended  September 30** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                           | ** ** | **2010**                                           | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                                    | ** ** |
| **Sales**                                                            | ** ** | ** **                                         |       |   |   |
| Trade                                                                |       | $                                                  | 1,712,347  |   | $ | 1,487,614 |   |
| Related parties                                                      |       | 19,891                                             |       | 26,000 |   |
|                                                                 |       | 1,732,238                                          |       | 1,513,614 |   |
|                                                                 |       |                                               |       |   |   |
| **Costs and expenses**                                               | ** ** | ** **                                         |       |   |   |
| Materials, labor, and other operating expenses                       |       | 1,498,264                                          |       | 1,346,656 |   |
| Materials, labor, and other operating expenses  from related parties |       | 27,321                                             |       | 24,716 |   |
| Depreciation and amortization                                        |       | 25,944                                             |       | 32,194 |   |
| Selling and  distribution expenses                                   |       | 154,992                                            |       | 143,726 |   |
| General and administrative expenses                                  |       | 30,075                                             |       | 20,629 |   |
| General and administrative expenses from related  party              |       | 1,576                                              |       | 7,618 |   |
| Other (income) expense, net                                          |       | (4,585                                             | )          | 355 |   |
|                                                                 |       | 1,733,587                                          |       | 1,575,894 |   |
|                                                                 |       |                                               |       |   |   |
| **Loss from operations**                                             |       | (1,349                                             | )          | (62,280 | ) |
|                                                                 |       |                                               |       |   |   |
| Equity in net income of affiliate                                    |       | 1,889                                              |       | 61,536 |   |
| Gain on sale of shares of equity affiliate                           |       | 25,308                                             |       | 997 |   |
| Impairment of investment in equity affiliate                         |       | —                                             |       | (43,039 | ) |
| Foreign exchange gain                                                |       | 113                                                |       | 904 |   |
| Change in fair value of contingent value rights                      |       | —                                             |       | 194 |   |
| Gain on repurchase of long-term debt                                 |       | —                                             |       | 6,026 |   |
| Interest expense                                                     |       | (16,262                                            | )          | (17,140 | ) |
| Interest income                                                      |       | 642                                                |       | 760 |   |
|                                                                 |       | 11,690                                             |       | 10,238 |   |
|                                                                 |       |                                               |       |   |   |
| **Income (loss) before income  taxes**                               |       | 10,341                                             |       | (52,042 | ) |
| Income tax provision                                                 |       | (230                                               | )          | (623 | ) |
| **Net income (loss)**                                                | ** ** | **$**                                              | **10,111** | ** ** | **$** | **(52,665** | **)** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Balance Sheets**

(unaudited)

 
| ** **                                       | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|--------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                       | ** ** | **2010**               | ** **  | **2009**              | ** ** |
| ** **                                       | ** ** | **(thousands)**        | ** **  |
| **ASSETS**                                       |       |                   |        |                  |       |
|                                             |       |                   |        |                  |       |
| **Current**                                      |       |                   |        |                  |       |
| Cash and cash equivalents                        |       | $                      | 285,556     |                  | $          | 287,101 |   |
| Receivables                                      |       |                   |        |                  |       |
| Trade, less allowances of $2,513 and $1,584 |       | 139,833                |        | 95,398                |       |
| Related parties                                  |       | 279                    |        | 2,604                 |       |
| Other                                            |       | 2,423                  |        | 3,495                 |       |
| Inventories                                      |       | 252,613                |        | 232,774               |       |
| Prepaid expenses and other                       |       | 4,967                  |        | 1,870                 |       |
|                                             |       | 685,671                |        | 623,242               |       |
|                                             |       |                   |        |                  |       |
| **Property**                                     |       |                   |        |                  |       |
| Property and equipment, net                      |       | 266,333                |        | 270,229               |       |
| Timber deposits                                  |       | 9,970                  |        | 9,264                 |       |
|                                             |       | 276,303                |        | 279,493               |       |
|                                             |       |                   |        |                  |       |
| **Investment in equity affiliate**               |       | —                 |        | 62,967                |       |
| **Deferred financing costs**                     |       | 3,990                  |        | 5,734                 |       |
| **Goodwill**                                     |       | 12,170                 |        | 12,170                |       |
| **Intangible assets, net**                       |       | 8,909                  |        | 8,919                 |       |
| **Other assets**                                 |       | 7,691                  |        | 8,359                 |       |
| **Total assets**                                 | ** ** | **$**                  | **994,734** | ** **            | **$**      | **1,000,884** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Balance Sheets(continued)**

(unaudited)

 
| ** **                                                                                                              | ** ** | **September 30,**                                       | ** **  | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|-------------|-----------------------|------------|
| ** **                                                                                                              | ** ** | **2010**                                                     | ** **  | **2009**              | ** ** |
| ** **                                                                                                              | ** ** | **(thousands, except for equity units)** | ** **  |
| **LIABILITIES AND CAPITAL**                                                                                             |       |                                                         |        |                  |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Current**                                                                                                             |       |                                                         |        |                  |       |
| Accounts payable                                                                                                        |       |                                                         |        |                  |       |
| Trade                                                                                                                   |       | $                                                            | 118,754     |                  | $          | 89,253 |   |
| Related parties                                                                                                         |       | 1,412                                                        |        | 2,449                 |       |
| Accrued liabilities                                                                                                     |       |                                                         |        |                  |       |
| Compensation and benefits                                                                                               |       | 45,508                                                       |        | 27,887                |       |
| Interest payable                                                                                                        |       | 7,506                                                        |        | 3,644                 |       |
| Other                                                                                                                   |       | 23,728                                                       |        | 16,695                |       |
|                                                                                                                    |       | 196,908                                                      |        | 139,928               |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Debt**                                                                                                                |       |                                                         |        |                  |       |
| Long-term debt                                                                                                          |       | 228,146                                                      |        | 303,146               |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Other**                                                                                                               |       |                                                         |        |                  |       |
| Compensation and benefits                                                                                               |       | 116,812                                                      |        | 113,290               |       |
| Other long-term liabilities                                                                                             |       | 14,723                                                       |        | 14,301                |       |
|                                                                                                                    |       | 131,535                                                      |        | 127,591               |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Redeemable equity units**                                                                                             |       |                                                         |        |                  |       |
| Series B equity units — 2,764,854 units  outstanding                                                     |       | 2,765                                                        |        | 2,765                 |       |
| Series C equity units —  16,270,616 units outstanding                                               |       | 6,505                                                        |        | 5,202                 |       |
|                                                                                                                    |       | 9,270                                                        |        | 7,967                 |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Commitments and contingent  liabilities**                                                                             |       |                                                         |        |                  |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Capital**                                                                                                             |       |                                                         |        |                  |       |
| Series A equity units — no par value;  66,000,000 units authorized and outstanding                       |       | 94,299                                                       |        | 88,908                |       |
| Series B equity units — no par value;  550,000,000 units authorized and 532,558,673 units outstanding         |       | 334,576                                                      |        | 333,344               |       |
| Series C equity units — no par value;  44,000,000 units authorized and 11,951,751 units outstanding |       | —                                                       |        | —                |       |
| **Total capital**                                                                                                       |       | 428,875                                                      |        | 422,252               |       |
|                                                                                                                    |       |                                                         |        |                  |       |
| **Total liabilities and capital**                                                                                       | ** ** | **$**                                                        | **994,734** | ** **            | **$**      | **1,000,884** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Statements of CashFlows**

(unaudited)

 
| ** **                                                           | ** ** | **Nine Months Ended  September 30** | ** **  |
|----------------------------------------------------------------------|------------|----------------------------------------------------|-------------|
| ** **                                                           | ** ** | **2010**                                           | ** **  | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                                    | ** **  |
| **Cash provided by (used for) operations**  | ** ** | ** **                                         | ** **  | ** ** | ** ** |
| Net income (loss)                                                    |       | $                                                  | 10,111      |   | $ | (52,665 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                                               |        |   |   |
| Equity in net income of affiliate                                    |       | (1,889                                             | )           | (61,536 | ) |
| Gain on sale of shares of equity affiliate                           |       | (25,308                                            | )           | (997 | ) |
| Impairment of investment in equity affiliate                         |       | —                                             |        | 43,039 |   |
| Depreciation and amortization of deferred  financing costs and other |       | 28,277                                             |        | 34,469 |   |
| Pension expense                                                      |       | 5,670                                              |        | 9,985 |   |
| Management equity units expense                                      |       | 1,303                                              |        | 2,306 |   |
| Gain on repurchase of long-term debt                                 |       | —                                             |        | (6,026 | ) |
| Facility closure and curtailment costs                               |       | —                                             |        | 1,968 |   |
| Other                                                                |       | (74                                                | )           | (1,605 | ) |
| Decrease (increase) in working capital, net of  acquisitions         |       |                                               |        |   |   |
| Receivables                                                          |       | (40,946                                            | )           | (54,591 | ) |
| Inventories                                                          |       | (19,839                                            | )           | 46,114 |   |
| Prepaid expenses and other                                           |       | (1,328                                             | )           | (2,059 | ) |
| Accounts payable and accrued liabilities                             |       | 52,745                                             |        | 39,602 |   |
| Pension contributions                                                |       | (3,766                                             | )           | (28,057 | ) |
| Other                                                                |       | 4,229                                              |        | (3,052 | ) |
| Cash provided by (used  for) operations                              |       | 9,185                                              |        | (33,105 | ) |
|                                                                 |       |                                               |        |   |   |
| **Cash provided by (used for)  investment**                          |       |                                               |        |   |   |
| Proceeds from sale of shares of equity affiliate                     |       | 86,123                                             |        | 3,032 |   |
| Expenditures for property and equipment                              |       | (22,369                                            | )           | (12,932 | ) |
| Acquisition of businesses and facilities                             |       | —                                             |        | (4,598 | ) |
| Other                                                                |       | 516                                                |        | 2,279 |   |
| Cash provided by (used for) investment                               |       | 64,270                                             |        | (12,219 | ) |
|                                                                 |       |                                               |        |   |   |
| **Cash provided by (used for)  financing**                           |       |                                               |        |   |   |
| Issuances of long-term debt                                          |       | 45,000                                             |        | 60,000 |   |
| Payments of long-term debt                                           |       | (120,000                                           | )           | (65,627 | ) |
| Tax distributions to members                                         |       | —                                             |        | (10,705 | ) |
| Repurchase of management equity units                                |       | —                                             |        | (18 | ) |
| Cash used for financing                                              |       | (75,000                                            | )           | (16,350 | ) |
|                                                                 |       |                                               |        |   |   |
| **Decrease in cash and cash  equivalents**                           |       | (1,545                                             | )           | (61,674 | ) |
|                                                                 |       |                                               |        |   |   |
| **Balance at beginning of the  period**                              |       | 287,101                                            |        | 275,803 |   |
|                                                                 |       |                                               |        |   |   |
| **Balance at end of the period**                                     | ** ** | **$**                                              | **285,556** | ** ** | **$** | **214,129** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Statements ofCapital**

(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, 2008                                |       | 66,000                                     |       | $                                          | 81,967     |                                       | 532,415     |       | $          | 268,391 |   | 11,183 |   | $ | — |   | $ | 350,358 |   |
|                                                             |       |                                       |       |                                       |       |                                       |        |       |       |   |   |   |   |   |   |
| Net loss (a)                                                     |       | —                                     |       | —                                     |       | —                                     |        | (19,057    | )          | — |   | — |   | (19,057 | ) |
| Other comprehensive income (loss), net of  tax (a) (b) |       |                                       |       |                                       |       |                                       |        |       |       |   |   |   |   |   |   |
| Unfunded accumulated benefit obligation                          |       | —                                     |       | —                                     |       | —                                     |        | 43,902     |       | — |   | — |   | 43,902 |   |
| Equity in other comprehensive income of equity  affiliate        |       | —                                     |       | —                                     |       | —                                     |        | 5,201      |       | — |   | — |   | 5,201 |   |
| Impairment of investment in equity affiliate                     |       | —                                     |       | —                                     |       | —                                     |        | 40,824     |       | — |   | — |   | 40,824 |   |
| Paid-in-kind dividend                                            |       | —                                     |       | 6,707                                      |       | —                                     |        | (6,707     | )          | — |   | — |   | — |   |
| Tax distributions, net                                           |       | —                                     |       | 234                                        |       | —                                     |        | 91         |       | — |   | — |   | 325 |   |
| Allocation of redeemable equity units to Capital                 |       | —                                     |       | —                                     |       | 144                                        |        | 340        |       | 769 |   | — |   | 340 |   |
| Other                                                            |       | —                                     |       | —                                     |       | —                                     |        | 359        |       | — |   | — |   | 359 |   |
| Balance at December 31, 2009 (c)                            |       | 66,000                                     |       | 88,908                                     |       | 532,559                                    |        | 333,344    |       | 11,952 |   | — |   | 422,252 |   |
|                                                             |       |                                       |       |                                       |       |                                       |        |       |       |   |   |   |   |   |   |
| Net income (a)                                                   |       | —                                     |       | —                                     |       | —                                     |        | 10,111     |       | — |   | — |   | 10,111 |   |
| Other comprehensive income (loss), net of  tax (a) (b) |       |                                       |       |                                       |       |                                       |        |       |       |   |   |   |   |   |   |
| Unfunded accumulated benefit obligation                          |       | —                                     |       | —                                     |       | —                                     |        | 559        |       | — |   | — |   | 559 |   |
| Equity in other comprehensive loss of equity  affiliate          |       | —                                     |       | —                                     |       | —                                     |        | (4,041     | )          | — |   | — |   | (4,041 | ) |
| Paid-in-kind dividend                                            |       | —                                     |       | 5,391                                      |       | —                                     |        | (5,391     | )          | — |   | — |   | — |   |
| Other                                                            |       | —                                     |       | —                                     |       | —                                     |        | (6         | )          | — |   | — |   | (6 | ) |
| **Balance at September 30,  2010** (c)                      | ** ** | **66,000**                                 | ** ** | **$**                                      | **94,299** | ** **                                 | **532,559** | ** ** | **$**      | **334,576** | ** ** | **11,952** | ** ** | **$** | **—** | ** ** | **$** | **428,875** | ** ** |

 

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(a)                                 Totalcomprehensive income (loss) for the three and nine months ended September 30,2010, was $(5.4) million and $6.6 million, compared with$25.3 million and $21.0 million for the three and nine months endedSeptember 30, 2009.

 

(b)                                 Total othercomprehensive income (loss) for the three and nine months endedSeptember 30, 2010, was $0.2 million and $(3.5) million,compared with $(0.9) million and $73.7 million for the three and ninemonths ended September 30, 2009.

 

(c)                                  Accumulatedother comprehensive loss at September 30, 2010, and December 31,2009, was $36.3 million and $32.9 million, respectively.

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

 

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

 

*Nature of Operations*

 

Boise Cascade Holdings,L.L.C., is a privately held building products company headquartered in Boise, Idaho.Our operations began on October 29, 2004 (inception), when we acquired theforest products and paper assets of OfficeMax (the Forest ProductsAcquisition). In February 2008, Boise Cascade, L.L.C., our wholly owneddirect subsidiary, sold its Paper and Packaging & Newsprint assets,and we became a focused wood products manufacturing and building productsdistribution business. As used in this Form 10-Q, the terms “BC Holdings,”“we,” and “our” refer to Boise Cascade Holdings, L.L.C., and its consolidatedsubsidiaries. Our wholly owned subsidiary, Boise Cascade, L.L.C., is a leadingU.S. wholesale distributor of building products and one of the largestproducers of engineered wood products and plywood in North America.

 

We operate ourbusiness in the following three reportable segments: Building MaterialsDistribution, Wood Products, and Corporate and Other. See Note 15, SegmentInformation, for additional information about our reportable segments.

 

*Basis of Presentation*

 

The quarterly consolidatedfinancial statements have not been audited by an independent registered publicaccounting firm but, in the opinion of management, include all adjustments,consisting only of normal, recurring adjustments, necessary to present fairlythe results for the periods presented. The net income (loss) for the three andnine months ended September 30, 2010 and 2009, involved estimates andassumptions about future events. These estimates and the underlying assumptionsaffect the amounts of assets and liabilities reported, disclosures about contingentassets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation ofaccounts receivable, inventories, goodwill, intangible assets, and otherlong-lived assets; legal contingencies; guarantee obligations; indemnifications;assumptions used in retirement and other postemployment benefits; and customerincentives, among others. These estimates and assumptions are based onmanagement’s best estimates and judgment. Management evaluates its estimatesand assumptions on an ongoing basis using historical experience and otherfactors, including the current economic environment, which management believesto be reasonable under the circumstances. We adjust such estimates andassumptions when facts and circumstances dictate. As future events and theireffects cannot be determined with precision, actual results could differsignificantly from these estimates. Changes in these estimates resulting fromcontinuing changes in the economic environment will be reflected in the consolidatedfinancial statements in future periods. Quarterly results are notnecessarily indicative of results that may be expected for the full year. Thesenotes to unaudited consolidated financial statements should be read inconjunction with our 2009 Form 10-K and the other reports we file with theSecurities and Exchange Commission (SEC).

 

*Reclassifications*

 

Certain amounts in prior periods’ consolidated financial statementshave been reclassified to conform with the current period’s presentation.

 

***2.******                                     ******Investmentin Equity Affiliate***

 

Inconnection with the sale of our Paper and Packaging & Newsprint assetsin February 2008, we received 37.9 million shares, or 49%, ofBoise Inc.’s common stock. We recorded our investment in “Investment inequity affiliate” on our Consolidated Balance Sheet. We accounted for theinvestment under the equity method of accounting. In 2009, we sold about half of our investment in Boise Inc.,decreasing our ownership position to 18.3 million shares, or 23.5%, atDecember 31, 2009. In first quarter 2010, we sold all of our remainingshares of Boise Inc. and, as a result, discontinued the equity method ofaccounting.

 

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Duringthe three months ended September 30, 2009, we recorded $29.2 millionof income related to our investment in Boise Inc. in our ConsolidatedStatements of Income (Loss), compared with $27.2 million and$19.5 million of net income during the nine months endedSeptember 30, 2010 and 2009, as follows:

 
| ** **                                             | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                             | ** ** | **2009**                                            | ** ** | **2010**                                           | ** ** | **2009** | ** ** |
| ** **                                             | ** ** | **(thousands)**                                     | ** ** |
|                                                   |       |                                                |       |                                               |       |   |   |
| Equity in net income of Boise Inc.                |       | $                                                   | 22,354     |                                               | $          | 73 |   | $ | 45,658 |   |
| Amortization of basis differential                     |       | 5,871                                               |       | 1,816                                              |       | 16,903 |   |
| Loss on shares issued for settlement of CVR  liability |       | —                                              |       | —                                             |       | (1,025 | ) |
| Equity in net income of affiliate                      |       | 28,225                                              |       | 1,889                                              |       | 61,536 |   |
| Gain on sale of shares of equity affiliate (a)         |       | 997                                                 |       | 25,308                                             |       | 997 |   |
| Impairment of investment in equity affiliate (b)       |       | —                                              |       | —                                             |       | (43,039 | ) |
| Total                                                  | ** ** | **$**                                               | **29,222** | ** **                                         | **$**      | **27,197** | ** ** | **$** | **19,494** | ** ** |

 

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(a)                             During thethree and nine months ended September 30, 2009, we sold 1.2 millionBoise Inc. shares and recorded a $1.0 million gain on the sale of theBoise Inc. shares in our Consolidated Statements of Income (Loss). Infirst quarter 2010, we sold 18.3 million Boise Inc. shares for netproceeds of $86.1 million, and we recorded a $25.3 million gain onthe sale of the shares in our Consolidated Statement of Income (Loss) for thenine months ended September 30, 2010. We reduced our investment in BoiseInc. and our accumulated other comprehensive income related to our investmentin Boise Inc. to zero.

 

(b)                             On March 31,2009, we compared the fair value of the Boise Inc. stock price ($0.61 pershare) with the carrying value of our investment ($1.77 per share) andconcluded that our investment in Boise Inc. met the definition of other thantemporarily impaired. We made the other-than-temporary-impairment determinationbased primarily on the length of time and extent to which the fair value of ourinvestment had been trading below its carrying value. As of March 31,2009, Boise Inc.’s stock had traded below our carrying value since wewrote the investment down in September 2008. Accordingly, for the ninemonths ended September 30, 2009, we recorded a $43.0 million chargein “Impairment of investment in equity affiliate” in our Consolidated Statementof Income (Loss).

 

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

 

In first quarter 2010, wesold our remaining investment in Boise Inc. (see Note 2, Investmentin Equity Affiliate, for more information), and because of the disposition,Boise Inc. and BC Holdings are no longer related parties. The 2010related-party activity with Boise Inc. included in the ConsolidatedFinancial Statements includes only those sales and costs and expensestransacted prior to March 2010, when BC Holdings and Boise Inc.were related parties. As a result, beginning in March 2010, transactionswith Louisiana Timber Procurement Company, L.L.C. (LTP) (discussed below)represent the only significant related-party activity recorded in ourconsolidated financial statements.

 

*Sales*

 

The $4.9 million and$19.9 million of related-party sales recorded in our ConsolidatedStatements of Income (Loss) for the three and nine months endedSeptember 30, 2010, and the $11.4 million and $26.0 million ofrelated-party sales during the three and nine months ended September 30,2009, represent chip and pulpwood sales to Boise Inc. (for the period they werea related party) and LTP from our Wood Products segment. The sales were made atprices designed to approximate market. LTP is an unconsolidatedvariable-interest entity that is 50% owned by Boise Cascade, L.L.C.,and 50% owned by Boise Inc. LTP procures saw timber, pulpwood, residualchips, and other residual wood fiber to meet the wood and fiber requirements ofBoise Inc. and Boise Cascade, L.L.C. We are not the primary beneficiary ofLTP, as we do not have power to direct the activities that most significantlyimpact the economic performance of LTP. Accordingly, we do not consolidateLTP’s results in our financial statements.

 

*Costsand Expenses*

 

During the threeand nine months ended September 30, 2010, we recorded related-party fiberpurchases of $10.5 million and $26.7 million from LTP, compared with$5.0 million and $21.4 million during the three and nine months endedSeptember 30, 2009. We also recorded $0.3 million, $0.6 million,

 

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and $1.8 million of related-party expenses fortransportation services purchased from Boise Inc. during the nine monthsended September 30, 2010, and the three and nine months endedSeptember 30, 2009. We purchased the fiber and transportation services atprices that approximated market prices. These costs are recorded in “Materials,labor, and other operating expenses from related parties” in our ConsolidatedStatements of Income (Loss).

 

In connection with the saleof our Paper and Packaging & Newsprint assets in February 2008,we entered into an Outsourcing Services Agreement under which Boise Inc.provides a number of corporate staff services to us at cost. These servicesinclude information technology, accounting, and human resource services. Theagreement, as extended, expires on February 22, 2012. The agreementautomatically renews for successive one-year terms unless either party providesnotice of termination to the other party at least 12 months in advance ofthe expiration date. The Outsourcing Services Agreement gives us (but not BoiseInc.) the right to terminate all or any portion of the services provided to uson 30 days’ notice, subject to payment of an absorption fee and relatedseverance. The remaining absorption fee of $1.0 million is allocated amongthe services provided under the contract and declines to zero onFebruary 22, 2011. For the three and nine months ended September 30, 2010,total expenses incurred under the Outsourcing Services Agreement, includingboth related-party and nonrelated-party expenses, were $3.7 million and$10.8 million, respectively.

 

During the nine months endedSeptember 30, 2010, and the three and nine months ended September 30,2009, we recorded the following expenses from the Outsourcing ServicesAgreement as related-party expenses in our Consolidated Statements of Income(Loss). As mentioned above, after we sold our remaining investment in Boise Inc.in March 2010, expenses incurred under the Outsourcing Services Agreementwere no longer related party and, therefore, are not included in the tablebelow.

 
| ** **                                                           | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                           | ** ** | **2009**                                            | ** ** | **2010**                                           | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                                     | ** ** |
|                                                                 |       |                                                |       |                                               |       |   |   |
| Materials, labor, and other operating expenses  from related parties |       | $                                                   | 491        |                                               | $          | 332 |   | $ | 1,444 |   |
| Selling and distribution expenses                                    |       | 676                                                 |       | 456                                                |       | 2,026 |   |
| General and administrative expenses from related  party              |       | 2,682                                               |       | 1,576                                              |       | 7,618 |   |
|                                                                 | ** ** | **$**                                               | **3,849**  | ** **                                         | **$**      | **2,364** | ** ** | **$** | **11,088** | ** ** |

 

*TaxDistributions*

 

We are a limited liability company, and the majority of our businessesand assets are held and operated by limited liability companies, which are notsubject to entity-level federal or state income taxation. We make cash distributionsto permit the members of BC Holdings and affiliates to pay income taxes.During the nine months ended September 30, 2010, we made no cash taxdistributions. During the nine months ended September 30, 2009, we made$10.7 million of cash tax distributions, which related primarily to thenet taxable gain on the sale of our Paper and Packaging & Newsprintassets. During the nine months ended September 30, 2009, we paid$8.1 million to Forest Products Holdings (FPH), our majority owner. FPH inturn paid $5.2 million to Madison Dearborn Partners, our equity sponsor,and $2.9 million to management investors. For the nine months endedSeptember 30, 2009, we paid $2.6 million to OfficeMax to fund theirtax obligations related to their investments in us.

 

***4.******                                     ******Vendor and Customer Rebates and Allowances***

 

We receive rebates andallowances from our vendors under a number of different programs, includingvendor marketing programs. At September 30, 2010, and December 31,2009, we had $1.3 million and $1.9 million, respectively, of vendorrebates and allowances recorded in “Receivables, Other” on the ConsolidatedBalance Sheets. Rebates and allowances received from our vendors are recognizedas a reduction of “Materials, labor, and other operating expenses” when theproduct is sold, unless the rebates and allowances are linked to a specificincremental cost to sell a vendor’s product. Amounts received from vendors thatare linked to specific selling and distribution expenses are recognized as areduction of “Selling and distribution expenses” in the period the expense isincurred.

 

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We also provide rebates toour customers and our customers’ customers based on the volume of theirpurchases. We provide the rebates to increase the sell-through of our products.The rebates are recorded as a decrease in “Sales, Trade.” At September 30,2010, and December 31, 2009, we had $14.0 million and$9.9 million, respectively, of rebates payable to our customers recordedin “Accrued liabilities, Other,” on our Consolidated Balance Sheets.

 

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

 

Other (income) expense, net, includes miscellaneous income and expenseitems. The components of Other (income) expense, net, in the ConsolidatedStatements of Income (Loss) are as follows:

 
| ** **                             | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|----------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                             | ** ** | **2010**                                            | ** ** | **2009**                                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                             | ** ** | **(thousands)**                                     | ** ** |
|                                   |       |                                                |       |                                               |       |   |   |   |   |
| Litigation settlement (a)              |       | $                                                   | (4,614     | )                                                  | $          | — |   | $ | (4,614 | ) | $ | — |   |
| Facility closures and curtailments (b) |       | —                                              |       | (550                                               | )          | — |   | 3,194 |   |
| Changes in pension plans (c)           |       | —                                              |       | —                                             |       | — |   | (747 | ) |
| Other, net                             |       | 49                                                  |       | (25                                                | )          | 29 |   | (2,092 | ) |
| ** **                             | ** ** | **$**                                               | **(4,565** | **)**                                              | **$**      | **(575** | **)** | **$** | **(4,585** | **)** | **$** | **355** | ** ** |

 

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(a)**                                **During thethree and nine months ended September 30, 2010, we recorded$4.6 million of income for cash received from a litigation settlementrelated to vendor product pricing.

 

(b)                                 In June 2009,we closed the lumber manufacturing facility in La Grande, Oregon. Duringthe nine months ended September 30, 2009, we recorded $3.1 million ofexpense in “Other (income) expense, net,” $5.2 million of accelerateddepreciation in “Depreciation and amortization,” and $0.6 million ofexpenses in “Materials, labor, and other operating expenses” in ourConsolidated Statement of Income (Loss).

 

(c)                                  InMarch 2009, we amended our defined benefit pension plan for salariedemployees and nonqualified salaried plans so that no future benefits wouldaccrue in the plans after December 31, 2009. We recognized a net$0.7 million noncash curtailment gain, primarily related to ournonqualified salaried pension plans. For more information, see Note 12,Retirement and Benefit Plans, of the Notes to Consolidated Financial Statementsin “Item 8. Financial Statements and Supplementary Data” of our 2009Form 10-K.

 

***6.******                                     ******Leases***

 

We lease a portion of our distribution centers as well as otherproperty and equipment under operating leases. For purposes of determiningstraight-line rent expense, the lease term is calculated from the date we firsttake possession of the facility, including any periods of free rent and anyrenewal option periods we are reasonably assured of exercising. Straight-linerent expense is also adjusted to reflect any allowances or reimbursementsprovided by the lessor. Rental expense for operating leases was$3.6 million and $3.3 million for the three months endedSeptember 30, 2010 and 2009, and $10.7 million and $9.8 millionfor the nine months ended September 30, 2010 and 2009. Sublease rentalincome was not material in any of the periods presented.

 

For noncancelable operating leases with remaining terms of more thanone year, the minimum lease payment requirements are $3.1 million for theremainder of 2010, $11.7 million in 2011, $10.7 million in 2012,$9.6 million in 2013, $8.4 million in 2014, and $7.5 million in2015, with total payments thereafter of $36.0 million. These futureminimum lease payment requirements have not been reduced by sublease rentalsdue in the future under noncancelable subleases. Minimum sublease incomereceived in the future is not expected to be material.

 

Substantially all leaseagreements have fixed payment terms based on the passage of time. Some leaseagreements provide us with the option to purchase the leased property.Additionally, some agreements contain renewal options averaging approximatelythree years, with fixed payment terms similar to those in the originallease agreements.

 

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***7.******                                     ******IncomeTaxes***

 

*Tax Distributions*

 

Weare a limited liability company, and the majority of our businesses and assetsare held and operated by limited liability companies, which are not subject toentity-level federal or state income taxation. The income taxes with respect tothese operations 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. Both our seniorcredit facilities and the indenture governing our notes permit thesedistributions. See Note 3, Transactions With Related Parties, for moreinformation.

 

*IncomeTax (Provision) Benefit*

 

Our income taxprovision generally consists of income taxes payable to states that do notallow for the income tax liability to be passed through to our equity holders,as well as income taxes payable by our separate subsidiaries that are taxed ascorporations. For both the three months ended September 30,2010 and 2009, income tax expense was $0.1 million. Income tax expense was$0.2 million and $0.6 million for the nine months endedSeptember 30, 2010 and 2009.

 

Excluding tax distributions to our equity holders (seeNote 3, Transactions With Related Parties), during both the three monthsended September 30, 2010 and 2009, we paid a negligible amount of incometaxes, net of income taxes refunded. We paid $0.2 million and$0.6 million of income taxes, net of refunds received, during the ninemonths ended September 30, 2010 and 2009, respectively.

 

*IncomeTax Uncertainties*

 

BC Holdings,or one of our subsidiaries, files federal income tax returns in the U.S. andCanada and various state and foreign income tax returns in the major statejurisdictions of Alabama, California, Idaho, Oregon, Texas, andWashington. We are subject to tax examinations from 2007 to present. In 2008,the United States Internal Revenue Service (IRS) completed an audit of BC Holdings’2005 and 2006 tax years and issued a proposed adjustment. We appealed theadjustment. In second quarter 2010, the IRS agreed with our position, and noadjustment resulted from the audit.

 

We recognize tax liabilitiesand adjust these liabilities when our judgment changes as a result of theevaluation of new information not previously available or as new uncertaintiesoccur. In third quarter 2007, the Canadian Revenue Agency began an audit ofBoise AllJoist for tax years 2005 and 2006, which is now closed. AtDecember 31, 2009, we increased the amount of our unrecognized tax benefitfrom zero to $5.8 million as a result of uncertainty surrounding thisaudit. We charged the $5.8 million of unrecognized tax liabilities toincome tax expense, with an offsetting adjustment to the valuation allowance ondeferred tax assets related to Boise AllJoist’s net operating losses. As aresult, the net impact of recording the unrecognized tax benefit in our 2009Consolidated Statement of Income (Loss) was zero. The audit was closed in 2010with no additional changes, and because of sufficient net operating losscarryforwards from prior years, no cash payments were required. After closingthe audit, we have no unrecognized tax benefits recorded on our Consolidated BalanceSheet, and we do not expect a significant change to the amount of unrecognizedtax benefits over the next 12 months.

 

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***8.******                                     ******Inventories***

 

Inventories include the following:

 
| ** **                         | ** ** | **September 30,  2010** | ** **  | **December 31,  2009** | ** ** |
|------------------------------------|------------|------------------------------|-------------|-----------------------------|------------|
| ** **                         | ** ** | **(thousands)**              | ** **  |
|                               |       |                         |        |                        |       |
| Finished goods and work in process |       | $                            | 203,341     |                        | $          | 187,215 |   |
| Logs                               |       | 32,283                       |        | 29,302                      |       |
| Other raw materials and supplies   |       | 16,989                       |        | 16,257                      |       |
| ** **                         | ** ** | **$**                        | **252,613** | ** **                  | **$**      | **232,774** | ** ** |

 

***9.******                                     ******Propertyand Equipment, Net***

 

Property and equipment, net, consisted of the following asset classes:

 
| ** **                    | ** ** | **September 30,  2010** | ** **  | **December 31,  2009** | ** ** |
|-------------------------------|------------|------------------------------|-------------|-----------------------------|------------|
| ** **                    | ** ** | **(thousands)**              | ** **  |
|                          |       |                         |        |                        |       |
| Land and land improvements    |       | $                            | 36,618      |                        | $          | 36,618 |   |
| Buildings and improvements    |       | 110,867                      |        | 110,268                     |       |
| Machinery and equipment       |       | 285,184                      |        | 279,455                     |       |
| Construction in progress      |       | 16,275                       |        | 4,156                       |       |
| ** **                    |       | 448,944                      |        | 430,497                     |       |
| Less accumulated depreciation |       | (182,611                     | )           | (160,268                    | )          |
|                          | ** ** | **$**                        | **266,333** | ** **                  | **$**      | **270,229** | ** ** |

 

***10.******                              ******Goodwill and 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 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 adiscounted cash flow approach. We also evaluate the remaining useful lives ofour finite-lived purchased intangible assets to determine whether anyadjustments to the useful lives are necessary. We completed our annualassessments in fourth quarter 2009 and determined that there was no impairment.

 

The carrying amount of our goodwill by segment is as follows:

 
| ** **                                                      | ** ** | **Building  Materials  Distribution** | ** ** | **Wood********Products** | ** ** | **Corporate  and  Other** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------|------------|---------------------------|------------|------------|------------|
| ** **                                                      | ** ** | **(thousands)**                       | ** ** |
| ** **                                                      | ** ** | ** **                            | ** ** | ** **               | ** ** | ** **                | ** ** | ** ** | ** ** |
| Balance at September 30, 2010, and  December 31, 2009 | ** ** | **$**                                 | **5,593**  | ** **               | **$**      | **6,577**                 | ** ** | **$**      | **—** | ** ** | **$** | **12,170** | ** ** |
|                                                                 |            |                                       |            |                          |            |                           |            |            |            |  |  |  |  |

 

At September 30, 2010, and December 31,2009, intangible assets represent the values assigned to trade names andtrademarks, customer relationships, and a noncompete agreement. The trade namesand trademarks have an indefinite life and are not amortized. Customerrelationships were amortized over five years, and the noncompete agreement isamortized over two years.

 

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Intangible assets consisted of the following:

 
| ** **                 | ** ** | **September 30, 2010**      | ** ** |
|----------------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **Gross Carrying********Amount** | ** ** | **Accumulated********Amortization** | ** ** | **Net Carrying********Amount** | ** ** |
| ** **                 | ** ** | **(thousands)**                       | ** ** |
|                       |       |                                  |       |   |   |   |   |
| Trade names and trademarks |       | $                                     | 8,900      |   | $ | — |   | $ | 8,900 |   |
| Customer relationships     |       | 2,100                                 |       | (2,100 | ) | — |   |
| Noncompete agreement       |       | 25                                    |       | (16 | ) | 9 |   |
| ** **                 | ** ** | **$**                                 | **11,025** | ** ** | **$** | **(2,116** | **)** | **$** | **8,909** | ** ** |

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

 

Intangibleasset amortization expense was insignificant for each of the three and ninemonths ended September 30, 2010. Amortization expense is not expected tobe significant for the remainder of 2010 or thereafter.

 

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

 

At September 30, 2010, and December 31, 2009, our long-termdebt was as follows:

 
| ** **                                      | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|-------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                      | ** ** | **2010**               | ** **  | **2009**              | ** ** |
| ** **                                      | ** ** | **(thousands)**        | ** **  |
|                                            |       |                   |        |                  |       |
| Asset-based revolving credit facility, due 2013 |       | $                      | —      |                  | $          | 75,000 |   |
| 7.125% senior subordinated notes, due 2014      |       | 228,146                |        | 228,146               |       |
| Total long-term debt                            | ** ** | **$**                  | **228,146** | ** **            | **$**      | **303,146** | ** ** |

 

*Asset-Based Revolving Credit Facility*

 

In May 2009, BoiseCascade, L.L.C., and its principal operating subsidiaries, Boise Cascade WoodProducts, L.L.C., and Boise Cascade Building MaterialsDistribution, L.L.C., as borrowers, amended it’s five-year$350 million senior secured asset-based revolving credit facility withBank of America (Revolving Credit Facility) to permanently reduce the lendingcommitments by $60.0 million, bringing the total commitments to$290.0 million. On April 1, 2010, we borrowed an additional$45.0 million under the Revolving Credit Facility, bringing the totalamount outstanding to $120.0 million. On April 30, 2010, we repaidthe $120.0 million, and we permanently reduced the lending commitments bya like amount, bringing the total commitments under the Revolving CreditFacility to $170.0 million. At September 30, 2010, andDecember 31, 2009, we had zero and $75.0 million of borrowingsoutstanding under the Revolving Credit Facility.

 

Interest rates under theRevolving Credit Facility are based on either the prime rate or the LondonInterbank Offered Rate (LIBOR). Pricing is subject to quarterly adjustmentbased on the average availability under the Revolving Credit Facility duringthe prior quarter. The range of borrowing costs under the pricing grid is:  (i) prime plus 1.00% to 1.50% or(ii) LIBOR plus 2.50% to 3.00%. For the nine months endedSeptember 30, 2010 and 2009, the average interest rates for our borrowingsunder the Revolving Credit Facility were 2.8% and 2.9%. Letters of credit aresubject to a 0.125% fronting fee payable to the issuing bank and a fee payableto the lenders equal to the product of the interest rate spread applicableto LIBOR borrowings under the Revolving Credit Facility and the dailyaverage amount available for drawing under the outstanding letters of credit.

 

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The minimum and maximumborrowings under the Revolving Credit Facility were zero and$120.0 million during the nine months ended September 30, 2010. Theweighted average amount of borrowings outstanding under the Revolving CreditFacility during the nine months ended September 30, 2010, was$37.5 million. The Revolving Credit Facility provides for a commitment feeof 0.50% per annum payable to the lenders on the average daily unused portionof the Revolving Credit Facility. The Revolving Credit Facility is guaranteedby our domestic subsidiaries (other than the three borrowers noted above) andis secured 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 theRevolving Credit Facility are constrained by a borrowing base formula dependentupon levels of eligible inventory and receivables, reduced by outstandingletters of credit, and, when our fixed-charge coverage ratio is below 1:1, asit was on September 30, 2010, by a further requirement that we maintain acombination of unrestricted cash and borrowing base, less outstanding loans, ator in excess of the greater of $45 million or 15% of the borrowing basedetermined under the Revolving Credit Facility. At September 30, 2010, ouraggregate liquidity from unrestricted cash and cash equivalents and unusedborrowing capacity under the Revolving Credit Facility totaled$395.8 million.

 

Inaddition, the Revolving Credit Facility contains a restriction on capitalinvestments that is applicable when a minimum availability threshold is notmet. That restriction was not applicable on September 30, 2010. TheRevolving Credit Facility also contains customary nonfinancial covenants,including a negative pledge covenant and restrictions on distributions toequity holders, acquisitions, and divestitures. These covenants will becomemore restrictive if a minimum availability threshold is not maintained.

 

*Lettersof Credit*

 

AtSeptember 30, 2010, and December 31, 2009, we had $14.4 millionand $16.5 million of letters of credit outstanding. These letters ofcredit reduce our borrowing capacity under the Revolving Credit Facility.

 

*SeniorSubordinated Notes*

 

In October 2004, BoiseCascade, L.L.C., issued $400.0 million of 7.125% senior subordinated notesdue in 2014. In July 2005, we completed an exchange offer whereby all ofour senior subordinated notes were exchanged for registered securities withidentical terms (other than terms relating to registration rights) to the notesissued in October 2004. We may redeem all or part of the notes at any timeat redemption prices set forth in the indenture governing our 7.125% seniorsubordinated notes (Indenture). If we sell assets or experience specific kindsof changes in control, we may be required to purchase the notes. With theproceeds from the sale of our Paper and Packaging & Newsprint assets,werepurchased $160.0 million of the notes at par in April 2008. Duringthe nine months ended September 30, 2009, we repurchased$11.9 million of senior subordinated notes and recorded a$6.0 million gain in “Gain on repurchase of long-term debt” in ourConsolidated Statement of Income (Loss).

 

We are obligated to use thenet proceeds (as defined in the Indenture) from the sale of Boise Inc.shares (see Note 2, Investment in Equity Affiliate) within one yearto repay senior indebtedness, acquire additional assets, or make a tender offerat par for a portion of the senior subordinated notes. At September 30,2010, and December 31, 2009, approximately $22 million and$78 million of cash, respectively, was governed by the Indenture. We anticipatethat the $120.0 million repayment and commitment reduction of theRevolving Credit Facility on April 30, 2010 (discussed above), incombination with our recent and expected capital spending, will fulfill ourobligation under the Indenture with respect to net available cash received inconnection with the Boise Inc. stock sales.

 

*Other*

 

For the nine months ended September 30, 2010 and2009, cash payments for interest, net of interest capitalized, were$10.1 million and $11.1 million, respectively.

 

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AtSeptember 30, 2010, the book value of fixed-rate debt was$228.1 million, and the fair value was estimated to be$218.7 million. The difference between book value and fair value isderived from the difference between the period-end market interest rate and thestated rate of our fixed-rate, long-term debt. We estimated the fair valuebased on quoted market prices for our debt.

 

***12.******                              ******FinancialInstrument Risk***

 

Inthe normal course of business, we are exposed to financial risks such aschanges in interest rates, credit risk, foreign currency exchange rates, andcommodity price risk. We do not use derivative instruments for speculativepurposes.

 

*InterestRate Risk*

 

We are exposed to interest rate risk arising fromfluctuations in interest rates on our cash and cash equivalents and bank creditfacility. During the nine months ended September 30, 2010 and 2009, we didnot use any interest rate derivatives to manage this risk.

 

*Concentrationof Credit Risk*

 

We are exposed to creditrisk related to customer accounts receivable. In order to reduce this risk, weconsider customer concentrations and current economic trends and monitor thecreditworthiness of customers based on ongoing credit evaluations. AtSeptember 30, 2010, and December 31, 2009, the receivables from asingle customer accounted for approximately 16% and 14% of total receivables,respectively. No other customer accounted for 10% or more of total receivables.

 

*ForeignCurrency Risk*

 

Approximately4% of our net sales are denominated in currencies other than the U.S. dollar,and we do not believe our total exposure to currency fluctuations issignificant.

 

*CommodityPrice Risk*

 

Our financial performance isprincipally dependent on the demand for and selling prices of our products.Both are subject to significant fluctuations. The markets for our products arecyclical and are affected by factors such as global economic conditions,including the strength of the U.S. housing market, changes in industryproduction capacity, changes in inventory levels, and other factors beyond ourcontrol. At this time, we do not manage commodity price risk with derivativeinstruments.

 

***13.******                              ******New and Recently Adopted Accounting Standards***

 

InJune 2009, the Financial Accounting Standards Board (FASB) issuedAccounting Standards Update (ASU) 2009-17 (Statement of Financial AccountingStandards No. 167), *Consolidations(Topic 810): Improvements to Financial Reporting by Enterprises Involvedwith Variable Interest Entities* (VIEs), which amends theconsolidation guidance applicable to VIEs. ASU 2009-17 requires that entitiesevaluate former qualified special-purpose entities for consolidation, changesthe approach to determining a VIE’s primary beneficiary from a quantitativeassessment to a qualitative assessment, and increases the frequency of requiredreassessment to determine whether a company is the primary beneficiary of aVIE. It also requires additional year-end and interim disclosures. We adoptedASU 2009-17 on January 1, 2010, and the adoption did not have a materialimpact on our financial position or results of operations.

 

Therewere no other accounting standards recently issued that had or are expected tohave a material impact on our financial position or results of operations.

 

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***14.******                              ******Retirementand Benefit Plans***

 

Thefollowing table presents the pension benefit costs:

 
| ** **                                    | ** ** | **Pension Benefits**                           | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
| ** **                                    | ** ** | **2010**                                            | ** ** | **2009** | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                    | ** ** | **(thousands)**                                     | ** ** |
|                                          |       |                                                |       |   |   |   |   |   |   |
| Service cost                                  |       | $                                                   | 1,162      |   | $ | 2,487 |   | $ | 3,755 |   | $ | 7,927 |   |
| Interest cost                                 |       | 5,093                                               |       | 4,886 |   | 15,199 |   | 14,797 |   |
| Expected return on plan assets                |       | (4,627                                              | )          | (4,605 | ) | (13,844 | ) | (13,771 | ) |
| Recognized actuarial gain (loss)              |       | 132                                                 |       | (289 | ) | 426 |   | (556 | ) |
| Amortization of prior service costs and other |       | 45                                                  |       | 45 |   | 134 |   | 136 |   |
| Curtailment loss                              |       | —                                              |       | — |   | — |   | 1,452 |   |
| Net periodic benefit cost                     | ** ** | **$**                                               | **1,805**  | ** ** | **$** | **2,524** | ** ** | **$** | **5,670** | ** ** | **$** | **9,985** | ** ** |

 

In the first nine months of 2010, we made $3.8 million in cashcontributions to the pension plans. For the remainder of 2010, we do not expectto make additional contributions to the pension plans.

 

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

 

We operate our business using three reportable segments:  Building Materials Distribution, WoodProducts, and Corporate and Other. There are no differences in our basis ofmeasurement of segment profit or loss from those disclosed in Note 15,Segment Information, of the Notes to Consolidated Financial Statements in“Item 8. Financial Statements and Supplementary Data” in our 2009Form 10-K.

 

An analysis of our operations by segment is as follows:

 
| ** **                                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|-------------------------------------------------|------------|----------------|------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **Sales**      | ** ** | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | ** **     | ** ** | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                      | ** ** | **Trade**      | ** ** | **Party**   | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                      | ** ** | **(millions)** | ** ** |
| **Three Months Ended  September 30, 2010** |       |           |       |        |       |             |       |       |       |       |       |             |       |       |       |
| Building Materials Distribution (a)        |       | $              | 470.4      |        | $          | —           |       | $          | 0.3        |       | $          | 470.7            |       | $          | 4.6        |   | $ | 1.9 |   | $ | 6.5 |   |
| Wood Products (a)                          |       | 118.2          |       | 4.9         |       | 60.3             |       | 183.4      |       | (1.0       | )          | 6.8              |       | 5.8        |       |
| Corporate and Other                             |       | —         |       | —      |       | —           |       | —     |       | (4.6       | )          | 0.1              |       | (4.6       | )          |
|                                            |       | 588.6          |       | 4.9         |       | 60.6             |       | 654.1      |       | (1.0       | )          | 8.8              |       | 7.7        |       |
| Intersegment eliminations                       |       | —         |       | —      |       | (60.6            | )          | (60.6      | )          | —     |       | —           |       | —     |       |
| Interest expense                                |       | —         |       | —      |       | —           |       | —     |       | (4.7       | )          | —           |       | —     |       |
| Interest income                                 |       | —         |       | —      |       | —           |       | —     |       | 0.2        |       | —           |       | —     |       |
| ** **                                      | ** ** | **$**          | **588.6**  | ** **  | **$**      | **4.9**          | ** ** | **$**      | **—** | ** ** | **$**      | **593.5**        | ** ** | **$**      | **(5.5**   | **)** | **$** | **8.8** | ** ** | **$** | **7.7** | ** ** |

 

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| ** **                                           | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|----------------|------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                           | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Sales**      | ** ** | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | ** **     | ** ** | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                           | ** ** | **Trade**      | ** ** | **Parties** | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                           | ** ** | **(millions)** | ** ** |
| **Three Months Ended****September 30, 2009**    | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** | ** ** | ** ** |
| Building Materials Distribution                      |       | $              | 472.1      |        | $          | —           |       | $          | 0.1        |       | $          | 472.2            |       | $          | 9.7        |   | $ | 1.9 |   | $ | 11.6 |   |
| Wood Products                                        |       | 95.5           |       | 11.4        |       | 56.3             |       | 163.2      |       | (4.2       | )          | 7.6              |       | 3.4        |       |
| Corporate and Other                                  |       | —         |       | —      |       | —           |       | —     |       | (3.2       | )          | 0.1              |       | (3.1       | )          |
|                                                 |       | 567.6          |       | 11.4        |       | 56.4             |       | 635.4      |       | 2.3        |       | 9.6              |       | 11.9       |       |
| Intersegment eliminations                            |       | —         |       | —      |       | (56.4            | )          | (56.4      | )          | —     |       | —           |       | —     |       |
| Equity in net income of affiliate (b)           |       | —         |       | —      |       | —           |       | —     |       | 28.2       |       | —           |       | 28.2       |       |
| Gain on sale of shares of equity  affiliate (b) |       | —         |       | —      |       | —           |       | —     |       | 1.0        |       | —           |       | 1.0        |       |
| Interest expense                                     |       | —         |       | —      |       | —           |       | —     |       | (5.4       | )          | —           |       | —     |       |
| Interest income                                      |       | —         |       | —      |       | —           |       | —     |       | 0.2        |       | —           |       | —     |       |
| ** **                                           | ** ** | **$**          | **567.6**  | ** **  | **$**      | **11.4**         | ** ** | **$**      | **—** | ** ** | **$**      | **579.0**        | ** ** | **$**      | **26.3**   | ** ** | **$** | **9.6** | ** ** | **$** | **41.1** | ** ** |

 
| ** **                                           | ** ** | ** **     | ** **  | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|----------------|-------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                           | ** ** | ** **     | ** **  | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Sales**      | ** **  | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | ** **     | ** **  | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                           | ** ** | **Trade**      | ** **  | **Party**   | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                           | ** ** | **(millions)** | ** **  |
| **Nine Months Ended  September 30, 2010**       |       |           |        |        |       |             |       |       |       |       |       |             |       |       |       |
| Building Materials Distribution (a)             |       | $              | 1,374.7     |        | $          | —           |       | $          | 0.6        |       | $          | 1,375.3          |       | $          | 11.2       |   | $ | 5.5 |   | $ | 16.7 |   |
| Wood Products (a)                               |       | 337.6          |        | 19.9        |       | 173.4            |       | 530.9      |       | 0.7        |       | 20.2             |       | 20.8       |       |
| Corporate and Other                                  |       | —         |        | —      |       | —           |       | —     |       | (13.1      | )          | 0.2              |       | (12.8      | )          |
|                                                 |       | 1,712.3        |        | 19.9        |       | 174.0            |       | 1,906.2    |       | (1.2       | )          | 25.9             |       | 24.7       |       |
| Intersegment eliminations                            |       | —         |        | —      |       | (174.0           | )          | (174.0     | )          | —     |       | —           |       | —     |       |
| Equity in net income of affiliate (b)           |       | —         |        | —      |       | —           |       | —     |       | 1.9        |       | —           |       | 1.9        |       |
| Gain on sale of shares of equity  affiliate (b) |       | —         |        | —      |       | —           |       | —     |       | 25.3       |       | —           |       | 25.3       |       |
| Interest expense                                     |       | —         |        | —      |       | —           |       | —     |       | (16.3      | )          | —           |       | —     |       |
| Interest income                                      |       | —         |        | —      |       | —           |       | —     |       | 0.6        |       | —           |       | —     |       |
| ** **                                           | ** ** | **$**          | **1,712.3** | ** **  | **$**      | **19.9**         | ** ** | **$**      | **—** | ** ** | **$**      | **1,732.2**      | ** ** | **$**      | **10.3**   | ** ** | **$** | **25.9** | ** ** | **$** | **51.9** | ** ** |

 

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| ** **                                             | ** ** | ** **     | ** **  | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|--------------------------------------------------------|------------|----------------|-------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                             | ** ** | ** **     | ** **  | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | **Sales**      | ** **  | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | ** **     | ** **  | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                             | ** ** | **Trade**      | ** **  | **Parties** | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                             | ** ** | **(millions)** | ** **  |
| **Nine Months Ended****September 30, 2009**       | ** ** | ** **     | ** **  | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** | ** ** | ** ** |
| Building Materials Distribution                        |       | $              | 1,240.6     |        | $          | —           |       | $          | 0.3        |       | $          | 1,240.9          |       | $          | 8.8        |   | $ | 5.7 |   | $ | 14.5 |   |
| Wood Products (c)                                 |       | 247.0          |        | 26.0        |       | 141.1            |       | 414.1      |       | (61.0      | )          | 26.1             |       | (34.9      | )          |
| Corporate and Other                                    |       | —         |        | —      |       | —           |       | —     |       | (9.2       | )          | 0.4              |       | (8.8       | )          |
|                                                   |       | 1,487.6        |        | 26.0        |       | 141.4            |       | 1,655.0    |       | (61.4      | )          | 32.2             |       | (29.2      | )          |
| Intersegment eliminations                              |       | —         |        | —      |       | (141.4           | )          | (141.4     | )          | —     |       | —           |       | —     |       |
| Equity in net income of affiliate (b)             |       | —         |        | —      |       | —           |       | —     |       | 61.5       |       | —           |       | 61.5       |       |
| Gain on sale of shares of equity  affiliate (b)   |       | —         |        | —      |       | —           |       | —     |       | 1.0        |       | —           |       | 1.0        |       |
| Impairment of investment in equity  affiliate (b) |       | —         |        | —      |       | —           |       | —     |       | (43.0      | )          | —           |       | (43.0      | )          |
| Change in fair value of contingent value rights        |       | —         |        | —      |       | —           |       | —     |       | 0.2        |       | —           |       | 0.2        |       |
| Gain on repurchase of long-term debt                   |       | —         |        | —      |       | —           |       | —     |       | 6.0        |       | —           |       | 6.0        |       |
| Interest expense                                       |       | —         |        | —      |       | —           |       | —     |       | (17.1      | )          | —           |       | —     |       |
| Interest income                                        |       | —         |        | —      |       | —           |       | —     |       | 0.8        |       | —           |       | —     |       |
| ** **                                             | ** ** | **$**          | **1,487.6** | ** **  | **$**      | **26.0**         | ** ** | **$**      | **—** | ** ** | **$**      | **1,513.6**      | ** ** | **$**      | **(52.0**  | **)** | **$** | **32.2** | ** ** | **$** | **(3.5** | **)** |

 

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(a)                                  Included$4.6 million of income for cash received from a litigation settlementrelated to vendor product pricing. We recorded $4.1 million in ourBuilding Materials Distribution segment and $0.5 million in our WoodProducts segment.

 

(b)                                 SeeNote 2, Investment in Equity Affiliate, for information related toour investment in Boise Inc.

 

(c)                                  Included$8.9 million of expenses in income (loss) before income taxes for the ninemonths ended September 30, 2009, and $3.7 million of expenses inEBITDA for the nine months ended September 30, 2009, related to theclosure of the lumber manufacturing facility in La Grande, Oregon.

 

(d)                                 EBITDArepresents income (loss) before interest (interest expense and interestincome), income taxes, and depreciation and amortization. EBITDA is the primarymeasure used by our chief operating decision makers to evaluate segmentoperating performance and to decide how to allocate resources to segments. Webelieve EBITDA is useful to investors because it provides a means to evaluatethe operating performance of our segments and our company on an ongoing basisusing criteria that are used by our internal decision makers and because it isfrequently used by investors and other interested parties when comparingcompanies in our industry that have different financing and capital structuresand/or tax rates. We believe EBITDA is a meaningful measure because it presentsa transparent view of our recurring operating performance and allows managementto readily view operating trends, perform analytical comparisons, and identifystrategies to improve operating performance. EBITDA, however, is not a measureof our liquidity or financial performance under generally accepted accountingprinciples (GAAP) and should not be considered as an alternative to net income(loss), income (loss) from operations, or any other performance measure derivedin accordance with GAAP or as an alternative to cash flow from operatingactivities as a measure of our liquidity. The use of EBITDA instead of netincome (loss) or segment income (loss) has limitations as an analytical tool,including the inability to determine profitability; the exclusion of interestexpense, interest income, and associated significant cash requirements; and theexclusion of depreciation and amortization, which represent unavoidableoperating costs. Management compensates for these limitations by relying on ourGAAP results. Our measures of EBITDA are not necessarily comparable to othersimilarly titled captions of other companies due to potential inconsistencies inthe methods of calculation.

 

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

 
| ** **                    | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|-------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                    | ** ** | **2010**                                            | ** ** | **2009**                                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                    | ** ** | **(millions)**                                      | ** ** |
|                          |       |                                                |       |                                               |       |   |   |   |   |
| Net income (loss)             |       | $                                                   | (5.6       | )                                                  | $          | 26.2 |   | $ | 10.1 |   | $ | (52.7 | ) |
| Interest expense              |       | 4.7                                                 |       | 5.4                                                |       | 16.3 |   | 17.1 |   |
| Interest income               |       | (0.2                                                | )          | (0.2                                               | )          | (0.6 | ) | (0.8 | ) |
| Income tax provision          |       | 0.1                                                 |       | 0.1                                                |       | 0.2 |   | 0.6 |   |
| Depreciation and amortization |       | 8.8                                                 |       | 9.6                                                |       | 25.9 |   | 32.2 |   |
| EBITDA                        | ** ** | **$**                                               | **7.7**    | ** **                                         | **$**      | **41.1** | ** ** | **$** | **51.9** | ** ** | **$** | **(3.5** | **)** |

 

***16.******                              ******Commitmentsand Guarantees***

 

*Commitments*

 

We have commitments forleases and long-term debt that are discussed further in Note 6, Leases,and Note 11, Debt. We are a party to a number of long-term log and fibersupply agreements that are discussed in Note 16, Commitments andGuarantees, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” in our 2009 Form 10-K.In addition, we have purchase obligations for goods and services, capitalexpenditures, and raw materials entered into in the normal course of business.At September 30, 2010, there have been no material changes to thecommitments disclosed in the 2009 Form 10-K (outside the normalcourse of business), except as disclosed in Note 11, Debt.

 

*Guarantees*

 

Weprovide guarantees, indemnifications, and assurances to others. Note 16, Commitments and Guarantees,of the Notes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” in our 2009 Form 10-K describes thenature of our guarantees, including the approximate terms of the guarantees,how the guarantees arose, the events or circumstances that would require us toperform under the guarantees, and the maximum potential undiscounted amounts offuture payments we could be required to make. As of September 30, 2010,there have been no material changes to the guarantees disclosed in the 2009Form 10-K, except that the amount of borrowings guaranteedunder the Revolving Credit Facility decreased $120.0 million to zero, asdiscussed in Note 11, Debt.

 

***17.******                              ******LegalProceedings and Contingencies***

 

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.

 

Wereceived $4.6 million from a litigation settlement related to vendorproduct pricing. For the three and nine months ended September 30, 2010,we recorded a $4.6 million gain related to the settlement in “Other(income) expense, net.”

 

***18.******                              ******ConsolidatingGuarantor and Nonguarantor Financial Information***

 

Thefollowing consolidating financial information presents the Statements of Income(Loss), Balance Sheets, and Cash Flows related to our business. Certain amountsin prior periods’ consolidating financial statements have been reclassified toconform with the current-period presentation. The senior subordinated notes areguaranteed on a senior subordinated basis jointly and severally by BC Holdingsand each of its existing and future subsidiaries (other than:  (i) the co-issuers, Boise Cascade andBoise Cascade Finance Corporation and (ii) our foreign subsidiaries).Other than the consolidated financial statements and footnotes for BC Holdings,financial statements and other disclosures concerning the guarantors have notbeen presented because management believes that such information is notmaterial to investors.

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Three Months EndedSeptember 30, 2010**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** ** | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** ** |
| **Sales**                                                                            |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                           | —     |                              | $          | —                      |       | $                                 | 585,155    |             | $          | 3,450            |       | $ | — |   | $ | 588,605 |   |
| Intercompany                                                                         |       | —                                                      |       | —                            |       | —                      |       | 2,867                             |       | (2,867           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |       | —                            |       | 4,892                       |       | —                            |       | —           |       | 4,892            |       |
|                                                                                 |       | —                                                      |       | —                            |       | 590,047                     |       | 6,317                             |       | (2,867           | )          | 593,497          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |       | —                            |       | 510,096                     |       | 7,004                             |       | (2,586           | )          | 514,514          |       |
| Materials, labor, and other operating expenses  from related parties                 |       | —                                                      |       | —                            |       | 10,549                      |       | —                            |       | —           |       | 10,549           |       |
| Depreciation and amortization                                                        |       | —                                                      |       | 90                                |       | 8,189                       |       | 480                               |       | —           |       | 8,759            |       |
| Selling and distribution expenses                                                    |       | —                                                      |       | —                            |       | 53,813                      |       | 384                               |       | —           |       | 54,197           |       |
| General and administrative expenses                                             |       | 1                                                           |       | 4,951                             |       | 6,741                       |       | —                            |       | (281             | )          | 11,412           |       |
| Other (income) expense, net                                                          |       | —                                                      |       | —                            |       | (4,469                      | )          | (96                               | )          | —           |       | (4,565           | )          |
|                                                                                 |       | 1                                                           |       | 5,041                             |       | 584,919                     |       | 7,772                             |       | (2,867           | )          | 594,866          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) from operations**                                                    |       | (1                                                          | )          | (5,041                            | )          | 5,128                       |       | (1,455                            | )          | —           |       | (1,369           | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Foreign exchange gain                                                                |       | —                                                      |       | 187                               |       | 59                          |       | 75                                |       | —           |       | 321              |       |
| Interest expense                                                                     |       | —                                                      |       | (4,721                            | )          | —                      |       | —                            |       | —           |       | (4,721           | )          |
| Interest income                                                                      |       | —                                                      |       | 127                               |       | 122                         |       | —                            |       | —           |       | 249              |       |
|                                                                                 |       | —                                                      |       | (4,407                            | )          | 181                         |       | 75                                |       | —           |       | (4,151           | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | (1                                                          | )          | (9,448                            | )          | 5,309                       |       | (1,380                            | )          | —           |       | (5,520           | )          |
| Income tax provision                                                                 |       | —                                                      |       | (59                               | )          | (36                         | )          | —                            |       | —           |       | (95              | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | (1                                                          | )          | (9,507                            | )          | 5,273                       |       | (1,380                            | )          | —           |       | (5,615           | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (5,614                                                      | )          | 3,893                             |       | —                      |       | —                            |       | 1,721            |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **(5,615** | **)**                             | **$**      | **(5,614**                  | **)**      | **$**                             | **5,273**  | ** **       | **$**      | **(1,380**       | **)**      | **$** | **1,721** | ** ** | **$** | **(5,615** | **)** |

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Three Months EndedSeptember 30, 2009**

 
| ** **                                                                           | ** ** | **Boise  Cascade**

**Holdings,**

**L.L.C.  (Parent)** | ** ** | **Boise  Cascade,**

**L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           |       | **(thousands)**                                         |       |
| **Sales**                                                                            |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                       | —     |                            | $          | —                      |       | $                                 | 563,713    |             | $          | 3,930            |       | $ | — |   | $ | 567,643 |   |
| Intercompany                                                                         |       | —                                                  |       | —                          |       | —                      |       | 2,548                             |       | (2,548           | )          | —           |       |
| Related parties                                                                      |       | —                                                  |       | —                          |       | 11,364                      |       | —                            |       | —           |       | 11,364           |       |
|                                                                                 |       | —                                                  |       | —                          |       | 575,077                     |       | 6,478                             |       | (2,548           | )          | 579,007          |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                  |       | —                          |       | 497,990                     |       | 6,644                             |       | (2,748           | )          | 501,886          |       |
| Materials, labor, and other operating expenses  from related parties                 |       | —                                                  |       | —                          |       | 6,094                       |       | —                            |       | —           |       | 6,094            |       |
| Depreciation and amortization                                                        |       | —                                                  |       | 113                             |       | 9,047                       |       | 467                               |       | —           |       | 9,627            |       |
| Selling and distribution expenses                                                    |       | —                                                  |       | —                          |       | 50,421                      |       | 293                               |       | —           |       | 50,714           |       |
| General and administrative expenses                                             |       | 1                                                       |       | 905                             |       | 5,735                       |       | —                            |       | 200              |       | 6,841            |       |
| General and administrative expenses from  related party                         |       | —                                                  |       | 2,682                           |       | —                      |       | —                            |       | —           |       | 2,682            |       |
| Other (income) expense, net                                                          |       | —                                                  |       | 42                              |       | (544                        | )          | (73                               | )          | —           |       | (575             | )          |
|                                                                                 |       | 1                                                       |       | 3,742                           |       | 568,743                     |       | 7,331                             |       | (2,548           | )          | 577,269          |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) from operations**                                                    |       | (1                                                      | )          | (3,742                          | )          | 6,334                       |       | (853                              | )          | —           |       | 1,738            |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Equity in net income of affiliate  (Boise Inc.)                                 |       | 28,225                                                  |       | —                          |       | —                      |       | —                            |       | —           |       | 28,225           |       |
| Gain on sale of shares of equity affiliate  (Boise Inc.)                        |       | 997                                                     |       | —                          |       | —                      |       | —                            |       | —           |       | 997              |       |
| Foreign exchange gain                                                                |       | —                                                  |       | 364                             |       | 40                          |       | 117                               |       | —           |       | 521              |       |
| Interest expense                                                                     |       | —                                                  |       | (5,389                          | )          | —                      |       | —                            |       | —           |       | (5,389           | )          |
| Interest income                                                                      |       | —                                                  |       | 95                              |       | 90                          |       | —                            |       | —           |       | 185              |       |
|                                                                                 |       | 29,222                                                  |       | (4,930                          | )          | 130                         |       | 117                               |       | —           |       | 24,539           |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 29,221                                                  |       | (8,672                          | )          | 6,464                       |       | (736                              | )          | —           |       | 26,277           |       |
| Income tax provision                                                                 |       | —                                                  |       | (20                             | )          | (52                         | )          | —                            |       | —           |       | (72              | )          |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | 29,221                                                  |       | (8,692                          | )          | 6,412                       |       | (736                              | )          | —           |       | 26,205           |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (3,016                                                  | )          | 5,676                           |       | —                      |       | —                            |       | (2,660           | )          | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                   | **26,205** | ** **                      | **$**      | **(3,016**                  | **)**      | **$**                             | **6,412**  | ** **       | **$**      | **(736**         | **)**      | **$** | **(2,660** | **)** | **$** | **26,205** | ** ** |

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Nine Months EndedSeptember 30, 2010**

 
| ** **                                                                           | ** ** | **Boise  Cascade**

**Holdings,**

**L.L.C.  (Parent)** | ** ** | **Boise  Cascade,**

**L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                         | ** ** |
| **Sales**                                                                            |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                       | —     |                            | $          | —                      |       | $                                 | 1,701,364  |             | $          | 10,983           |       | $ | — |   | $ | 1,712,347 |   |
| Intercompany                                                                         |       | —                                                  |       | —                          |       | —                      |       | 10,005                            |       | (10,005          | )          | —           |       |
| Related parties                                                                      |       | —                                                  |       | —                          |       | 19,891                      |       | —                            |       | —           |       | 19,891           |       |
|                                                                                 |       | —                                                  |       | —                          |       | 1,721,255                   |       | 20,988                            |       | (10,005          | )          | 1,732,238        |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                  |       | —                          |       | 1,485,268                   |       | 22,985                            |       | (9,989           | )          | 1,498,264        |       |
| Materials, labor, and other operating expenses from  related parties                 |       | —                                                  |       | —                          |       | 27,321                      |       | —                            |       | —           |       | 27,321           |       |
| Depreciation and amortization                                                        |       | —                                                  |       | 278                             |       | 24,235                      |       | 1,431                             |       | —           |       | 25,944           |       |
| Selling and distribution expenses                                                    |       | —                                                  |       | —                          |       | 153,957                     |       | 1,035                             |       | —           |       | 154,992          |       |
| General and administrative expenses                                             |       | 1                                                       |       | 11,298                          |       | 18,792                      |       | —                            |       | (16              | )          | 30,075           |       |
| General and administrative expenses from related  party                              |       | —                                                  |       | 1,576                           |       | —                      |       | —                            |       | —           |       | 1,576            |       |
| Other (income) expense, net                                                          |       | —                                                  |       | 39                              |       | (4,513                      | )          | (111                              | )          | —           |       | (4,585           | )          |
|                                                                                 |       | 1                                                       |       | 13,191                          |       | 1,705,060                   |       | 25,340                            |       | (10,005          | )          | 1,733,587        |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) from operations**                                                    |       | (1                                                      | )          | (13,191                         | )          | 16,195                      |       | (4,352                            | )          | —           |       | (1,349           | )          |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| Equity in net income of affiliate  (Boise Inc.)                                 |       | 1,889                                                   |       | —                          |       | —                      |       | —                            |       | —           |       | 1,889            |       |
| Gain from sale of shares of equity affiliate  (Boise Inc.)                      |       | 25,308                                                  |       | —                          |       | —                      |       | —                            |       | —           |       | 25,308           |       |
| Foreign exchange (gain) loss                                                         |       | —                                                  |       | 72                              |       | (100                        | )          | 141                               |       | —           |       | 113              |       |
| Interest expense                                                                     |       | —                                                  |       | (16,262                         | )          | —                      |       | —                            |       | —           |       | (16,262          | )          |
| Interest income                                                                      |       | —                                                  |       | 283                             |       | 359                         |       | —                            |       | —           |       | 642              |       |
|                                                                                 |       | 27,197                                                  |       | (15,907                         | )          | 259                         |       | 141                               |       | —           |       | 11,690           |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 27,196                                                  |       | (29,098                         | )          | 16,454                      |       | (4,211                            | )          | —           |       | 10,341           |       |
| Income tax provision                                                                 |       | —                                                  |       | (165                            | )          | (46                         | )          | (19                               | )          | —           |       | (230             | )          |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | 27,196                                                  |       | (29,263                         | )          | 16,408                      |       | (4,230                            | )          | —           |       | 10,111           |       |
|                                                                                 |       |                                                    |       |                            |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (17,085                                                 | )          | 12,178                          |       | —                      |       | —                            |       | 4,907            |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                   | **10,111** | ** **                      | **$**      | **(17,085**                 | **)**      | **$**                             | **16,408** | ** **       | **$**      | **(4,230**       | **)**      | **$** | **4,907** | ** ** | **$** | **10,111** | ** ** |

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Nine Months Ended September 30,2009**

 
| ** **                                                                           | ** ** | **Boise  Cascade**

**Holdings,**

**L.L.C.  (Parent)** | ** **  | **Boise  Cascade,**

**L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------------|-------------|---------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                         | ** **  |
| **Sales**                                                                            |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                                |       | $                                                       | —      |                            | $          | —                      |       | $                                 | 1,480,153   |             | $          | 7,461            |       | $ | — |   | $ | 1,487,614 |   |
| Intercompany                                                                         |       | —                                                  |        | —                          |       | 15                          |       | 6,516                             |        | (6,531           | )          | —           |       |
| Related parties                                                                      |       | —                                                  |        | —                          |       | 26,000                      |       | —                            |        | —           |       | 26,000           |       |
|                                                                                 |       | —                                                  |        | —                          |       | 1,506,168                   |       | 13,977                            |        | (6,531           | )          | 1,513,614        |       |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                  |        | —                          |       | 1,338,492                   |       | 15,010                            |        | (6,846           | )          | 1,346,656        |       |
| Materials, labor, and other operating expenses  from related parties                 |       | —                                                  |        | —                          |       | 24,716                      |       | —                            |        | —           |       | 24,716           |       |
| Depreciation and amortization                                                        |       | —                                                  |        | 340                             |       | 30,465                      |       | 1,389                             |        | —           |       | 32,194           |       |
| Selling and distribution expenses                                                    |       | —                                                  |        | —                          |       | 142,838                     |       | 888                               |        | —           |       | 143,726          |       |
| General and administrative expenses                                                  |       | 1                                                       |        | 3,896                           |       | 16,417                      |       | —                            |        | 315              |       | 20,629           |       |
| General and administrative expenses from related  party                              |       | —                                                  |        | 7,618                           |       | —                      |       | —                            |        | —           |       | 7,618            |       |
| Other (income) expense, net                                                          |       | —                                                  |        | (1,829                          | )          | 2,479                       |       | (295                              | )           | —           |       | 355              |       |
|                                                                                 |       | 1                                                       |        | 10,025                          |       | 1,555,407                   |       | 16,992                            |        | (6,531           | )          | 1,575,894        |       |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Loss from operations**                                                             |       | (1                                                      | )           | (10,025                         | )          | (49,239                     | )          | (3,015                            | )           | —           |       | (62,280          | )          |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                                       |       | 61,536                                                  |        | —                          |       | —                      |       | —                            |        | —           |       | 61,536           |       |
| Gain on sale of shares of equity affiliate (Boise  Inc.)                             |       | 997                                                     |        | —                          |       | —                      |       | —                            |        | —           |       | 997              |       |
| Impairment of investment in equity affiliate  (Boise Inc.)                           |       | (43,039                                                 | )           | —                          |       | —                      |       | —                            |        | —           |       | (43,039          | )          |
| Foreign exchange gain                                                                |       | —                                                  |        | 590                             |       | 173                         |       | 141                               |        | —           |       | 904              |       |
| Change in fair value of contingent value rights                                      |       | —                                                  |        | 194                             |       | —                      |       | —                            |        | —           |       | 194              |       |
| Gain on repurchase of long-term debt                                                 |       | —                                                  |        | 6,026                           |       | —                      |       | —                            |        | —           |       | 6,026            |       |
| Interest expense                                                                     |       | —                                                  |        | (17,140                         | )          | —                      |       | —                            |        | —           |       | (17,140          | )          |
| Interest income                                                                      |       | —                                                  |        | 490                             |       | 270                         |       | —                            |        | —           |       | 760              |       |
|                                                                                 |       | 19,494                                                  |        | (9,840                          | )          | 443                         |       | 141                               |        | —           |       | 10,238           |       |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 19,493                                                  |        | (19,865                         | )          | (48,796                     | )          | (2,874                            | )           | —           |       | (52,042          | )          |
| Income tax provision                                                                 |       | —                                                  |        | (561                            | )          | (41                         | )          | (21                               | )           | —           |       | (623             | )          |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | 19,493                                                  |        | (20,426                         | )          | (48,837                     | )          | (2,895                            | )           | —           |       | (52,665          | )          |
|                                                                                 |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (72,158                                                 | )           | (51,732                         | )          | —                      |       | —                            |        | 123,890          |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                   | **(52,665** | **)**                           | **$**      | **(72,158**                 | **)**      | **$**                             | **(48,837** | **)**            | **$**      | **(2,895**       | **)**      | **$** | **123,890** | ** ** | **$** | **(52,665** | **)** |

 

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

**Consolidating Balance Sheets at September 30, 2010**

** **
| ** **                    | ** ** | **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     |       | $                                                       | 5           |                            | $          | 285,438                     |       | $                                 | 16          |             | $          | 97               |       | $ | — |   | $ | 285,556 |   |
| Receivables                   |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| Trade, less allowances        |       | —                                                  |        | 7                               |       | 138,131                     |       | 1,695                             |        | —           |       | 139,833          |       |
| Related parties               |       | —                                                  |        | 5                               |       | 274                         |       | —                            |        | —           |       | 279              |       |
| Intercompany                  |       | —                                                  |        | —                          |       | 56                          |       | —                            |        | (56              | )          | —           |       |
| Other                         |       | —                                                  |        | (24                             | )          | 2,179                       |       | 268                               |        | —           |       | 2,423            |       |
| Inventories                   |       | —                                                  |        | —                          |       | 246,441                     |       | 6,172                             |        | —           |       | 252,613          |       |
| Prepaid expenses and other    |       | —                                                  |        | 2,661                           |       | 2,201                       |       | 105                               |        | —           |       | 4,967            |       |
|                          |       | 5                                                       |        | 288,087                         |       | 389,298                     |       | 8,337                             |        | (56              | )          | 685,671          |       |
|                          |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Property**                  |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| Property and equipment, net   |       | —                                                  |        | 1,581                           |       | 253,220                     |       | 11,532                            |        | —           |       | 266,333          |       |
| Timber deposits               |       | —                                                  |        | —                          |       | 9,970                       |       | —                            |        | —           |       | 9,970            |       |
|                          |       | —                                                  |        | 1,581                           |       | 263,190                     |       | 11,532                            |        | —           |       | 276,303          |       |
| ** **                    |       |                                                    |        |                            |       |                        |       |                              |        |             |       |             |       |
| **Deferred financing costs**  |       | —                                                  |        | 3,990                           |       | —                      |       | —                            |        | —           |       | 3,990            |       |
| **Goodwill**                  |       | —                                                  |        | —                          |       | 12,170                      |       | —                            |        | —           |       | 12,170           |       |
| **Intangible assets, net**    |       | —                                                  |        | —                          |       | 8,909                       |       | —                            |        | —           |       | 8,909            |       |
| **Other assets**              |       | —                                                  |        | 19                              |       | 7,672                       |       | —                            |        | —           |       | 7,691            |       |
| **Investments in affiliates** |       | 438,140                                                 |        | 534,996                         |       | —                      |       | —                            |        | (973,136         | )          | —           |       |
| **Total assets**              | ** ** | **$**                                                   | **438,145** | ** **                      | **$**      | **828,673**                 | ** ** | **$**                             | **681,239** | ** **       | **$**      | **19,869**       | ** ** | **$** | **(973,192** | **)** | **$** | **994,734** | ** ** |

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at September 30, 2010 (continued)**

 
| ** **                                  | ** ** | **Boise  Cascade  Holdings,  L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                  | ** ** | **(thousands)**                                 | ** **  |
| **LIABILITIES AND CAPITAL**                 | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                 |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Accounts payable                            |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade                                       |       | $                                               | —      |                              | $          | 9,236                       |       | $                                             | 108,637     |             | $          | 881              |       | $ | — |   | $ | 118,754 |   |
| Related parties                             |       | —                                          |        | 392                               |       | 1,020                       |       | —                                        |        | —           |       | 1,412            |       |
| Intercompany                                |       | —                                          |        | —                            |       | —                      |       | 56                                            |        | (56              | )          | —           |       |
| Accrued liabilities                         |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Compensation and benefits                   |       | —                                          |        | 15,868                            |       | 29,138                      |       | 502                                           |        | —           |       | 45,508           |       |
| Interest payable                            |       | —                                          |        | 7,506                             |       | —                      |       | —                                        |        | —           |       | 7,506            |       |
| Other                                       |       | —                                          |        | 1,767                             |       | 21,005                      |       | 956                                           |        | —           |       | 23,728           |       |
|                                        |       | —                                          |        | 34,769                            |       | 159,800                     |       | 2,395                                         |        | (56              | )          | 196,908          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Debt**                                    |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Long-term debt                              |       | —                                          |        | 228,146                           |       | —                      |       | —                                        |        | —           |       | 228,146          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Other**                                   | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Compensation and benefits                   |       | —                                          |        | 116,812                           |       | —                      |       | —                                        |        | —           |       | 116,812          |       |
| Other long-term liabilities                 |       | —                                          |        | 10,806                            |       | 3,917                       |       | —                                        |        | —           |       | 14,723           |       |
|                                        |       | —                                          |        | 127,618                           |       | 3,917                       |       | —                                        |        | —           |       | 131,535          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Redeemable equity units**                 |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Series B equity units                       |       | 2,765                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 2,765            |       |
| Series C equity units                       |       | 6,505                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 6,505            |       |
| Redeemable equity units                     |       | —                                          |        | 9,270                             |       | —                      |       | —                                        |        | (9,270           | )          | —           |       |
|                                        |       | 9,270                                           |        | 9,270                             |       | —                      |       | —                                        |        | (9,270           | )          | 9,270            |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Commitments and contingent  liabilities** | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                  | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                 | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A equity units                       |       | 94,299                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | 94,299           |       |
| Series B equity units                       |       | 334,576                                         |        | —                            |       | —                      |       | —                                        |        | —           |       | 334,576          |       |
| Series C equity units                       |       | —                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | —           |       |
| Subsidiary equity                           |       | —                                          |        | 428,870                           |       | 517,522                     |       | 17,474                                        |        | (963,866         | )          | —           |       |
| **Total capital**                           |       | 428,875                                         |        | 428,870                           |       | 517,522                     |       | 17,474                                        |        | (963,866         | )          | 428,875          |       |
| **Total liabilities and capital**           | ** ** | **$**                                           | **438,145** | ** **                        | **$**      | **828,673**                 | ** ** | **$**                                         | **681,239** | ** **       | **$**      | **19,869**       | ** ** | **$** | **(973,192** | **)** | **$** | **994,734** | ** ** |

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at December 31, 2009**

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

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at December 31, 2009 (continued)**

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

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Nine Months Ended September 30, 2010**

 
| ** **                                                           | ** ** | **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)                                                    |       | $                                                                       | 10,111     |                                    | $          | (17,085                     | )          | $                                             | 16,408     |                         | $          | (4,230           | )          | $ | 4,907 |   | $ | 10,111 |   |
| Items in net income (loss) not using (providing)  cash               |       |                                                                    |       |                                    |       |                        |       |                                          |       |                         |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                       |       | (1,889                                                                  | )          | —                                  |       | —                      |       | —                                        |       | —                       |       | (1,889           | )          |
| Gain on sale of shares of equity affiliate (Boise Inc.)              |       | (25,308                                                                 | )          | —                                  |       | —                      |       | —                                        |       | —                       |       | (25,308          | )          |
| Equity in net (income) loss of affiliates                            |       | 17,085                                                                  |       | (12,178                                 | )          | —                      |       | —                                        |       | (4,907                       | )          | —           |       |
| Depreciation and amortization of deferred  financing costs and other |       | —                                                                  |       | 2,611                                   |       | 24,235                      |       | 1,431                                         |       | —                       |       | 28,277           |       |
| Pension expense                                                      |       | —                                                                  |       | 5,670                                   |       | —                      |       | —                                        |       | —                       |       | 5,670            |       |
| Management equity units expense                                      |       | —                                                                  |       | 1,303                                   |       | —                      |       | —                                        |       |                         |       | 1,303            |       |
| Other                                                                |       | —                                                                  |       | (30                                     | )          | 141                         |       | (185                                          | )          | —                       |       | (74              | )          |
| Decrease (increase) in working capital                               |       |                                                                    |       |                                    |       |                        |       |                                          |       |                         |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 99                                      |       | (40,454                     | )          | (591                                          | )          | —                       |       | (40,946          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                  |       | (18,155                     | )          | (1,684                                        | )          | —                       |       | (19,839          | )          |
| Prepaid expenses and other                                           |       | —                                                                  |       | (186                                    | )          | (1,107                      | )          | (35                                           | )          | —                       |       | (1,328           | )          |
| Accounts payable and accrued liabilities                             |       | —                                                                  |       | 7,571                                   |       | 44,168                      |       | 1,006                                         |       | —                       |       | 52,745           |       |
| Pension contributions                                                |       | —                                                                  |       | (3,766                                  | )          | —                      |       | —                                        |       | —                       |       | (3,766           | )          |
| Other                                                                |       | —                                                                  |       | 3,527                                   |       | 710                         |       | (8                                            | )          | —                       |       | 4,229            |       |
| Cash provided by (used for) operations                               |       | (1                                                                      | )          | (12,464                                 | )          | 25,946                      |       | (4,296                                        | )          | —                       |       | 9,185            |       |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |                         |       |             |       |
| **Cash provided by (used for) investment**                           |       |                                                                    |       |                                    |       |                        |       |                                          |       |                         |       |             |       |
| Proceeds from sale of shares of equity affiliate  (Boise Inc.)       |       | 86,123                                                                  |       | —                                  |       | —                      |       | —                                        |       | —                       |       | 86,123           |       |
| Expenditures for property and equipment                              |       | —                                                                  |       | (7                                      | )          | (21,620                     | )          | (742                                          | )          | —                       |       | (22,369          | )          |
| Other                                                                |       | —                                                                  |       | 722                                     |       | (392                        | )          | 186                                           |       | —                       |       | 516              |       |
| Cash provided by (used for) investment                               |       | 86,123                                                                  |       | 715                                     |       | (22,012                     | )          | (556                                          | )          | —                       |       | 64,270           |       |
| ** **                                                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **                   | ** ** | ** **       | ** ** |
| **Cash provided by (used for)  financing**                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **                   | ** ** | ** **       | ** ** |
| Issuances of long-term debt                                          |       | —                                                                  |       | 45,000                                  |       | —                      |       | —                                        |       | —                       |       | 45,000           |       |
| Payments of long-term debt                                           |       | —                                                                  |       | (120,000                                | )          | —                      |       | —                                        |       | —                       |       | (120,000         | )          |
| Parent/subsidiary equity transactions                                |       | (86,117                                                                 | )          | 86,117                                  |       | —                      |       | —                                        |       | —                       |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (929                                    | )          | (3,937                      | )          | 4,866                                         |       | —                       |       | —           |       |
| Cash provided by (used for) financing                                |       | (86,117                                                                 | )          | 10,188                                  |       | (3,937                      | )          | 4,866                                         |       | —                       |       | (75,000          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |                         |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**                |       | 5                                                                       |       | (1,561                                  | )          | (3                          | )          | 14                                            |       | —                       |       | (1,545           | )          |
| **Balance at beginning of the  period**                              |       | —                                                                  |       | 286,999                                 |       | 19                          |       | 83                                            |       | —                       |       | 287,101          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **5**      | ** **                              | **$**      | **285,438**                 | ** ** | **$**                                         | **16**     | ** **                   | **$**      | **97**           | ** ** | **$** | **—** | ** ** | **$** | **285,556** | ** ** |

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Nine Months Ended September 30, 2009**

 
| ** **                                                           | ** ** | **Boise********Cascade********Holdings,********L.L.C.********(Parent)** | ** ** | **Boise********Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                           | ** ** | **(thousands)**                                                         | ** ** |
| **Cash provided by (used for) operations**                           |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Net income (loss)                                                    |       | $                                                                       | (52,665    | )                                       | $          | (72,158                     | )          | $                                             | (48,837    | )                | $          | (2,895           | )          | $ | 123,890 |   | $ | (52,665 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                       |       | (61,536                                                                 | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (61,536          | )          |
| Gain on sale of shares of equity affiliate (Boise Inc.)              |       | (997                                                                    | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (997             | )          |
| Impairment of investment in equity affiliate  (Boise Inc.)           |       | 43,039                                                                  |       | —                                  |       | —                      |       | —                                        |       | —           |       | 43,039           |       |
| Equity in net (income) loss of affiliates                            |       | 72,158                                                                  |       | 51,732                                  |       | —                      |       | —                                        |       | (123,890         | )          | —           |       |
| Depreciation and amortization of deferred  financing costs and other |       | —                                                                  |       | 2,615                                   |       | 30,465                      |       | 1,389                                         |       | —           |       | 34,469           |       |
| Pension expense                                                      |       | —                                                                  |       | 9,985                                   |       | —                      |       | —                                        |       | —           |       | 9,985            |       |
| Management equity units expense                                      |       | —                                                                  |       | 2,306                                   |       | —                      |       | —                                        |       | —           |       | 2,306            |       |
| Gain on repurchase of long-term debt                                 |       | —                                                                  |       | (6,026                                  | )          | —                      |       | —                                        |       | —           |       | (6,026           | )          |
| Facility closure and curtailment costs                               |       | —                                                                  |       | —                                  |       | 1,968                       |       | —                                        |       | —           |       | 1,968            |       |
| Other                                                                |       | —                                                                  |       | (767                                    | )          | (697                        | )          | (141                                          | )          | —           |       | (1,605           | )          |
| Decrease (increase) in working capital, net of  acquisitions         |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 747                                     |       | (53,535                     | )          | (2,090                                        | )          | 287              |       | (54,591          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                  |       | 44,073                      |       | 2,041                                         |       | —           |       | 46,114           |       |
| Prepaid expenses and other                                           |       | —                                                                  |       | (1,167                                  | )          | (781                        | )          | (111                                          | )          | —           |       | (2,059           | )          |
| Accounts payable and accrued liabilities                             |       | —                                                                  |       | 2,976                                   |       | 36,196                      |       | 717                                           |       | (287             | )          | 39,602           |       |
| Pension contributions                                                |       | —                                                                  |       | (28,057                                 | )          | —                      |       | —                                        |       | —           |       | (28,057          | )          |
| Other                                                                |       | —                                                                  |       | (72                                     | )          | (2,980                      | )          | —                                        |       | —           |       | (3,052           | )          |
| Cash provided by (used for) operations                               |       | (1                                                                      | )          | (37,886                                 | )          | 5,872                       |       | (1,090                                        | )          | —           |       | (33,105          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used for) investment**                           |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Proceeds from sale of shares of equity affiliate  (Boise Inc.)       |       | 3,032                                                                   |       | —                                  |       | —                      |       | —                                        |       | —           |       | 3,032            |       |
| Expenditures for property and equipment                              |       | —                                                                  |       | (6                                      | )          | (12,166                     | )          | (760                                          | )          | —           |       | (12,932          | )          |
| Acquisition of businesses and facilities                             |       | —                                                                  |       | —                                  |       | (4,598                      | )          | —                                        |       | —           |       | (4,598           | )          |
| Other                                                                |       | —                                                                  |       | 580                                     |       | 1,540                       |       | 159                                           |       | —           |       | 2,279            |       |
| Cash provided by (used for) investment                               |       | 3,032                                                                   |       | 574                                     |       | (15,224                     | )          | (601                                          | )          | —           |       | (12,219          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used for)  financing**                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Issuances of long-term debt                                          |       | —                                                                  |       | 60,000                                  |       | —                      |       | —                                        |       | —           |       | 60,000           |       |
| Payments of long-term debt                                           |       | —                                                                  |       | (65,627                                 | )          | —                      |       | —                                        |       | —           |       | (65,627          | )          |
| Tax distributions to members                                         |       | (10,705                                                                 | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (10,705          | )          |
| Repurchase of management equity units                                |       | (18                                                                     | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (18              | )          |
| Parent/subsidiary equity transactions                                |       | 7,692                                                                   |       | (7,692                                  | )          | —                      |       | —                                        |       | —           |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (11,086                                 | )          | 9,351                       |       | 1,735                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                                |       | (3,031                                                                  | )          | (24,405                                 | )          | 9,351                       |       | 1,735                                         |       | —           |       | (16,350          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**                |       | —                                                                  |       | (61,717                                 | )          | (1                          | )          | 44                                            |       | —           |       | (61,674          | )          |
| **Balance at beginning of the  period**                              |       | 1                                                                       |       | 275,726                                 |       | 20                          |       | 56                                            |       | —           |       | 275,803          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **1**      | ** **                              | **$**      | **214,009**                 | ** ** | **$**                                         | **19**     | ** **       | **$**      | **100**          | ** ** | **$** | **—** | ** ** | **$** | **214,129** | ** ** |

 

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| ***ITEM 2.*** | ***MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS*** |
|---------------|---------------------------------------------------------------------------------------------------|

 

***Understanding Our FinancialInformation***

 

This Management’s Discussion and Analysis of FinancialCondition and Results of Operations should be read in conjunction with ourconsolidated financial statements and related notes in “Item 1. FinancialStatements” of this Form 10-Q, as well as our 2009 Form 10-K. Thefollowing discussion includes statements regarding our expectations withrespect 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 include, withoutlimitation, any statement that may predict, indicate, or imply future results,performance, or achievements and may contain the words “may,” “will,” “expect,”“believe,” “should,” “plan,” “anticipate,” and other similar expressions. Allof these forward-looking statements are based on estimates and assumptions madeby our management that, although believed by us to be reasonable, areinherently uncertain. These forward-looking statements are subject to numerous risks and uncertainties,including, but not limited to, the risks and uncertainties described in“Part I, Item 1A. Risk Factors” in our 2009 Form 10-K, aswell as the factors listed in other documents we file with the Securities andExchange Commission (SEC). There have been no material changes to our riskfactors during the nine months ended September 30, 2010, from those listedin our 2009 Form 10-K. We do not assume an obligation to update anyforward-looking statement. Our future actual results may differ materially fromthose contained in or implied by any of the forward-looking statements in thisForm 10-Q.

 

*Background*

 

BoiseCascade Holdings, L.L.C., is a privately held building products companyheadquartered in Boise, Idaho. Our operations began on October 29,2004 (inception), when we acquired the forest products and paper assets ofOfficeMax (the Forest Products Acquisition). In February 2008, BoiseCascade, L.L.C., our wholly owned direct subsidiary, sold its Paper andPackaging & Newsprint assets, and we became a focused wood productsmanufacturing and building products distribution business. As used in thisForm 10-Q, the terms “BC Holdings,” “we,” and “our” refer to Boise CascadeHoldings, L.L.C., and its consolidated subsidiaries. Our wholly owned subsidiary,Boise Cascade, L.L.C., is a leading U.S. wholesale distributor of buildingproducts and one of the largest producers of engineered wood products (EWP) andplywood in North America.

 

We operate our business using three reportable segments:  (1) Building Materials Distribution,which is a wholesale distributor of building materials, (2) Wood Products,which manufactures and sells EWP, plywood, particleboard, dimension lumber, andhigh-quality ponderosa pine lumber, and (3) Corporate and Other, whichincludes corporate support staff services, related assets and liabilities, andforeign exchange gains and losses. These segments represent distinct businessesthat are managed separately because of differing products and services. Each ofthese businesses requires distinct operating and marketing strategies.Management reviews the performance of the company based on these segments. Formore information see Note 15, Segment Information, of the Notes toUnaudited Quarterly Consolidated Financial Statements in “Item 1. FinancialStatements” of this Form 10-Q.

 

***Executive Overview***

 

Duringthe nine months ended September 30, 2010, the average prices for many ofthe commodity products we manufacture and distribute increased, due primarilyto a supply-driven run-up in prices in the first four months of the year, whichresulted from constrained dealer inventory levels, curtailments, and disruptedimports. Once buyers filled inventory needs and industry supply responded tothe higher prices, prices declined. At the end of the third quarter, compositepanel and lumber prices were back to beginning-of-the-year price levels.

 

Demandfor our products correlates with the level of residential construction activityin North America, which has historically been cyclical. As of October 2010,the Blue Chip Economic Indicators consensus forecast for 2010 single- andmultifamily housing starts in the U.S. was approximately 0.6 millionunits, which is significantly below historical trends of approximately1.5 million units over the ten years prior to 2010. New home sales havesteadied after falling 25% from April to June following the 

 

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expiration of the government’s tax incentivefor first-time home buyers, which ended in April of this year. The housingmarket continues to face significant challenges from high unemployment andforeclosures, which are impeding a broader recovery. The federal governmentrecently announced a refinancing program backed by the Federal HousingAdministration for homeowners who owe more money on their homes than they areworth. In addition, Housing and Urban Development has said they will launch anemergency loan program to help people who are unemployed keep their homes.These programs, if successful, could help reduce the number of delinquenciesand improve stability in the market.

 

Ultimately,however, we believe the housing story, whether it is delinquencies, home sales,or housing starts, is an employment story. We don’t expect to see an increasein sales and housing starts or a sustained improvement in delinquency numbersuntil we see a consistent increase in employment. Many economists project thatunemployment will stay above 9% through 2011. We believe this is likely tocontinue to depress demand even as record-low mortgage rates and lower pricesmake homes more affordable.

 

Becausethe housing recovery is likely to be slow and uneven, we continue to manage ourproduction levels to our sales demand. The weakness in demand will likely causeus to continue to operate our facilities below their capacity. In addition, wecontinue to prudently manage our working capital and capital spending in thisenvironment. We expect the downturn to continue to adversely affect ouroperating results in 2010; however, we do expect improvement in our 2010operating results, compared with 2009. While near-term residential constructionremains weak in the U.S., positive long-term demographic fundamentals,including immigration, are expected to support household formations, which inturn are expected to support an eventual recovery in new residential housingdemand.

 

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

 

Ourresults of operations and financial performance are influenced by a variety offactors, including the following:

 

·                  General economic conditions,including but not limited to housing starts, repair-and-remodel activity andlight commercial construction, foreclosure rates, interest rates, unemploymentrates, and relative currency values;

 

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

 

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

 

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

 

·                  Industry cycles and capacityutilization rates;

 

·                  Cost of 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;

 

·                  The financial condition andcreditworthiness of our customers;

 

·                  Major equipment failure;

 

·                  Severe weather phenomenasuch as drought, hurricanes, tornadoes, and fire;

 

·                  Actions ofsuppliers, customers, and competitors, including merger and acquisitionactivities, plant closures, and financial failures;

 

·                  Boise Inc.’s performanceunder the Outsourcing Services Agreement; and

 

·                  The other factors describedin “Part I, Item 1A. Risk Factors” in our 2009 Form 10-K.

 

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In March 2010, thePatient Protection and Affordable Care Act and the Health Care and EducationReconciliation Act of 2010 (the Acts) became law. Based on our preliminaryreview, the Acts do not appear to create any substantial, immediate costs.Because we do not subsidize our retiree medical plans and do not provideretirees with post-65 medical coverage, the elimination of the tax deductionrelated to the Medicare Part D subsidy in the Patient Protection andAffordable Care Act did not affect our financial statements. We are continuingto evaluate the impact of the Acts on our financial position and results ofoperations. Given the scope and complexity of the legislation, it is difficultto predict its future impact, although we do not expect the Acts to have amaterial impact on our financial position or results of operations.

 

***Our Operating Results***

 

Thefollowing tables set forth our operating results in dollars and as a percentageof sales for the three and nine months ended September 30, 2010 and 2009:

 
| ** **                                                                     | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2010**                                            | ** ** | **2009**                                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                     | ** ** | **(millions)**                                      | ** ** |
| **Sales**                                                                      |       |                                                |       |                                               |       |   |   |   |   |
| Trade                                                                          |       | $                                                   | 588.6      |                                               | $          | 567.6 |   | $ | 1,712.3 |   | $ | 1,487.6 |   |
| Related parties (a)                                                            |       | 4.9                                                 |       | 11.4                                               |       | 19.9 |   | 26.0 |   |
|                                                                           |       | 593.5                                               |       | 579.0                                              |       | 1,732.2 |   | 1,513.6 |   |
|                                                                           |       |                                                |       |                                               |       |   |   |   |   |
| **Costs and expenses**                                                         |       |                                                |       |                                               |       |   |   |   |   |
| Materials, labor, and other operating expenses                                 |       | 514.5                                               |       | 501.9                                              |       | 1,498.3 |   | 1,346.7 |   |
| Materials, labor, and other operating expenses  from related parties (a)       |       | 10.6                                                |       | 6.1                                                |       | 27.3 |   | 24.7 |   |
| Depreciation and amortization                                                  |       | 8.8                                                 |       | 9.6                                                |       | 25.9 |   | 32.2 |   |
| Selling and distribution expenses                                              |       | 54.2                                                |       | 50.7                                               |       | 155.0 |   | 143.7 |   |
| General and administrative expenses                                            |       | 11.4                                                |       | 6.9                                                |       | 30.0 |   | 20.6 |   |
| General and administrative expenses from related  party (a)                    |       | —                                              |       | 2.7                                                |       | 1.6 |   | 7.6 |   |
| Other (income) expense, net                                                    |       | (4.6                                                | )          | (0.6                                               | )          | (4.6 | ) | 0.4 |   |
|                                                                           |       | 594.9                                               |       | 577.3                                              |       | 1,733.5 |   | 1,575.9 |   |
|                                                                           |       |                                                |       |                                               |       |   |   |   |   |
| **Income (loss) from operations**                                              | ** ** | **$**                                               | **(1.4**   | **)**                                              | **$**      | **1.7** | ** ** | **$** | **(1.3** | **)** | **$** | **(62.3** | **)** |
| ** **                                                                     |       |                                                |       |                                               |       |   |   |   |   |
| ** **                                                                     | ** ** | **(percentage of sales)**                           | ** ** |
| **Sales**                                                                      |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |
| Trade                                                                          |       | 99.2                                                | %          |                                               | 98.0       | % |   | 98.9 | % |   | 98.3 | % |   |
| Related parties                                                                |       | 0.8                                                 |       |                                               | 2.0        |   |   | 1.1 |   |   | 1.7 |   |   |
|                                                                           |       | 100.0                                               | %          |                                               | 100.0      | % |   | 100.0 | % |   | 100.0 | % |   |
|                                                                           |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |
| **Costs and expenses**                                                         |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |
| Materials, labor, and other operating expenses,  including related parties (a) |       | 88.5                                                | %          |                                               | 87.7       | % |   | 88.1 | % |   | 90.6 | % |   |
| Depreciation and amortization                                                  |       | 1.5                                                 |       |                                               | 1.7        |   |   | 1.5 |   |   | 2.1 |   |   |
| Selling and distribution expenses                                              |       | 9.1                                                 |       |                                               | 8.8        |   |   | 9.0 |   |   | 9.5 |   |   |
| General and administrative expenses, including  related party (a)              |       | 1.9                                                 |       |                                               | 1.6        |   |   | 1.8 |   |   | 1.9 |   |   |
| Other (income) expense, net                                                    |       | (0.8                                                | )          |                                               | (0.1       | ) |   | (0.3 | ) |   | — |   |   |
|                                                                           |       | 100.2                                               | %          |                                               | 99.7       | % |   | 100.1 | % |   | 104.1 | % |   |
|                                                                           |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |
| **I****ncome (loss) from operations**                                          |       | **(0.2)**                                           | **%**      |                                               | **0.3**    | **%** |   | **(0.1)** | **%** |   | **(4.1)** | **%** |   |
|                                                                                |            |                                                     |            |                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(a)                                 As of the March 2010sale of our remaining investment in Boise Inc., Boise Inc. was nolonger a related party. As a result, beginning in March 2010, transactionswith Louisiana Timber Procurement Company, L.L.C., represent the onlysignificant related-party activity recorded in the financial statements. Formore information, see Note 3, Transactions With Related Parties, of theNotes to Unaudited Quarterly Consolidated Financial Statements in “Item 1.Financial Statements” of this Form 10-Q.

 

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***Sales Volumes and Prices***

 

Set forth below are sales mix information for our Building MaterialsDistribution segment and segment sales volumes and average net selling pricesfor the principal products sold by our Wood Products segment for the three andnine months ended September 30, 2010 and 2009.

 
| ** **                                       | ** ** | **Three Months Ended********September 30**         | ** ** | **Nine Months Ended********September 30** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                       | ** ** | **2010**                                                          | ** ** | **2009**                                                 | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                       | ** ** | **(millions)**                                                    | ** ** |
| **Segment Sales**                                |       |                                                              |       |                                                     |       |   |   |   |   |
| Building Materials  Distribution                 |       | $                                                                 | 470.7      |                                                     | $          | 472.2 |   | $ | 1,375.3 |   | $ | 1,240.9 |   |
| Wood Products                                    |       | 183.4                                                             |       | 163.2                                                    |       | 530.9 |   | 414.1 |   |
|                                             |       |                                                              |       |                                                     |       |   |   |   |   |
| ** **                                       | ** ** | **(percentage  of Building Materials********Distribution sales)** | ** ** |
| **Product Line Sales**                           |       |                                                              |       |                                                     |       |   |   |   |   |
| **Building Materials Distribution**              | ** ** | ** **                                                        | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Commodity                                        |       | 48.5                                                              | %          | 45.4                                                     | %          | 49.6 | % | 45.8 | % |
| Engineered wood                                  |       | 11.7                                                              | %          | 11.9                                                     | %          | 11.1 | % | 10.8 | % |
| General line                                     |       | 39.8                                                              | %          | 42.7                                                     | %          | 39.3 | % | 43.4 | % |
|                                             |       |                                                              |       |                                                     |       |   |   |   |   |
| ** **                                       | ** ** | **(millions)**                                                    | ** ** |
| **Sales Volumes**                                |       |                                                              |       |                                                     |       |   |   |   |   |
| **Wood Products**                                |       |                                                              |       |                                                     |       |   |   |   |   |
| Laminated veneer lumber  (LVL) (cubic feet)      |       | 1.6                                                               |       | 1.7                                                      |       | 5.1 |   | 4.2 |   |
| I-joists (equivalent  lineal feet)               |       | 27                                                                |       | 27                                                       |       | 83 |   | 65 |   |
| Plywood (sq. ft.) (3/8”  basis)             |       | 308                                                               |       | 261                                                      |       | 820 |   | 753 |   |
| Lumber (board feet)                              |       | 37                                                                |       | 45                                                       |       | 111 |   | 110 |   |
| Particleboard (sq. ft.)  (3/4” basis)       |       | 21                                                                |       | 22                                                       |       | 61 |   | 61 |   |
|                                             |       |                                                              |       |                                                     |       |   |   |   |   |
| ** **                                       | ** ** | **(dollars  per unit)**                                           | ** ** |
| **Average Net Selling Prices**                   | ** ** | ** **                                                        | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Wood Products**                                | ** ** | ** **                                                        | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Laminated veneer lumber  (LVL) (cubic foot)      |       | $                                                                 | 16.01      |                                                     | $          | 15.08 |   | $ | 15.40 |   | $ | 15.20 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 949                                                               |       | 908                                                      |       | 931 |   | 907 |   |
| Plywood (1,000 sq. ft.)  (3/8” basis)       |       | 247                                                               |       | 226                                                      |       | 257 |   | 212 |   |
| Lumber (1,000 board  feet)                       |       | 420                                                               |       | 374                                                      |       | 436 |   | 337 |   |
| Particleboard (1,000 sq.  ft.) (3/4” basis) |       | 306                                                               |       | 332                                                      |       | 310 |   | 340 |   |

 

***Operating Results***

 

***Sales***

 

Forthe three months ended September 30, 2010 total sales increased$14.5 million, or 3%, to $593.5 million from $579.0 millionduring the three months ended September 30, 2009. For the nine monthsended September 30, 2010, total sales increased $218.6 million, or14%, to $1,732.2 million from $1,513.6 million in the prior year. Inboth periods, the increase in sales was attributable to higher prices for manyof the commodity products we manufacture and distribute. The Random Lengths composite lumber andpanel prices were approximately 34% and 32% higher, on average, during the ninemonths ended September 30, 2010, compared with the same period in 2009.Prices rose sharply from the start of the year through April 2010 andbegan to retreat in early May. The Random Lengths composite lumber and panelprices dropped from $367 and $474 at their peak in April 2010 and fellquickly to $247 and $328, respectively, by late June, and the composite panelprices dropped even further to $278 by the end of September. We believe thedramatic drop is the result of stagnating demand and increased industryproduction in response to a run-up in prices in the first four months of theyear, which resulted from constrained dealer inventory levels, curtailments,and disrupted imports.

 

*BuildingMaterials Distribution.*  Salesdecreased slightly to $470.7 million for the three months ended September 30, 2010, from$472.2 million for the three months ended September 30, 2009. Pricesfor the segment were up approximately 9%; however, sales volumes declined approximately8%, offsetting the benefit to revenues. Our financial results continue to benegatively impacted by reduced demand for our products. Third quarter 2010housing starts were consistent with the levels experienced in 

 

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the same quarter of 2009, which was the worstyear for housing starts on record. During the nine months endedSeptember 30, 2010, sales increased $134.4 million, or 11%, to$1,375.3 million from $1,240.9 million in the prior year. Comparedwith the nine months ended September 30, 2009, the increase was drivenprimarily by an 11% increase in product sales prices.

 

*Wood Products.* Sales increased $20.2 million, or 12%, to$183.4 million for thethree months ended September 30, 2010, from $163.2 million for thethree months ended September 30, 2009. During the nine months endedSeptember 30, 2010, sales increased $116.8 million, or 28%, to $530.9 millionfrom $414.1 million in the same period a year ago. Compared with the threeand nine months ended September 30, 2009, the increase in sales resultedfrom an 18% and 9% increase in plywood sales volume, respectively, and higherprices for all of our major product lines. Compared with the three and ninemonths ended September 30, 2009, plywood prices increased 9% and 21% andlumber prices increased 12% and 29%. Also contributing to the increase in salesduring the nine months ended September 30, 2010, was a more than 20%increase in EWP sales volumes.

 

***Costs and Expenses***

 

Materials, labor, and otheroperating expenses, including from related parties, increased$17.1 million, or 3%, to $525.1 million for the three months ended September 30, 2010, compared with$508.0 million during the same period in the prior year. For the ninemonths ended September 30, 2010, these expenses increased$154.2 million, or 11%, to $1,525.6 million, compared with$1,371.4 million in the same period in the prior year. During both thethree and nine months ended September 30, 2010, materials, labor, andother operating expenses, including from related parties, increased due tohigher purchased materials costs in our Building Materials Distributionsegment. Gross margins decreased 1.3% and 0.5% in our Building MaterialsDistribution segment during the three and nine months ended September 30,2010, respectively, as commodity product prices trended lower during the thirdquarter. Conversely, during the three and nine months ended September 30,2009, commodity product prices trended higher which positively impacted grossmargins. The increase in materials, labor, and other operating expenses,including from related parties, during the nine months ended September 30,2010, was also attributable to an increase in sales volume in all of our majorproduct lines in our Wood Products segment. While total materials, labor, andother operating expenses, including from related parties, increased during thenine months ended September 30, 2010, the costs decreased as a percent ofsales, as these costs did not increase at the same pace as sales.

 

Depreciation and amortization expenses decreased$0.8 million, or 9%, to$8.8 million for the three months ended September 30, 2010, comparedwith $9.6 million for the same period in the prior year. Relative to thenine months ended September 30, 2009, these expenses decreased$6.3 million, or 19%, to $25.9 million, compared with$32.2 million in the prior year. During the nine months ended September 30,2009, we recognized $5.2 million of incremental expense as a result ofaccelerating depreciation on the assets at our La Grande, Oregon, lumbermanufacturing facility following our decision to close the operations in 2009.

 

Selling and distributionexpenses increased $3.5 million, or 7%, to $54.2 million for the three months endedSeptember 30, 2010, compared with $50.7 million for the same periodin the prior year. During the nine months ended September 30, 2010, thesecosts increased $11.3 million, or 8%, to $155.0 million, comparedwith $143.7 million during the same period a year ago. For both comparisonperiods, the increases were due to increased occupancy-related expenses at thebuilding materials distribution facilities we added or expanded in the lastyear, increased transportation costs, and increased compensation and benefitcosts. While total selling and distribution expenses increased during the ninemonths ended September 30, 2010, the costs decreased as a percent ofsales, because these costs did not increase at the same pace as sales.

 

Generaland administrative expenses, including from related party, increased $1.8 million, or 20%, to$11.4 million for the threemonths ended September 30, 2010, compared with $9.6 million for thesame period in the prior year. For the nine months ended September 30,2010, general and administrative expenses, including from related party,increased $3.4 million, or 12%, to $31.6 million, compared with$28.2 million a year ago. The increase in general and administrative expenses for the threeand nine months ended September 30, 2010, was principally the result of highercompensation and benefit costs.

 

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Other(income) expense, net, for the three and nine months ended September 30,2010, included $4.6 million of income associated with receiving proceedsfrom a litigation settlement related to vendor product pricing. Other (income)expense, net, for the three and nine months ended September 30, 2009,included $0.5 million of income and $3.2 million of expense relatedto facility closures. The nine months ended September 30, 2009, alsoincluded a net $0.7 million noncash curtailment gain related to amendingour defined benefit pension plan for salaried employees and nonqualifiedsalaried pension plans so that no future benefits would accrue in the plansafter December 31, 2009.

 

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

 

Incomefrom operations decreased $3.1 million to a $1.4 million loss for thethree months ended September 30, 2010, compared with $1.7 million ofincome for the three months ended September 30, 2009. The decrease is dueto an 8% decrease in sales volume and increased costs in our Building MaterialsDistribution segment, which are described below. Our loss from operationsdecreased $61.0 million to $1.3 million for the nine months endedSeptember 30, 2010, compared with a $62.3 million loss during the sameperiod in the prior year. Compared with the nine months ended September 30,2009, our improved financial results were driven primarily by higher productprices. Also contributing to the improved results for the nine months endedSeptember 30, 2010, were favorable per-unit conversion costs in our WoodProducts segment. These changes are also discussed in more detail below.

 

*Building Materials Distribution.*  Segment income decreased $5.1 million to$4.6 million for the three months ended September 30, 2010, from$9.7 million for the three months ended September 30, 2009. Duringthe nine months ended September 30, 2010, segment income increased$2.4 million to $11.2 million from $8.8 million of income in thesame period a year ago. Excluding the $4.1 million of income recorded froma litigation settlement related to vendor product pricing, segment incomedecreased $9.1 million and $1.7 million during the three and ninemonths ended September 30, 2010. The decrease in income was driven byincreased occupancy-related expenses at the building materials distributionfacilities we added or expanded in the last year, higher compensation andbenefit costs, and a 1.3% and 0.5% decrease in gross margins during the threeand nine months ended September 30, 2010, respectively, as commodity productprices trended lower during the third quarter. During the three and nine monthsended September 30, 2009, commodity product prices trended higher, whichpositively affected gross margins.

 

*Wood Products. *Segment loss decreased $3.2 million to $1.0 million for the three months endedSeptember 30, 2010, compared witha $4.2 million loss for the three months ended September 30, 2009.Our loss decreased $61.7 million to $0.7 million of income forthe nine months ended September 30, 2010, compared with a $61.0 millionloss in the same period a year ago. During the three and nine months endedSeptember 30, 2010, we recorded $0.5 million of income from a litigationsettlement related to vendor product pricing. In both the three and nine monthsended September 30, 2010, the improved financial results were drivenprimarily by favorable product prices, primarily plywood prices, whichincreased 9% and 21% for the three and nine months ended September 30,2010. Compared with the nine months ended September 30, 2009, favorableper-unit conversion costs also contributed to improved financial results. Inaddition, the Wood Products segment loss for the nine months endedSeptember 30, 2009, included $8.9 million of expenses related toclosing our lumber manufacturing facility in La Grande, Oregon.

 

***Other***

 

*Investment in Equity Affiliate*.  In connection with the sale of our Paper andPackaging & Newsprint assets in February 2008, we received37.9 million shares, or 49%, of Boise Inc.’s common stock. Werecorded our investment in “Investment in equity affiliate” on our ConsolidatedBalance Sheet. We accounted for the investment under the equity method ofaccounting. In 2009, we sold about halfof our investment in Boise Inc., decreasing our ownership position to18.3 million shares, or 23.5%, at December 31, 2009. In first quarter2010, we sold all of our remaining shares of Boise Inc. and, as a result,discontinued the equity method of accounting.

 

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Duringthe three months ended September 30, 2009, we recorded $29.2 millionof income related to our investment in Boise Inc. in our ConsolidatedStatements of Income (Loss), compared with $27.2 million and$19.5 million of net income during the nine months endedSeptember 30, 2010 and 2009, as follows:

 
| ** **                                             | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                             | ** ** | **2009**                                            | ** ** | **2010**                                           | ** ** | **2009** | ** ** |
| ** **                                             | ** ** | **(millions)**                                      | ** ** |
|                                                   |       |                                                |       |                                               |       |   |   |
| Equity in net income of Boise Inc.                |       | $                                                   | 22.4       |                                               | $          | 0.1 |   | $ | 45.7 |   |
| Amortization of basis differential                     |       | 5.9                                                 |       | 1.8                                                |       | 16.9 |   |
| Loss on shares issued for settlement of CVR  liability |       | —                                              |       | —                                             |       | (1.0 | ) |
| Equity in net income of affiliate                      |       | 28.2                                                |       | 1.9                                                |       | 61.5 |   |
| Gain on sale of shares of equity affiliate (a)         |       | 1.0                                                 |       | 25.3                                               |       | 1.0 |   |
| Impairment of investment in equity affiliate (b)       |       | —                                              |       | —                                             |       | (43.0 | ) |
| Total                                                  | ** ** | **$**                                               | **29.2**   | ** **                                         | **$**      | **27.2** | ** ** | **$** | **19.5** | ** ** |

 

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(a)                                 During thethree and nine months ended September 30, 2009, we sold 1.2 millionBoise Inc. shares and recorded a $1.0 million gain on the sale of theBoise Inc. shares in our Consolidated Statements of Income (Loss). Infirst quarter 2010, we sold 18.3 million Boise Inc. shares for netproceeds of $86.1 million, and we recorded a $25.3 million gain onthe sale of the shares in our Consolidated Statement of Income (Loss) for thenine months ended September 30, 2010. We reduced our investment in BoiseInc. and our accumulated other comprehensive income related to our investmentin Boise Inc. to zero.

 

(b)                                 On March 31,2009, we compared the fair value of the Boise Inc. stock price ($0.61 pershare) with the carrying value of our investment ($1.77 per share) andconcluded that our investment in Boise Inc. met the definition of other thantemporarily impaired. We made the other-than-temporary-impairment determinationbased primarily on the length of time and extent to which the fair value of ourinvestment had been trading below its carrying value. As of March 31,2009, Boise Inc.’s stock had traded below our carrying value since wewrote the investment down in September 2008. Accordingly, for the ninemonths ended September 30, 2009, we recorded a $43.0 million chargein “Impairment of investment in equity affiliate” in our Consolidated Statementof Income (Loss).

 

*Gain onrepurchase of long-term debt. *During the ninemonths ended September 30, 2009, we repurchased $11.9 million ofsenior subordinated notes and recorded a $6.0 million gain.

 

*Income tax provision.* Our income tax provisiongenerally consists of income taxes payable to states that do not allow for theincome tax liability to be passed through to our equity holders, as well asincome taxes payable by our separate subsidiaries that are taxed ascorporations. For both the three months ended September 30, 2010 and 2009,income tax expense was $0.1 million. Income tax expense was$0.2 million and $0.6 million for the nine months endedSeptember 30, 2010 and 2009.

 

***Liquidity and Capital Resources***

 

Continuedconcerns over the level of residential construction activity, number offoreclosures, availability and cost of credit, unemployment, and consumer andbusiness confidence create uncertainty around the amount of cash flow we willgenerate during the remainder of 2010 and 2011. In response to the continuedeconomic uncertainty and to enhance our liquidity, we have and will continue tomatch production with market demand.

 

Despite the difficultconditions, we ended third quarter 2010 with $285.6 million of cash,$228.1 million of long-term debt, and $395.8 million of availableliquidity (unrestricted cash and cash equivalents and unused borrowing capacityunder the Revolving Credit Facility). In first quarter 2010, we sold18.3 million Boise Inc. shares for net proceeds of$86.1 million. We are obligated under the indenture governing our 7.125%senior subordinated notes (Indenture) to use the net proceeds (as defined inthe Indenture) from the sale of Boise Inc. shares within one year to repaysenior indebtedness, acquire additional assets, or make a tender offer at parfor a portion of the senior subordinated notes. At September 30, 2010,approximately $22 million of cash related to the sale of Boise Inc.shares was governed by the Indenture. We anticipate that this amount will beused toward capital spending and that this will fulfill our remainingobligation under the Indenture.

 

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We believe that our cashflows from operations, combined with our current cash levels and availableborrowing capacity, will be adequate to fund debt service requirements andprovide cash, as required, to support our ongoing operations, capitalexpenditures, lease obligations, and working capital for at least the next12 months.

 

***Sources and Uses of Cash***

 

Wegenerate cash from sales of our products and from short-term and long-termborrowings, as well as from cash proceeds from the sale of nonstrategic assets.Our primary uses of cash are for expenses related to the manufacture anddistribution of building products, including fiber, inventory purchased forresale, labor, energy, and chemicals. In addition to paying for ongoingoperating costs, we use cash to invest in our business, repay debt, and meetour contractual obligations and commercial commitments. Below is a discussionof our sources and uses of cash for operating activities, investing activities,and financing activities.

 

***Operating Activities***

 

For the nine months endedSeptember 30, 2010, our operating activities provided $9.2 million ofcash, compared with $33.1 million used by operations in the same period in2009. Compared with the nine months ended September 30, 2009, the increasein cash provided by operations relates primarily to the following:

 

·                  *Anincrease in income in our Building Materials Distribution and Wood Productssegments. *As discussedunder “Operating Results” above, the improved financial results for the ninemonths ended September 30, 2010, were driven primarily by higher product prices.Also contributing to the improved results for the nine months endedSeptember 30, 2010, were $4.6 million of proceeds from a litigationsettlement related to vendor product pricing and favorable per-unit conversioncosts in our Wood Products segment.

 

·                  *Fewercash contributions to our pension plans.*  During the nine months endedSeptember 30, 2010, we used $3.8 million of cash to make pensioncontributions, compared with $28.1 million during the nine months endedSeptember 30, 2009.

 

·                  *Theincrease in cash**provided from operations for the items discussed above was partiallyoffset by $9.4 million of cash used for working capital items during thenine months ended September 30, 2010, compared with $29.1 million ofcash generated by the reduction of working capital in the same period a yearago.*Working capital is subject to cyclical operating needs, thetiming of the collection of receivables, the payment of payables and expenses,and to a lesser extent, seasonal fluctuations in our operations. The increasein working capital during the nine months ended September 30, 2010, wasattributable primarily to higher receivables and, to a lesser extent, higherinventories, partially offset by an increase in accounts payable and accruedliabilities. The increase in receivables in our Building Materials Distributionand Wood Products segments primarily reflects increased sales of approximately36% and 49%, respectively, comparing sales for the month of September 2010with sales for the month of December 2009. Inventories increased primarilydue to added or expanded locations in our Building Materials Distributionsegment and an increase in log and EWP inventories in our Wood Productssegment. The increases in accounts payable and accrued liabilities in 2010reflect seasonal trends and an increase in compensation and benefit accruals.The decrease in working capital during the nine months ended September 30,2009, was primarily attributable to a decrease in inventory in our WoodProducts segment, which primarily reflected reduced inventory as part of oureffort to respond to the weakened demand environment in the housing market, andseasonally higher accounts payable and accrued liabilities in our BuildingMaterials Distribution segment. These positive working capital changes werepartially offset by higher receivables in our Building Materials Distributionand Wood Products segments, which primarily reflect increased sales ofapproximately 45% and 41%, comparing sales for the month of September 2009with sales for the month of December 2008.

 

***Investment Activities***

 

Duringthe nine months ended September 30, 2010, we received $86.1 millionof net proceeds from the sale of 18.3 million Boise Inc. shares. Weused approximately $22.4 million of cash for purchases of property, plant,and equipment, which included $7.5 million of expenditures for a new 

 

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veneer dryer (dryer eight) at our facility inMedford, Oregon. We expect the dryer to reduce our costs through higherproductivity and reduced seasonal purchases of dry veneer. We expect capitalexpenditures in 2010 to total approximately $35 million to$40 million, excluding acquisitions. This level of capital expenditurescould increase or decrease as a result of a number of factors, including ourfinancial results, future economic conditions, and timing of equipmentpurchases. Our capital spending in 2010 has been and will be for expansion,business improvement and quality/efficiency projects, replacement projects, andongoing environmental compliance.

 

During the nine months endedSeptember 30, 2009, we used approximately $12.9 million of cash forpurchases of property, plant, and equipment, which included expenditures fordryer seven in Medford, Oregon, as well as costs related to other replacementprojects and ongoing environmental compliance. In addition, we spent$4.6 million for the acquisition of businesses and facilities during thefirst nine months of 2009. We purchased a sawmill in Pilot Rock, Oregon, and atruss assembly operation and EWP sales office in Saco and Biddeford, Maine,respectively. We received $3.0 million of net proceeds from the sale of1.2 million Boise Inc. shares, of which we contributed substantiallyall of the cash proceeds from the sale of the shares to our pension plans.

 

***Financing Activities***

 

The following provides asummary of our financing activities during the nine months endedSeptember 30, 2010 and 2009. For more information related to our debtstructure, see the discussion under “Part II, Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in our 2009 Form 10-K. Except as updated in Note 11,Debt, of the Notes to Unaudited Quarterly Consolidated Financial Statements in“Item 1. Financial Statements” of this Form 10-Q, as of the date ofthis filing, there have been no other changes to our debt structure.

 

Cash used for financingactivities was $75.0 million for the nine months ended September 30,2010, compared with $16.4 million during the same period in 2009.

 

*2010*

 

On April 1, 2010, weborrowed $45.0 million under our asset-based revolving credit facility(Revolving Credit Facility), bringing the total amount outstanding to$120.0 million. On April 30, 2010, we repaid the $120.0 million,and we permanently reduced the lending commitments by a like amount, bringingthe total commitments under the Revolving Credit Facility to $170.0 million.We anticipate that this repayment, in combination with our recent and expectedcapital spending, will fulfill our obligation under the Indenture with respectto net available cash received in connection with the Boise Inc. stocksales.

 

*2009*

 

During the nine months endedSeptember 30, 2009, we repurchased $11.9 million of seniorsubordinated notes for $5.6 million, plus accrued interest. In addition,we repaid, and subsequently reborrowed, $60.0 million of outstandingborrowings under the Revolving Credit Facility. In connection with the$60.0 million payment on the Revolving Credit Facility, we amended theRevolving Credit Facility to permanently reduce the lending commitments by$60.0 million, bringing the total commitments from $350 million to$290 million. This debt reduction, in combination with capital spending,fulfilled our obligations under the senior subordinated notes indenture withrespect to net available cash received in connection with the June 2008sale of the note receivable from Boise Inc. and the July 2008 sale ofour Brazilian subsidiary.

 

Duringthe nine months ended September 30, 2009, we also made $10.7 millionof tax distributions to equity holders, most of which related to the taxablegain on the sale of our Paper and Packaging & Newsprint assets.

 

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***Contractual Obligations***

 

For information oncontractual obligations, see Contractual Obligations in “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour 2009 Form 10-K. During the nine months ended September 30, 2010, there were nomaterial changes to our contractual obligations outside the normal course ofbusiness, except as disclosed in Note 11, Debt, of the Notes to UnauditedQuarterly Consolidated Financial Statements in “Item 1. FinancialStatements” of this Form 10-Q. During the nine months endedSeptember 30, 2010, we repaid the $75.0 million Revolving Credit Facilitybalance that was outstanding at December 31, 2009.

 

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

 

AtSeptember 30, 2010, and December 31, 2009, we had no materialoff-balance-sheet arrangements with unconsolidated entities.

 

***Guarantees***

 

Note 16, Commitments and Guarantees, andNote 19, Consolidating Guarantor and Nonguarantor Financial Information,of the Notes to Consolidated Financial Statements in “Item 8. FinancialStatements and Supplementary Data” in our 2009 Form 10-K describe thenature of our guarantees, including the approximate terms of the guarantees,how the guarantees arose, the events or circumstances that would require us toperform under the guarantees, and the maximum potential undiscounted amounts offuture payments we could be required to make. As of September 30, 2010,there have been no material changes to the guarantees disclosed in our 2009Form 10-K.

 

***Seasonal and Inflationary Influences***

 

We are exposed tofluctuations in quarterly sales volumes and expenses due to seasonal factors.These seasonal factors are common in the building products industry. Seasonalchanges in levels of building activity affect our building products businesses,which are dependent on housing starts, repair-and-remodel activities, and lightcommercial construction activities. We typically report lower sales in thefirst and fourth quarters due to the impact of poor weather on the constructionmarket, and we generally have higher sales in the second and third quarters,reflecting an increase in construction due to more favorable weatherconditions. We typically have higher working capital in the second and thirdquarters due to the summer building season. Seasonally cold weather increasescosts, especially energy consumption, at most of our manufacturing facilities.

 

Our major costs ofproduction are labor, wood fiber, energy, and chemicals. Energy costs,particularly for electricity, natural gas, and fuel oil, have been volatile inrecent years.

 

***Employees***

 

As of September 30, 2010, we had approximately4,200 employees. Approximately 34% of these employees work pursuant to12 collective bargaining agreements. We have no agreements up for renewalduring the remainder of 2010. We do not expect materialwork interruptions 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.

 

***Environmental***

 

Forinformation on environmental issues, see Environmental in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in our 2009 Form 10-K.

 

***Critical Accounting Estimates***

 

Critical accounting estimates are those that are mostimportant to the portrayal of our financial condition and results. Theseestimates require management’s most difficult, subjective, or complexjudgments, often as a result of the need to estimate matters that areinherently uncertain. We review the 

 

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development, selection, and disclosure of our criticalaccounting estimates with the Audit Committee of our board of directors. Forinformation about critical accounting estimates, see Critical AccountingEstimates in “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations” in our 2009 Form 10-K. As ofSeptember 30, 2010, there have been no changes to our critical accountingestimates disclosed in our 2009 Form 10-K, except that in first quarter2010, we sold our remaining investment in Boise Inc., and we are no longerrequired to evaluate the investment for other-than-temporary impairment.

 

***New and RecentlyAdopted Accounting Standards***

 

Forinformation related to new and recently adopted accounting standards, seeNote 13, New and Recently Adopted Accounting Standards, of the Notes toUnaudited Quarterly Consolidated Financial Statements in “Item 1.Financial Statements” in this Form 10-Q.

 

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

 

Forinformation relating to quantitative and qualitative disclosures about marketrisk, see the discussion under “Part II, Item 7A. Quantitativeand Qualitative Disclosures About Market Risk” under the heading “Disclosuresof Financial Market Risks” in “Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations” in our 2009 Form 10-K.Except as updated in Note 12, Financial Instrument Risk, of the Notes toUnaudited Quarterly Financial Statements in “Item 1. Financial Statements” of thisForm 10-Q, as of September 30, 2010, there have been nomaterial changes in our exposure to market risk from those disclosed in our2009 Form 10-K.

 

***ITEM 4.          CONTROLS AND PROCEDURES***

 

Attached as exhibits to this Form 10-Qare certifications of our chief executive officer and chief financial officer.Rule 13a-14 of the Securities Exchange Act of 1934, as amended, requiresthat we include these certifications with this report. This Controls andProcedures section includes information concerning the disclosure controls andprocedures referred to in the certifications. You should read this section inconjunction with the certifications.

 

*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 ourdisclosure controls and procedures on at least a quarterly basis. A number ofkey components in our internal control system assist us in these evaluations.Since the company’s inception, we have had a disclosure committee. Thecommittee meets regularly and includes input from our senior management,general counsel, internal audit staff, and independent accountants. Thiscommittee is charged with considering and evaluating the materiality ofinformation and reviewing the company’s disclosure obligations on a timelybasis. Our internal audit department also evaluates components of our internalcontrols on an ongoing basis. To assist in its evaluations, the internal auditstaff identifies, documents, and tests our controls and procedures. Our intentis to maintain disclosure controls and procedures as dynamic processes thatchange as our business and working environments change.

 

Under an Outsourcing Services Agreement, Boise Inc. provides a number ofcorporate staff services to us at cost. These services include informationtechnology, accounting, and human resource services. Our management, with the participation of our CEO and CFO, hasevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures, including the effectiveness of the services providedto us under the Outsourcing Services Agreement, as of the end of the quartercovered 

 

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by thisForm 10-Q. Based on that evaluation, the CEO and CFO have concluded that,as of such date, our disclosure controls and procedures were effective inmeeting the objectives for which they were designed and were operating at areasonable assurance level.

 

*Limitations on the Effectiveness of Controls andProcedures*

 

In designing and evaluating our disclosurecontrols and procedures, we recognized that disclosure controls and procedures,no matter how well conceived and well operated, can provide only reasonable,not absolute, assurance that the objectives of the disclosure controls andprocedures are met. Additionally, in designing disclosure controls andprocedures, our management necessarily was required to apply its judgment inevaluating the cost-benefit relationship of possible disclosure controls andprocedures. We have also designed our disclosure controls and procedures basedin part upon assumptions about the likelihood of future events, and there canbe no assurance that any design will succeed in achieving its stated goals underall potential future conditions.

 

*Changes in Internal Control Over FinancialReporting*

 

There have been no changesin our internal control over financial reporting that occurred during the threemonths ended September 30, 2010, that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

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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.

 

We received$4.6 million from a litigation settlement related to vendor productpricing. During the three and nine months ended September 30, 2010, werecorded $4.6 million of income related to the settlement in “Other(income) expense, net.”

 

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

 

Thisreport on Form 10-Q contains forward-looking statements. Statements thatare not historical or current facts, including statements about ourexpectations, anticipated financial results, projected capital expenditures,and future business prospects, are forward-looking statements. You can identifythese statements by our use of words such as “may,” “will,” “expect,”“believe,” “should,” “plan,” “anticipate,” and other similar expressions. Youcan find examples of these statements throughout this report, including “Item2. Management’s Discussion and Analysis of Financial Condition and Results ofOperations.” We cannot guarantee that our actual results will be consistentwith the forward-looking statements we make in this report. You should reviewcarefully the risk factors listed in “Item 1A. Risk Factors” in our 2009Form 10-K, as well as those factors listed in other documents we file withthe Securities and Exchange Commission (SEC). There have been no materialchanges to our risk factors during the nine months ended September 30,2010, from those listed in our 2009 Form 10-K. We do not assume anobligation to update any forward-looking statement.

 

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

 

None.

 

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

 

None.

 

***ITEM 4.          (REMOVED AND RESERVED)***

 

***ITEM 5.          OTHER INFORMATION***

 

OnNovember 2, 2010, we and our Vice President, General Counsel andSecretary, David G. Gadda, agreed that effective January 1, 2011,Mr. Gadda will relinquish his responsibilities as General Counsel andSecretary. Mr. Gadda will retain the position of Vice President, Legal.Mr. Gadda’s responsibilities as General Counsel and Secretary will beassumed on that date by our Vice President, Human Resources and Communications,John T. Sahlberg. Mr. Gadda will reduce his work schedule toapproximately half time at such date, with his current salary of $300,000 peryear to be adjusted proportionately to the actual time worked. Mr. Gaddawill continue to participate in the company’s incentive compensation and othercompensation and benefit plans and perquisites without change in the applicableterms of those plans and perquisites.

 

***ITEM 6.          EXHIBITS***

 

Requiredexhibits are listed in the Index to Exhibits and are incorporated by reference.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

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

 

Date:  November 4, 2010

 

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

 

**INDEX TOEXHIBITS**

 

Filed With the Quarterly Report on Form 10-Q for the Quarter EndedSeptember 30, 2010

 
| **Number** | ** ** | **Description**                                                                   |
|------------|------------|-----------------------------------------------------------------------------------|
|       |       |                                                                              |
| 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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