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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 June 30, 2010**

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

 

**For thetransition period from ___________ to ___________**

 

**CommissionFile Number:  333-122770**

 

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

(Exact name 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 past90 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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**Table of 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 | 11 |
|                                        |   | 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 | 38 |
|                                        |   | Off-Balance-Sheet  Activities | 38 |
|                                        |   | Guarantees | 38 |
|                                        |   | Seasonal  and Inflationary Influences | 38 |
|                                        |   | Employees | 39 |
|                                        |   | Environmental | 39 |
|                                        |   | Critical  Accounting Estimates | 39 |
|                                        |   | New and  Recently Adopted Accounting Standards | 39 |
|                                        |   |   |   |   |
| Item 3.                                | Quantitative  and Qualitative Disclosures About Market Risk | 39 |
|                                        |   |   |
| 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 I—FINANCIAL INFORMATION**

 

***ITEM 1.          FINANCIAL STATEMENTS***

 

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

**Consolidated Statements of Income(Loss)**

(unaudited)

** **
| ** **                                                           | ** ** | **Three Months Ended  June 30** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                           | ** ** | **2010**                             | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                      | ** ** |
| **Sales**                                                            |       |                                 |       |   |   |
| Trade                                                                |       | $                                    | 646,320    |   | $ | 512,247 |   |
| Related parties                                                      |       | 5,168                                |       | 8,933 |   |
|                                                                 |       | 651,488                              |       | 521,180 |   |
|                                                                 |       |                                 |       |   |   |
| **Costs and expenses**                                               | ** ** | ** **                           | ** ** |   | ** ** |
| Materials, labor, and other operating expenses                       |       | 557,849                              |       | 463,699 |   |
| Materials, labor, and other operating expenses  from related parties |       | 10,550                               |       | 6,332 |   |
| Depreciation and amortization                                        |       | 8,595                                |       | 11,448 |   |
| Selling and  distribution expenses                                   |       | 52,630                               |       | 47,771 |   |
| General and administrative expenses                                  |       | 11,205                               |       | 6,863 |   |
| General and administrative expenses from related  party              |       | —                               |       | 2,503 |   |
| Other (income) expense, net                                          |       | 60                                   |       | (1,751 | ) |
|                                                                 |       | 640,889                              |       | 536,865 |   |
|                                                                 |       |                                 |       |   |   |
| **Income (loss) from operations**                                    |       | 10,599                               |       | (15,685 | ) |
|                                                                 |       |                                 |       |   |   |
| Equity in net income of affiliate                                    |       | —                               |       | 30,306 |   |
| Foreign exchange gain (loss)                                         |       | (355                                 | )          | 715 |   |
| Interest expense                                                     |       | (6,021                               | )          | (6,135 | ) |
| Interest income                                                      |       | 199                                  |       | 178 |   |
|                                                                 |       | (6,177                               | )          | 25,064 |   |
|                                                                 |       |                                 |       |   |   |
| **Income before income taxes**                                       |       | 4,422                                |       | 9,379 |   |
| Income tax provision                                                 |       | (90                                  | )          | (68 | ) |
| **Net income**                                                       | ** ** | **$**                                | **4,332**  | ** ** | **$** | **9,311** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

(unaudited)

** **
| ** **                                                           | ** ** | **Six Months Ended  June 30** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                           | ** ** | **2010**                           | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                    | ** ** |
| **Sales**                                                            |       |                               |       |   |   |
| Trade                                                                |       | $                                  | 1,123,742  |   | $ | 919,971 |   |
| Related parties                                                      |       | 14,999                             |       | 14,636 |   |
|                                                                 |       | 1,138,741                          |       | 934,607 |   |
|                                                                 |       |                               |       |   |   |
| **Costs and expenses**                                               | ** ** | ** **                         | ** ** |   | ** ** |
| Materials, labor, and other operating expenses                       |       | 983,750                            |       | 844,770 |   |
| Materials, labor, and other operating expenses  from related parties |       | 16,772                             |       | 18,622 |   |
| Depreciation and amortization                                        |       | 17,185                             |       | 22,567 |   |
| Selling and  distribution expenses                                   |       | 100,795                            |       | 93,012 |   |
| General and administrative expenses                                  |       | 18,663                             |       | 13,788 |   |
| General and administrative expenses from related  party              |       | 1,576                              |       | 4,936 |   |
| Other (income) expense, net                                          |       | (20                                | )          | 930 |   |
|                                                                 |       | 1,138,721                          |       | 998,625 |   |
|                                                                 |       |                               |       |   |   |
| **Income (loss) from operations**                                    |       | 20                                 |       | (64,018 | ) |
|                                                                 |       |                               |       |   |   |
| Equity in net income of affiliate                                    |       | 1,889                              |       | 33,311 |   |
| Gain on sale of shares of equity affiliate                           |       | 25,308                             |       | — |   |
| Impairment of investment in equity affiliate                         |       | —                             |       | (43,039 | ) |
| Foreign exchange gain (loss)                                         |       | (208                               | )          | 383 |   |
| Change in fair value of contingent value rights                      |       | —                             |       | 194 |   |
| Gain on repurchase of long-term debt                                 |       | —                             |       | 6,026 |   |
| Interest expense                                                     |       | (11,541                            | )          | (11,751 | ) |
| Interest income                                                      |       | 393                                |       | 575 |   |
|                                                                 |       | 15,841                             |       | (14,301 | ) |
|                                                                 |       |                               |       |   |   |
| **Income (loss) before income  taxes**                               |       | 15,861                             |       | (78,319 | ) |
| Income tax provision                                                 |       | (135                               | )          | (551 | ) |
| **Net income (loss)**                                                | ** ** | **$**                              | **15,726** | ** ** | **$** | **(78,870** | **)** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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** **

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

**Consolidated Balance Sheets**

(unaudited)

 
| ** **                                       | ** ** | **June 30,** | ** **  | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                       | ** ** | **2010**          | ** **  | **2009**              | ** ** |
| ** **                                       | ** ** | **(thousands)**   | ** **  |
| **ASSETS**                                       |       |              |        |                  |       |
|                                             |       |              |        |                  |       |
| **Current**                                      |       |              |        |                  |       |
| Cash and cash equivalents                        |       | $                 | 264,548     |                  | $          | 287,101 |   |
| Receivables                                      |       |              |        |                  |       |
| Trade, less allowances of $2,103 and $1,584 |       | 156,554           |        | 95,398                |       |
| Related parties                                  |       | 936               |        | 2,604                 |       |
| Other                                            |       | 3,050             |        | 3,495                 |       |
| Inventories                                      |       | 253,948           |        | 232,774               |       |
| Prepaid expenses and other                       |       | 5,664             |        | 1,870                 |       |
|                                             |       | 684,700           |        | 623,242               |       |
|                                             |       |              |        |                  |       |
| **Property**                                     |       |              |        |                  |       |
| Property and equipment, net                      |       | 263,191           |        | 270,229               |       |
| Timber deposits                                  |       | 11,339            |        | 9,264                 |       |
|                                             |       | 274,530           |        | 279,493               |       |
|                                             |       |              |        |                  |       |
| **Investment in equity affiliate**               |       | —            |        | 62,967                |       |
| **Deferred financing costs**                     |       | 4,256             |        | 5,734                 |       |
| **Goodwill**                                     |       | 12,170            |        | 12,170                |       |
| **Intangible assets, net**                       |       | 8,912             |        | 8,919                 |       |
| **Other assets**                                 |       | 7,468             |        | 8,359                 |       |
| **Total assets**                                 | ** ** | **$**             | **992,036** | ** **            | **$**      | **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)

 
| ** **                                                                                                           | ** ** | **June 30,**                        | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|-------------|-----------------------|------------|
| ** **                                                                                                           | ** ** | **2010**                                 | ** **  | **2009**              | ** ** |
| ** **                                                                                                           | ** ** | **(thousands, except for equity units)** | ** **  |
| **LIABILITIES AND CAPITAL**                                                                                          |       |                                     |        |                  |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Current**                                                                                                          |       |                                     |        |                  |       |
| Accounts payable                                                                                                     |       |                                     |        |                  |       |
| Trade                                                                                                                |       | $                                        | 128,771     |                  | $          | 89,253 |   |
| Related parties                                                                                                      |       | 2,629                                    |        | 2,449                 |       |
| Accrued liabilities                                                                                                  |       |                                     |        |                  |       |
| Compensation and benefits                                                                                            |       | 36,069                                   |        | 27,887                |       |
| Interest payable                                                                                                     |       | 3,503                                    |        | 3,644                 |       |
| Other                                                                                                                |       | 20,867                                   |        | 16,695                |       |
|                                                                                                                 |       | 191,839                                  |        | 139,928               |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Debt**                                                                                                             |       |                                     |        |                  |       |
| Long-term debt                                                                                                       |       | 228,146                                  |        | 303,146               |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Other**                                                                                                            |       |                                     |        |                  |       |
| Compensation and benefits                                                                                            |       | 115,095                                  |        | 113,290               |       |
| Other long-term liabilities                                                                                          |       | 13,806                                   |        | 14,301                |       |
|                                                                                                                 |       | 128,901                                  |        | 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                                                 |       | 6,071                                    |        | 5,202                 |       |
|                                                                                                                 |       | 8,836                                    |        | 7,967                 |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Commitments and contingent  liabilities**                                                                          |       |                                     |        |                  |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Capital**                                                                                                          |       |                                     |        |                  |       |
| Series A equity units — no par value;  66,000,000 units authorized and outstanding                    |       | 92,435                                   |        | 88,908                |       |
| Series B equity units — no par value;  550,000,000 units authorized; 532,558,673 units outstanding    |       | 341,879                                  |        | 333,344               |       |
| Series C equity units — no par value;  44,000,000 units authorized; 11,951,751 units outstanding |       | —                                   |        | —                |       |
| **Total capital**                                                                                                    |       | 434,314                                  |        | 422,252               |       |
|                                                                                                                 |       |                                     |        |                  |       |
| **Total liabilities and capital**                                                                                    | ** ** | **$**                                    | **992,036** | ** **            | **$**      | **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)

** **
| ** **                                                           | ** ** | **Six Months Ended  June 30** | ** **  |
|----------------------------------------------------------------------|------------|------------------------------------|-------------|
| ** **                                                           | ** ** | **2010**                           | ** **  | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                    | ** **  |
| **Cash provided by (used for)  operations**                          |       |                               |        |   |   |
| Net income (loss)                                                    |       | $                                  | 15,726      |   | $ | (78,870 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                               |        |   |   |
| Equity in net income of affiliate                                    |       | (1,889                             | )           | (33,311 | ) |
| Gain on sale of shares of equity affiliate                           |       | (25,308                            | )           | — |   |
| Impairment of investment in equity affiliate                         |       | —                             |        | 43,039 |   |
| Depreciation and amortization of deferred  financing costs and other |       | 19,063                             |        | 23,836 |   |
| Pension expense                                                      |       | 3,865                              |        | 7,461 |   |
| Management equity units expense                                      |       | 869                                |        | 1,496 |   |
| Gain on repurchase of long-term debt                                 |       | —                             |        | (6,026 | ) |
| Facility closure and curtailment costs                               |       | —                             |        | 1,968 |   |
| Other                                                                |       | 196                                |        | (1,014 | ) |
| Decrease (increase) in working capital, net of  acquisitions         |       |                               |        |   |   |
| Receivables                                                          |       | (58,511                            | )           | (52,812 | ) |
| Inventories                                                          |       | (21,174                            | )           | 39,903 |   |
| Prepaid expenses and other                                           |       | (2,098                             | )           | (3,281 | ) |
| Accounts payable and accrued liabilities                             |       | 48,161                             |        | 41,366 |   |
| Pension contributions                                                |       | (3,070                             | )           | (25,064 | ) |
| Other                                                                |       | 1,899                              |        | (2,618 | ) |
| Cash used for  operations                                            |       | (22,271                            | )           | (43,927 | ) |
|                                                                 |       |                               |        |   |   |
| **Cash provided by (used for)  investment**                          |       |                               |        |   |   |
| Proceeds from sale of shares of equity affiliate,  net               |       | 86,123                             |        | — |   |
| Expenditures for property and equipment                              |       | (9,997                             | )           | (8,102 | ) |
| Acquisitions of businesses and facilities                            |       | —                             |        | (4,598 | ) |
| Other                                                                |       | (1,408                             | )           | 1,778 |   |
| Cash provided by (used for) investment                               |       | 74,718                             |        | (10,922 | ) |
|                                                                 |       |                               |        |   |   |
| **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                                         |       | —                             |        | (10,719 | ) |
| Repurchase of management equity units                                |       | —                             |        | (18 | ) |
| Cash used for financing                                              |       | (75,000                            | )           | (16,364 | ) |
|                                                                 |       |                               |        |   |   |
| **Decrease in cash and cash  equivalents**                           |       | (22,553                            | )           | (71,213 | ) |
|                                                                 |       |                               |        |   |   |
| **Balance at beginning of the  period**                              |       | 287,101                            |        | 275,803 |   |
|                                                                 |       |                               |        |   |   |
| **Balance at end of the period**                                     | ** ** | **$**                              | **264,548** | ** ** | **$** | **204,590** | ** ** |

 

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)                                                   |       | —                                |       | —                                |       | —                                |        | 15,726     |       | — |   | — |   | 15,726 |   |
| Other comprehensive income (loss), net of  tax (a) (b) |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Unfunded accumulated benefit obligation                          |       | —                                |       | —                                |       | —                                |        | 383        |       | — |   | — |   | 383 |   |
| Equity in other comprehensive loss of equity affiliate           |       | —                                |       | —                                |       | —                                |        | (4,041     | )          | — |   | — |   | (4,041 | ) |
| Paid-in-kind dividend                                            |       | —                                |       | 3,527                                 |       | —                                |        | (3,527     | )          | — |   | — |   | — |   |
| Other                                                            |       | —                                |       | —                                |       | —                                |        | (6         | )          | — |   | — |   | (6 | ) |
| **Balance at June 30, 2010** (c)                            | ** ** | **66,000**                            | ** ** | **$**                                 | **92,435** | ** **                            | **532,559** | ** ** | **$**      | **341,879** | ** ** | **11,952** | ** ** | **$** | **—** | ** ** | **$** | **434,314** | ** ** |

 

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(a)                                  Totalcomprehensive income (loss) for the three and six months ended June 30,2010, was $4.5 million and $12.1 million, compared with$9.6 million and $(4.3) million for the three and six months endedJune 30, 2009.

 

(b)                                 Total othercomprehensive income (loss) for the three and six months ended June 30,2010, was $0.2 million and $(3.7) million, compared with$0.3 million and $74.6 million for the three and six months endedJune 30, 2009.

 

(c)                                  Accumulatedother comprehensive loss at June 30, 2010, and December 31, 2009, was$36.5 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.             Nature of 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 andsix months ended June 30, 2010 and 2009, involved estimates andassumptions about future events. These estimates and the underlying assumptionsaffect the amounts of assets and liabilities reported, disclosures aboutcontingent assets and liabilities, and reported amounts of revenues andexpenses. Such estimates include the valuation of accounts receivable, inventories,goodwill, intangible assets, and other long-lived assets; legal contingencies;guarantee obligations; indemnifications; assumptions used in retirement andother postemployment benefits; and customer incentives, among others. Theseestimates and assumptions are based on management’s best estimates andjudgment. Management evaluates its estimates and assumptions on an ongoingbasis using historical experience and other factors, including the currenteconomic environment, which management believes to be reasonable under thecircumstances. We adjust such estimates and assumptions when facts andcircumstances dictate. As future events and their effects cannot be determinedwith precision, actual results could differ significantly from these estimates.Changes in these estimates resulting from continuing changes in the economicenvironment will be reflected in the consolidated financial statements infuture periods. Quarterly results are not necessarily indicative ofresults that may be expected for the full year. These notes to unauditedconsolidated financial statements should be read in conjunction with our 2009 Form 10-Kand the other reports we file with the Securities 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 June 30, 2009, we recorded $30.3 million ofincome related to our investment in Boise Inc. in our ConsolidatedStatements of Income (Loss), compared with $27.2 million of income and$9.7 million of net expense during the six months ended June 30, 2010and 2009, as follows:

 
| ** **                                             | ** ** | **Three Months  Ended June 30** | ** ** | **Six Months  Ended June 30** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                             | ** ** | **2009**                             | ** ** | **2010**                           | ** ** | **2009** | ** ** |
| ** **                                             | ** ** | **(thousands)**                      | ** ** |
|                                                   |       |                                 |       |                               |       |   |   |
| Equity in net income of Boise Inc.                |       | $                                    | 24,256     |                               | $          | 73 |   | $ | 23,304 |   |
| Amortization of basis differential                     |       | 6,050                                |       | 1,816                              |       | 11,032 |   |
| Loss on shares issued for settlement of CVR  liability |       | —                               |       | —                             |       | (1,025 | ) |
| Equity in net income of affiliate                      |       | 30,306                               |       | 1,889                              |       | 33,311 |   |
| Gain on sale of shares of equity affiliate (a)         |       | —                               |       | 25,308                             |       | — |   |
| Impairment of investment in equity affiliate (b)       |       | —                               |       | —                             |       | (43,039 | ) |
| Total                                                  | ** ** | **$**                                | **30,306** | ** **                         | **$**      | **27,197** | ** ** | **$** | **(9,728** | **)** |

 

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(a)                             In first quarter 2010, wesold 18.3 million Boise Inc. shares for net proceeds of$86.1 million, and we recorded a $25.3 million gain on the sale ofthe shares in our Consolidated Statement of Income (Loss) for the six monthsended June 30, 2010. We reduced our investment in Boise Inc. and ouraccumulated other comprehensive income related to our investment in 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 sixmonths ended June 30, 2009, we recorded a $43.0 million charge in “Impairmentof investment in equity affiliate” in our Consolidated Statement of Income(Loss).

 

***3.             Transactions With 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 our ConsolidatedFinancial Statements.

 

*Sales*

 

The $5.2 million and$15.0 million of related-party sales recorded in our ConsolidatedStatements of Income (Loss) for the three and six months ended June 30,2010, and the $8.9 million and $14.6 million of related-party salesduring the three and six months ended June 30, 2009, represent chip andpulpwood sales to Boise Inc. (for the period they were a related party) and LTPfrom our Wood Products segment. The sales were made at prices designed toapproximate market. LTP is an unconsolidated variable-interest entity that is50% owned by Boise Cascade, L.L.C., and 50% owned by Boise Inc.LTP procures saw timber, pulpwood, residual chips, and other residual woodfiber to meet the wood and fiber requirements of Boise Inc. and BoiseCascade, L.L.C. We are not the primary beneficiary of LTP, as we do not havepower to direct the activities that most significantly impact the economicperformance of LTP. Accordingly, we do not consolidate LTP’s results in ourfinancial statements.

 

*Costsand Expenses*

 

During the threeand six months ended June 30, 2010, we recorded related-party fiberpurchases of $10.6 million and $16.2 million from LTP, compared with$5.2 million and $16.4 million during the three and six months endedJune 30, 2009. We also recorded $0.3 million, $0.7 million, and$1.3 million of related-party expenses for transportation servicespurchased from Boise Inc. during the six months ended June 30, 2010,and the three and six months ended June 30, 2009. We purchased the fiberand transportation services at prices that approximated market prices. Thesecosts are recorded in “Materials, labor, and other operating expenses fromrelated parties” in our Consolidated Statements of Income (Loss).

 

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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 agreement automaticallyrenews for successive one-year terms unless either party provides notice oftermination to the other party at least 12 months in advance of theexpiration 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 six months ended June 30, 2010,total expenses incurred under the Outsourcing Services Agreement, includingboth related party and nonrelated party, were $3.6 million and$7.1 million, respectively.

 

During the six months endedJune 30, 2010, and the three and six months ended June 30, 2009, werecorded the following expenses from the Outsourcing Services Agreement asrelated-party expenses in our Consolidated Statements of Income (Loss). Asmentioned above, after we sold our remaining investment in Boise Inc. in March 2010,expenses incurred under the Outsourcing Services Agreement were no longerrelated party and, therefore, are not included in the table below.

 
| ** **                                                           | ** ** | **Three Months  Ended June 30** | ** ** | **Six Months  Ended June 30** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                           | ** ** | **2009**                             | ** ** | **2010**                           | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                      | ** ** |
|                                                                 |       |                                 |       |                               |       |   |   |
| Materials, labor, and other operating expenses  from related parties |       | $                                    | 463        |                               | $          | 332 |   | $ | 953 |   |
| Selling and distribution expenses                                    |       | 656                                  |       | 456                                |       | 1,349 |   |
| General and administrative expenses from related  party              |       | 2,503                                |       | 1,576                              |       | 4,936 |   |
|                                                                 | ** ** | **$**                                | **3,622**  | ** **                         | **$**      | **2,364** | ** ** | **$** | **7,238** | ** ** |

 

*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 cashdistributions to permit the members of BC Holdings and affiliates to payincome taxes. During the six months ended June 30, 2010, we made no cashtax distributions. During the six months ended June 30, 2009, we made$10.7 million of cash tax distributions, which primarily related to thenet taxable gain on the sale of our Paper and Packaging & Newsprintassets. During the six months ended June 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 six months endedJune 30, 2009, we paid $2.6 million to OfficeMax to fund their taxobligations related to their investments in us.

 

***4.             Vendorand Customer Rebates and Allowances***

 

We receive rebates andallowances from our vendors under a number of different programs, includingvendor marketing programs. At June 30, 2010, and December 31, 2009,we had $1.4 million and $1.9 million, respectively, of vendor rebatesand allowances recorded in “Receivables, Other” on our Consolidated BalanceSheets. Rebates and allowances received from our vendors are recognized as areduction of “Materials, labor, and other operating expenses” when the productis sold, unless the rebates and allowances are linked to a specific incrementalcost to sell a vendor’s product. Amounts received from vendors that are linkedto specific selling and distribution expenses are recognized as a reduction of “Sellingand distribution expenses” in the period the expense is incurred.

 

We also provide rebates toour customers based on the volume of their purchases. We provide the rebates toincrease the sell-through of our products. The rebates are recorded as adecrease in “Sales, Trade.” At June 30, 2010, and December 31, 2009,we had $13.0 million and $9.9 million, respectively, of rebatespayable to our customers recorded in “Accrued liabilities, Other” on ourConsolidated Balance Sheets.

 

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***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  June 30** | ** ** | **Six Months Ended  June 30** | ** ** |
|----------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                             | ** ** | **2010**                             | ** ** | **2009**                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                             | ** ** | **(thousands)**                      | ** ** |
|                                   |       |                                 |       |                               |       |   |   |   |   |
| Facility closures and curtailments (a) |       | $                                    | —     |                               | $          | (932 | ) | $ | — |   | $ | 3,745 |   |
| Changes in pension plans (b)           |       | —                               |       | —                             |       | — |   | (747 | ) |
| Other, net                             |       | 60                                   |       | (819                               | )          | (20 | ) | (2,068 | ) |
| ** **                             | ** ** | **$**                                | **60**     | ** **                         | **$**      | **(1,751** | **)** | **$** | **(20** | **)** | **$** | **930** | ** ** |

 

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(a)                                 In the first half of 2009,we closed the lumber manufacturing facility in La Grande, Oregon, andduring the three and six months ended June 30, 2009, we recorded$0.9 million of income and $3.4 million of expense in “Other (income)expense, net.” In addition, we recorded $2.6 million and $5.2 millionof accelerated depreciation in “Depreciation and amortization” for the threeand six months ended June 30, 2009, and $0.6 million of expenses in “Materials,labor, and other operating expenses” during the six months ended June 30,2009, in our Consolidated Statements of Income (Loss).

 

(b)                                 In March 2009, weamended our defined benefit pension plan for salaried employees andnonqualified salaried plans so that no future benefits would accrue in theplans after December 31, 2009. We recognized a net $0.7 millionnoncash curtailment gain, primarily related to our nonqualified salariedpension plans. For more information, see Note 12, Retirement and BenefitPlans, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” of our 2009 Form 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 $3.2 million for the three months endedJune 30, 2010 and 2009, and $7.1 million and $6.5 million forthe six months ended June 30, 2010 and 2009. Sublease rental income wasnot material in any of the periods presented.

 

For noncancelable operating leases with remaining terms of more thanone year, the minimum lease payment requirements are $6.2 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.             Income Taxes***

 

*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 June 30, 2010and 2009, income tax expense was $0.1 million. Income tax expense was $0.1 millionand $0.6 million for the six months ended June 30, 2010 and 2009.

 

Excluding tax distributions to our equity holders (seeNote 3, Transactions With Related Parties), during the three monthsended June 30, 2010 and 2009, we paid $0.2 million and $0.6 millionof tax, net of income taxes refunded, and we paid $0.1 million and$0.6 million of income taxes, net of refunds received, during the sixmonths ended June 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 ofBC Holdings’ 2005 and 2006 tax years and issued a proposed adjustment. Weappealed the adjustment. The IRS agreed with our position, and no adjustmentresulted 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 benefitby $5.8 million as a result of uncertainty surrounding this audit. Wecharged the $5.8 million of unrecognized tax liabilities to income taxexpense, with an offsetting adjustment to the valuation allowances on deferredtax assets related to Boise AllJoist’s net operating losses. As a result, thenet impact of recording the unrecognized tax benefit in our 2009 ConsolidatedStatement of Income (Loss) was zero. The audit was closed with no additionalchanges, and because of sufficient net operating loss carryforwards from prioryears, no cash payments were required.

 

***8.             Inventories***

 

Inventories include the following:

 
| ** **                         | ** ** | **June 30,  2010** | ** **  | **December 31,  2009** | ** ** |
|------------------------------------|------------|-------------------------|-------------|-----------------------------|------------|
| ** **                         | ** ** | **(thousands)**         | ** **  |
|                               |       |                    |        |                        |       |
| Finished goods and work in process |       | $                       | 219,984     |                        | $          | 187,215 |   |
| Logs                               |       | 17,107                  |        | 29,302                      |       |
| Other raw materials and supplies   |       | 16,857                  |        | 16,257                      |       |
| ** **                         | ** ** | **$**                   | **253,948** | ** **                  | **$**      | **232,774** | ** ** |

 

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***9.             Property and Equipment, Net***

 

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

 
| ** **                    | ** ** | **June 30,  2010** | ** **  | **December 31,  2009** | ** ** |
|-------------------------------|------------|-------------------------|-------------|-----------------------------|------------|
| ** **                    | ** ** | **(thousands)**         | ** **  |
|                          |       |                    |        |                        |       |
| Land and land improvements    |       | $                       | 36,618      |                        | $          | 36,618 |   |
| Buildings and improvements    |       | 110,542                 |        | 110,268                     |       |
| Machinery and equipment       |       | 281,136                 |        | 279,455                     |       |
| Construction in progress      |       | 10,780                  |        | 4,156                       |       |
| ** **                    |       | 439,076                 |        | 430,497                     |       |
| Less accumulated depreciation |       | (175,885                | )           | (160,268                    | )          |
|                          | ** ** | **$**                   | **263,191** | ** **                  | **$**      | **270,229** | ** ** |

 

***10.          Goodwilland Intangible Assets***

 

Goodwill represents theexcess of purchase price and related costs over the value assigned to the nettangible and intangible assets of businesses acquired. We 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 June 30, 2010, and  December 31, 2009 | ** ** | **$**                                 | **5,593**  | ** **               | **$**      | **6,577**                 | ** ** | **$**      | **—** | ** ** | **$** | **12,170** | ** ** |
|                                                            |            |                                       |            |                          |            |                           |            |            |            |  |  |  |  |

 

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

 

Intangible assets consisted of the following:

 
| ** **                 | ** ** | **June 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                                    |       | (13 | ) | 12 |   |
| ** **                 | ** ** | **$**                                 | **11,025** | ** ** | **$** | **(2,113** | **)** | **$** | **8,912** | ** ** |

 

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| ** **                 | ** ** | **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 sixmonths ended June 30, 2010. Amortization expense is not expected to besignificant for the remainder of 2010 or thereafter.

 

***11.          Debt***

 

At June 30, 2010, and December 31, 2009, our long-term debtwas as follows:

 
| ** **                                      | ** ** | **June 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 total amountoutstanding to $120.0 million. On April 30, 2010, we repaid the$120.0 million, and we permanently reduced the lending commitments by alike amount, bringing the total commitments under the Revolving Credit Facilityto $170.0 million. At June 30, 2010, and December 31, 2009, wehad zero and $75.0 million of borrowings outstanding under the RevolvingCredit 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 six months endedJune 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.

 

The minimum and maximumborrowings under the Revolving Credit Facility were zero and$120.0 million during the six months ended June 30, 2010. Theweighted average amount of borrowings outstanding under the Revolving CreditFacility during the six months ended June 30, 2010, were$56.5 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.

 

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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 June 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 June 30, 2010, ouraggregate liquidity from unrestricted cash and cash equivalents and unusedborrowing capacity under the Revolving Credit Facility totaled$374.8 million.

 

Inaddition, the Revolving Credit Facility contains a restriction on capitalinvestments that is applicable when a minimum availability threshold is notmet. That covenant was not applicable on June 30, 2010. The RevolvingCredit Facility also contains customary nonfinancial covenants, including anegative pledge covenant and restrictions on distributions to equity holders,acquisitions, and divestitures. These covenants will become more restrictive ifa minimum availability threshold is not maintained.

 

*Lettersof Credit*

 

AtJune 30, 2010, and December 31, 2009, we had $14.4 million and$16.5 million of letters of credit outstanding. These letters of creditreduce 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. We repurchased $160.0 million of thenotes at par in April 2008. During the six months ended June 30,2009, we repurchased $11.9 million of senior subordinated notes andrecorded a $6.0 million gain in “Gain on repurchase of long-term debt” inour Consolidated 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 June 30, 2010,and December 31, 2009, approximately $34 million and $78 millionof cash, respectively, was governed by the Indenture. We anticipate that the$120.0 million repayment and commitment reduction of the Revolving CreditFacility on April 30, 2010 (discussed above), in combination with our recentand expected capital spending, will fulfill our obligation under the Indenturewith respect to net available cash received in connection with theBoise Inc. stock sales.

 

*Other*

 

For the six months ended June 30, 2010 and 2009,cash payments for interest, net of interest capitalized, were $9.8 millionand $10.3 million, respectively.

 

AtJune 30, 2010, the book value of fixed-rate debt was $228.1 million,and the fair value was estimated to be $214.2 million. The differencebetween book value and fair value is derived from the difference between theperiod-end market interest rate and the stated rate of our fixed-rate,long-term debt. We estimated the fair value based on quoted market prices forour debt.

 

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***12.          FinancialInstrument Risk***

 

Inthe normal course of business, we are exposed to financial risks such aschanges in interest rates, credit risk, and foreign currency exchange rates. Wedo not use derivative instruments for speculative purposes.

 

*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 six months ended June 30, 2010 and 2009, we did notuse any interest rate derivatives to manage this risk.

 

*Concentrationof Credit Risk*

 

Weare exposed to credit risk related to customer accounts receivables. In orderto reduce this risk, we consider customer concentrations and current economictrends and monitor the creditworthiness of significant customers based onongoing credit evaluations. At June 30, 2010, and December 31, 2009,the receivables from a single customer accounted for approximately 17% and 14%of total receivables, respectively. No other customer accounted for 10% or moreof total receivables.

 

*ForeignCurrency Risk*

 

Approximately3% 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 conditionsincluding 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 AccountingStandards***

 

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.          Retirement and Benefit Plans***

 

The following table presents the pension benefit costs:

 
| ** **                                    | ** ** | **Pension Benefits**                 | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|
| ** **                                    | ** ** | **Three Months Ended  June 30** | ** ** | **Six Months Ended  June 30** | ** ** |
| ** **                                    | ** ** | **2010**                             | ** ** | **2009** | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                    | ** ** | **(thousands)**                      | ** ** |
|                                          |       |                                 |       |   |   |   |   |   |   |
| Service cost                                  |       | $                                    | 1,199      |   | $ | 2,487 |   | $ | 2,593 |   | $ | 5,440 |   |
| Interest cost                                 |       | 5,031                                |       | 4,887 |   | 10,106 |   | 9,911 |   |
| Expected return on plan assets                |       | (4,628                               | )          | (4,606 | ) | (9,217 | ) | (9,166 | ) |
| Recognized actuarial gain (loss)              |       | 131                                  |       | (290 | ) | 294 |   | (267 | ) |
| Amortization of prior service costs and other |       | 45                                   |       | 45 |   | 89 |   | 91 |   |
| Curtailment loss                              |       | —                               |       | — |   | — |   | 1,452 |   |
| Net periodic benefit cost                     | ** ** | **$**                                | **1,778**  | ** ** | **$** | **2,523** | ** ** | **$** | **3,865** | ** ** | **$** | **7,461** | ** ** |

 

In the first six months of 2010, we made $3.1 million in cashcontributions to the pension plans. For the remainder of 2010, we expect thatwe will be required to contribute less than $1 million to the pensionplans.

 

***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 2009 Form 10-K.

 

An analysis of our operations by segment is as follows:

 
| ** **                                      | ** ** | **Sales**      | ** ** | **Income********(Loss)********Before** | ** ** | **Depreciation**    | ** ** | ** ** | ** ** |
|-------------------------------------------------|------------|----------------|------------|----------------------------------------|------------|---------------------|------------|------------|------------|
| ** **                                      | ** ** | **Trade**      | ** ** | **Related********Parties**             | ** ** | **Inter-  segment** | ** ** | **Total**  | ** ** | **Income  Taxes** | ** ** | **and********Amortization** | ** ** | **EBITDA********(d)** | ** ** |
| ** **                                      | ** ** | **(millions)** | ** ** |
| **Three Months Ended June 30,  2010** | ** ** | ** **     | ** ** | ** **                             | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                 |       | $              | 515.2      |                                   | $          | —              |       | $          | 0.2        |   | $ | 515.4 |   | $ | 7.3 |   | $ | 1.8 |   | $ | 9.1 |   |
| Wood Products                                   |       | 131.1          |       | 5.2                                    |       | 63.1                |       | 199.4      |       | 8.2 |   | 6.7 |   | 14.9 |   |
| Corporate and Other                             |       | —         |       | —                                 |       | —              |       | —     |       | (5.3 | ) | 0.1 |   | (5.2 | ) |
|                                            |       | 646.3          |       | 5.2                                    |       | 63.3                |       | 714.8      |       | 10.2 |   | 8.6 |   | 18.8 |   |
| Intersegment eliminations                       |       | —         |       | —                                 |       | (63.3               | )          | (63.3      | )          | — |   | — |   | — |   |
| Interest expense                                |       | —         |       | —                                 |       | —              |       | —     |       | (6.0 | ) | — |   | — |   |
| Interest income                                 |       | —         |       | —                                 |       | —              |       | —     |       | 0.2 |   | — |   |   |   |
| ** **                                      | ** ** | **$**          | **646.3**  | ** **                             | **$**      | **5.2**             | ** ** | **$**      | **—** | ** ** | **$** | **651.5** | ** ** | **$** | **4.4** | ** ** | **$** | **8.6** | ** ** | **$** | **18.8** | ** ** |

 

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| ** **                                      | ** ** | **Sales**      | ** ** | **Income********(Loss)********Before** | ** ** | **Depreciation**    | ** ** | ** ** | ** ** |
|-------------------------------------------------|------------|----------------|------------|----------------------------------------|------------|---------------------|------------|------------|------------|
| ** **                                      | ** ** | **Trade**      | ** ** | **Related********Parties**             | ** ** | **Inter-  segment** | ** ** | **Total**  | ** ** | **Income  Taxes** | ** ** | **and********Amortization** | ** ** | **EBITDA********(d)** | ** ** |
| ** **                                      | ** ** | **(millions)** | ** ** |
| **Three Months  Ended June 30, 2009** | ** ** | ** **     | ** ** | ** **                             | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                 |       | $              | 433.6      |                                   | $          | —              |       | $          | 0.1        |   | $ | 433.7 |   | $ | 7.6 |   | $ | 1.9 |   | $ | 9.6 |   |
| Wood Products (b)                               |       | 78.7           |       | 8.9                                    |       | 46.8                |       | 134.4      |       | (19.2 | ) | 9.4 |   | (9.8 | ) |
| Corporate and Other                             |       | —         |       | —                                 |       | —              |       | —     |       | (3.4 | ) | 0.2 |   | (3.3 | ) |
|                                            |       | 512.3          |       | 8.9                                    |       | 46.9                |       | 568.1      |       | (15.0 | ) | 11.5 |   | (3.5 | ) |
| Intersegment eliminations                       |       | —         |       | —                                 |       | (46.9               | )          | (46.9      | )          | — |   | — |   | — |   |
| Equity in net income of affiliate               |       | —         |       | —                                 |       | —              |       | —     |       | 30.3 |   | — |   | 30.3 |   |
| Interest expense                                |       | —         |       | —                                 |       | —              |       | —     |       | (6.1 | ) | — |   | — |   |
| Interest income                                 |       | —         |       | —                                 |       | —              |       | —     |       | 0.2 |   | — |   | — |   |
| ** **                                      | ** ** | **$**          | **512.3**  | ** **                             | **$**      | **8.9**             | ** ** | **$**      | **—** | ** ** | **$** | **521.2** | ** ** | **$** | **9.4** | ** ** | **$** | **11.5** | ** ** | **$** | **26.8** | ** ** |

 
| ** **                                     | ** ** | **Sales**      | ** **  | **Income********(Loss)********Before** | ** ** | **Depreciation**    | ** ** | ** ** | ** ** |
|------------------------------------------------|------------|----------------|-------------|----------------------------------------|------------|---------------------|------------|------------|------------|
| ** **                                     | ** ** | **Trade**      | ** **  | **Related********Parties**             | ** ** | **Inter-  segment** | ** ** | **Total**  | ** ** | **Income********Taxes** | ** ** | **and********Amortization** | ** ** | **EBITDA********(d)** | ** ** |
| ** **                                     | ** ** | **(millions)** | ** **  |
| **Six Months  Ended June 30, 2010**  | ** ** | ** **     | ** **  | ** **                             | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                |       | $              | 904.3       |                                   | $          | —              |       | $          | 0.3        |   | $ | 904.6 |   | $ | 6.5 |   | $ | 3.6 |   | $ | 10.2 |   |
| Wood Products                                  |       | 219.4          |        | 15.0                                   |       | 113.0               |       | 347.4      |       | 1.6 |   | 13.4 |   | 15.0 |   |
| Corporate and Other                            |       | —         |        | —                                 |       | —              |       | —     |       | (8.3 | ) | 0.2 |   | (8.2 | ) |
|                                           |       | 1,123.7        |        | 15.0                                   |       | 113.3               |       | 1,252.0    |       | (0.2 | ) | 17.2 |   | 17.0 |   |
| Intersegment eliminations                      |       | —         |        | —                                 |       | (113.3              | )          | (113.3     | )          | — |   | — |   | — |   |
| Equity in net income of affiliate              |       | —         |        | —                                 |       | —              |       | —     |       | 1.9 |   | — |   | 1.9 |   |
| Gain on sale of shares of equity affiliate (a) |       | —         |        | —                                 |       | —              |       | —     |       | 25.3 |   | — |   | 25.3 |   |
| Interest expense                               |       | —         |        | —                                 |       | —              |       | —     |       | (11.5 | ) | — |   | — |   |
| Interest income                                |       | —         |        | —                                 |       | —              |       | —     |       | 0.4 |   | — |   | — |   |
| ** **                                     | ** ** | **$**          | **1,123.7** | ** **                             | **$**      | **15.0**            | ** ** | **$**      | **—** | ** ** | **$** | **1,138.7** | ** ** | **$** | **15.9** | ** ** | **$** | **17.2** | ** ** | **$** | **44.2** | ** ** |

 

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| ** **                                       | ** ** | **Sales**      | ** ** | **Income********(Loss)********Before** | ** ** | **Depreciation**    | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|----------------|------------|----------------------------------------|------------|---------------------|------------|------------|------------|
| ** **                                       | ** ** | **Trade**      | ** ** | **Related********Parties**             | ** ** | **Inter-  segment** | ** ** | **Total**  | ** ** | **Income********Taxes** | ** ** | **and********Amortization** | ** ** | **EBITDA********(d)** | ** ** |
| ** **                                       | ** ** | **(millions)** | ** ** |
| **Six Months  Ended June 30, 2009**    | ** ** | ** **     | ** ** | ** **                             | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Building Materials Distribution                  |       | $              | 768.5      |                                   | $          | —              |       | $          | 0.2        |   | $ | 768.7 |   | $ | (0.9 | ) | $ | 3.8 |   | $ | 2.9 |   |
| Wood Products (b)                                |       | 151.5          |       | 14.6                                   |       | 84.8                |       | 250.9      |       | (56.8 | ) | 18.5 |   | (38.3 | ) |
| Corporate and Other                              |       | —         |       | —                                 |       | —              |       | —     |       | (5.9 | ) | 0.3 |   | (5.7 | ) |
|                                             |       | 920.0          |       | 14.6                                   |       | 85.0                |       | 1,019.6    |       | (63.6 | ) | 22.6 |   | (41.1 | ) |
| Intersegment eliminations                        |       | —         |       | —                                 |       | (85.0               | )          | (85.0      | )          | — |   | — |   | — |   |
| Equity in net income of affiliate                |       | —         |       | —                                 |       | —              |       | —     |       | 33.3 |   | — |   | 33.3 |   |
| Impairment of investment in equity affiliate (c) |       | —         |       | —                                 |       | —              |       | —     |       | (43.0 | ) | — |   | (43.0 | ) |
| Change in fair value of contingent value rights  |       | —         |       | —                                 |       | —              |       | —     |       | 0.2 |   | — |   | 0.2 |   |
| Gain on repurchase of long-term debt             |       | —         |       | —                                 |       | —              |       | —     |       | 6.0 |   | — |   | 6.0 |   |
| Interest expense                                 |       | —         |       | —                                 |       | —              |       | —     |       | (11.8 | ) | — |   | — |   |
| Interest income                                  |       | —         |       | —                                 |       | —              |       | —     |       | 0.6 |   | — |   | — |   |
| ** **                                       | ** ** | **$**          | **920.0**  | ** **                             | **$**      | **14.6**            | ** ** | **$**      | **—** | ** ** | **$** | **934.6** | ** ** | **$** | **(78.3** | **)** | **$** | **22.6** | ** ** | **$** | **(44.6** | **)** |

 

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(a)                                  In first quarter 2010, wesold 18.3 million Boise Inc. shares for net proceeds of$86.1 million, and we recorded a $25.3 million gain on the sale ofthe shares in our Consolidated Statement of Income (Loss) for the six monthsended June 30, 2010. See Note 2, Investment in Equity Affiliate,for more information.

 

(b)                                 Included $1.7 millionand $9.2 million of expenses in income (loss) before income taxes for thethree and six months ended June 30, 2009, and $0.9 million of incomeand $4.0 million of expenses in EBITDA for the three and six months endedJune 30, 2009, related to the closure of the lumber manufacturing facilityin La Grande, Oregon.

 

(c)                                  On March 31, 2009, weconcluded that our investment in Boise Inc. met the definition of other thantemporarily impaired*.*Accordingly, we recorded a $43.0 million charge in “Impairment ofinvestment in equity affiliate” in our Consolidated Statement of Income (Loss) for the six months endedJune 30, 2009. See Note 2, Investment in Equity Affiliate, formore information.

 

(d)                                 EBITDA represents income(loss) before interest (interest expense and interest income), income taxes,and depreciation and amortization. EBITDA is the primary measure used by ourchief operating decision makers to evaluate segment operating performance andto decide how to allocate resources to segments. We believe EBITDA is useful toinvestors because it provides a means to evaluate the operating performance ofour segments and our company on an ongoing basis using criteria that are usedby our internal decision makers and because it is frequently used by investorsand other interested parties when comparing companies in our industry that havedifferent financing and capital structures and/or tax rates. We believe EBITDAis a meaningful measure because it presents a transparent view of our recurringoperating performance and allows management to readily view operating trends,perform analytical comparisons, and identify strategies to improve operatingperformance. EBITDA, however, is not a measure of our liquidity or financialperformance under generally accepted accounting principles (GAAP) and shouldnot be considered as an alternative to net income (loss), income (loss) fromoperations, or any other performance measure derived in accordance with GAAP oras an alternative to cash flow from operating activities as a measure of ourliquidity. The use of EBITDA instead of net income (loss) or segment income(loss) has limitations as an analytical tool, including the inability todetermine profitability; the exclusion of interest expense, interest income,and associated significant cash requirements; and the exclusion of depreciationand amortization. Management compensates for these limitations by relying onour GAAP results. Our measures of EBITDA are not necessarily comparable toother similarly titled captions of other companies due to potentialinconsistencies in the methods of calculation.

 

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

 

| ** **                 | ** ** | **Three Months Ended  June 30** | ** ** | **Six Months Ended  June 30** | ** ** |
|----------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                 | ** ** | **2010**                             | ** ** | **2009**                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                 | ** ** | **(millions)**                       | ** ** |
|                       |       |                                 |       |                               |       |   |   |   |   |
| Net income (loss)          |       | $                                    | 4.3        |                               | $          | 9.3 | (a) | $ | 15.7 | (b) | $ | (78.9) | (a) (c) |
| Interest expense           |       | 6.0                                  |       | 6.1                                |       | 11.5 |   | 11.8 |   |
| Interest income            |       | (0.2                                 | )          | (0.2                               | )          | (0.4 | ) | (0.6 | ) |
| Income tax provision       |       | 0.1                                  |       | 0.1                                |       | 0.1 |   | 0.6 |   |
| Depreciation and depletion |       | 8.6                                  |       | 11.5                               |       | 17.2 |   | 22.6 |   |
| EBITDA                     | ** ** | **$**                                | **18.8**   | ** **                         | **$**      | **26.8** | ** ** | **$** | **44.2** | ** ** | **$** | **(44.6** | **)** |

 

***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 June 30, 2010, there have been no material changes to the commitmentsdisclosed in the 2009 Form 10-K (outside the normal course 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 June 30, 2010, therehave been no material changes to the guarantees disclosed in the 2009Form 10-K, except that the amount of borrowings guaranteed under theRevolving Credit Facility decreased $120.0 million to zero atJune 30, 2010, as discussed 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.

 

Weexpect to receive a future payment as a class participant in a class actionlitigation regarding oriented-strand-board (OSB) pricing. We were and continueto be a major purchaser of OSB. At this time, we do not have definitiveinformation regarding our share of the industry settlement nor the timing ofthe receipt of any settlement amounts and therefore, we have not recorded anyamount related to the potential settlement in our financial statements. Webelieve the determination may occur before the end of 2010.

 

***18.          Consolidating Guarantor and Nonguarantor FinancialInformation***

 

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 to 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 EndedJune 30, 2010**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** ** | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** ** |
| **Sales**                                                                            |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                           | —     |                              | $          | —                      |       | $                                 | 641,889    |             | $          | 4,431            |       | $ | — |   | $ | 646,320 |   |
| Intercompany                                                                         |       | —                                                      |       | —                            |       | —                      |       | 4,104                             |       | (4,104           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |       | —                            |       | 5,168                       |       | —                            |       | —           |       | 5,168            |       |
|                                                                                 |       | —                                                      |       | —                            |       | 647,057                     |       | 8,535                             |       | (4,104           | )          | 651,488          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |       | —                            |       | 552,644                     |       | 9,384                             |       | (4,179           | )          | 557,849          |       |
| Materials, labor, and other operating expenses  from related parties                 |       | —                                                      |       | —                            |       | 10,550                      |       | —                            |       | —           |       | 10,550           |       |
| Depreciation and amortization                                                        |       | —                                                      |       | 91                                |       | 8,029                       |       | 475                               |       | —           |       | 8,595            |       |
| Selling and distribution expenses                                                    |       | —                                                      |       | —                            |       | 52,283                      |       | 347                               |       | —           |       | 52,630           |       |
| General and administrative expenses                                             |       | —                                                      |       | 4,773                             |       | 6,357                       |       | —                            |       | 75               |       | 11,205           |       |
| Other (income) expense, net                                                          |       | —                                                      |       | 39                                |       | (9                          | )          | 30                                |       | —           |       | 60               |       |
|                                                                                 |       | —                                                      |       | 4,903                             |       | 629,854                     |       | 10,236                            |       | (4,104           | )          | 640,889          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) from operations**                                                    |       | —                                                      |       | (4,903                            | )          | 17,203                      |       | (1,701                            | )          | —           |       | 10,599           |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Foreign exchange loss                                                                |       | —                                                      |       | (158                              | )          | (109                        | )          | (88                               | )          | —           |       | (355             | )          |
| Interest expense                                                                     |       | —                                                      |       | (6,021                            | )          | —                      |       | —                            |       | —           |       | (6,021           | )          |
| Interest income                                                                      |       | —                                                      |       | 96                                |       | 103                         |       | —                            |       | —           |       | 199              |       |
|                                                                                 |       | —                                                      |       | (6,083                            | )          | (6                          | )          | (88                               | )          | —           |       | (6,177           | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | —                                                      |       | (10,986                           | )          | 17,197                      |       | (1,789                            | )          | —           |       | 4,422            |       |
| Income tax (provision) benefit                                                       |       | —                                                      |       | (90                               | )          | 19                          |       | (19                               | )          | —           |       | (90              | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | —                                                      |       | (11,076                           | )          | 17,216                      |       | (1,808                            | )          | —           |       | 4,332            |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | 4,332                                                       |       | 15,408                            |       | —                      |       | —                            |       | (19,740          | )          | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **4,332**  | ** **                        | **$**      | **4,332**                   | ** ** | **$**                             | **17,216** | ** **       | **$**      | **(1,808**       | **)**      | **$** | **(19,740** | **)** | **$** | **4,332** | ** ** |

 

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

**Consolidating Statements of Income (Loss)**

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

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** ** | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** ** |
| **Sales**                                                                            |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                                |       | $                                                           | —     |                              | $          | —                      |       | $                                 | 509,971     |             | $          | 2,276            |       | $ | — |   | $ | 512,247 |   |
| Intercompany                                                                         |       | —                                                      |       | —                            |       | 12                          |       | 2,271                             |        | (2,283           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |       | —                            |       | 8,933                       |       | —                            |        | —           |       | 8,933            |       |
|                                                                                 |       | —                                                      |       | —                            |       | 518,916                     |       | 4,547                             |        | (2,283           | )          | 521,180          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |       | 64                                |       | 461,394                     |       | 4,639                             |        | (2,398           | )          | 463,699          |       |
| Materials, labor, and other operating expenses from  related parties                 |       | —                                                      |       | —                            |       | 6,332                       |       | —                            |        | —           |       | 6,332            |       |
| Depreciation and amortization                                                        |       | —                                                      |       | 114                               |       | 10,874                      |       | 460                               |        | —           |       | 11,448           |       |
| Selling and distribution expenses                                                    |       | —                                                      |       | —                            |       | 47,475                      |       | 296                               |        | —           |       | 47,771           |       |
| General and administrative expenses                                             |       | —                                                      |       | 1,404                             |       | 5,344                       |       | —                            |        | 115              |       | 6,863            |       |
| General and administrative expenses from  related party                         |       | —                                                      |       | 2,503                             |       | —                      |       | —                            |        | —           |       | 2,503            |       |
| Other (income) expense, net                                                          |       | —                                                      |       | 42                                |       | (1,713                      | )          | (80                               | )           | —           |       | (1,751           | )          |
|                                                                                 |       | —                                                      |       | 4,127                             |       | 529,706                     |       | 5,315                             |        | (2,283           | )          | 536,865          |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| **Loss from operations**                                                             |       | —                                                      |       | (4,127                            | )          | (10,790                     | )          | (768                              | )           | —           |       | (15,685          | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| Equity in net income of affiliate  (Boise Inc.)                                 |       | 30,306                                                      |       | —                            |       | —                      |       | —                            |        | —           |       | 30,306           |       |
| Foreign exchange gain                                                                |       | —                                                      |       | 473                               |       | 149                         |       | 93                                |        | —           |       | 715              |       |
| Interest expense                                                                     |       | —                                                      |       | (6,135                            | )          | —                      |       | —                            |        | —           |       | (6,135           | )          |
| Interest income                                                                      |       | —                                                      |       | 114                               |       | 64                          |       | —                            |        | —           |       | 178              |       |
|                                                                                 |       | 30,306                                                      |       | (5,548                            | )          | 213                         |       | 93                                |        | —           |       | 25,064           |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 30,306                                                      |       | (9,675                            | )          | (10,577                     | )          | (675                              | )           | —           |       | 9,379            |       |
| Income tax provision                                                                 |       | —                                                      |       | (32                               | )          | (15                         | )          | (21                               | )           | —           |       | (68              | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | 30,306                                                      |       | (9,707                            | )          | (10,592                     | )          | (696                              | )           | —           |       | 9,311            |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (20,995                                                     | )          | (11,288                           | )          | —                      |       | —                            |        | 32,283           |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **9,311**  | ** **                        | **$**      | **(20,995**                 | **)**      | **$**                             | **(10,592** | **)**            | **$**      | **(696**         | **)**      | **$** | **32,283** | ** ** | **$** | **9,311** | ** ** |

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Six Months EndedJune 30, 2010**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** ** | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             | ** ** |
| **Sales**                                                                            |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                           | —     |                              | $          | —                      |       | $                                 | 1,116,209  |             | $          | 7,533            |       | $ | — |   | $ | 1,123,742 |   |
| Intercompany                                                                         |       | —                                                      |       | —                            |       | —                      |       | 7,138                             |       | (7,138           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |       | —                            |       | 14,999                      |       | —                            |       | —           |       | 14,999           |       |
|                                                                                 |       | —                                                      |       | —                            |       | 1,131,208                   |       | 14,671                            |       | (7,138           | )          | 1,138,741        |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |       | —                            |       | 975,172                     |       | 15,981                            |       | (7,403           | )          | 983,750          |       |
| Materials, labor, and other operating expenses  from related parties                 |       | —                                                      |       | —                            |       | 16,772                      |       | —                            |       | —           |       | 16,772           |       |
| Depreciation and amortization                                                        |       | —                                                      |       | 188                               |       | 16,046                      |       | 951                               |       | —           |       | 17,185           |       |
| Selling and distribution expenses                                                    |       | —                                                      |       | —                            |       | 100,144                     |       | 651                               |       | —           |       | 100,795          |       |
| General and administrative expenses                                             |       | —                                                      |       | 6,347                             |       | 12,051                      |       | —                            |       | 265              |       | 18,663           |       |
| General and administrative expenses from  related party                         |       | —                                                      |       | 1,576                             |       | —                      |       | —                            |       | —           |       | 1,576            |       |
| Other (income) expense, net                                                          |       | —                                                      |       | 39                                |       | (44                         | )          | (15                               | )          | —           |       | (20              | )          |
|                                                                                 |       | —                                                      |       | 8,150                             |       | 1,120,141                   |       | 17,568                            |       | (7,138           | )          | 1,138,721        |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) from operations**                                                    |       | —                                                      |       | (8,150                            | )          | 11,067                      |       | (2,897                            | )          | —           |       | 20               |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| Equity in net income of affiliate  (Boise Inc.)                                 |       | 1,889                                                       |       | —                            |       | —                      |       | —                            |       | —           |       | 1,889            |       |
| Gain on sale of shares of Boise Inc.                                            |       | 25,308                                                      |       | —                            |       | —                      |       | —                            |       | —           |       | 25,308           |       |
| Foreign exchange gain (loss)                                                         |       | —                                                      |       | (115                              | )          | (159                        | )          | 66                                |       | —           |       | (208             | )          |
| Interest expense                                                                     |       | —                                                      |       | (11,541                           | )          | —                      |       | —                            |       | —           |       | (11,541          | )          |
| Interest income                                                                      |       | —                                                      |       | 156                               |       | 237                         |       | —                            |       | —           |       | 393              |       |
|                                                                                 |       | 27,197                                                      |       | (11,500                           | )          | 78                          |       | 66                                |       | —           |       | 15,841           |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 27,197                                                      |       | (19,650                           | )          | 11,145                      |       | (2,831                            | )          | —           |       | 15,861           |       |
| Income tax provision                                                                 |       | —                                                      |       | (106                              | )          | (10                         | )          | (19                               | )          | —           |       | (135             | )          |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in  net income (loss) of affiliates**                  |       | 27,197                                                      |       | (19,756                           | )          | 11,135                      |       | (2,850                            | )          | —           |       | 15,726           |       |
|                                                                                 |       |                                                        |       |                              |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (11,471                                                     | )          | 8,285                             |       | —                      |       | —                            |       | 3,186            |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **15,726** | ** **                        | **$**      | **(11,471**                 | **)**      | **$**                             | **11,135** | ** **       | **$**      | **(2,850**       | **)**      | **$** | **3,186** | ** ** | **$** | **15,726** | ** ** |

 

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

**Consolidating Statements of Income (Loss)**

**F****or the Six Months EndedJune 30, 2009**

 
| ** **                                                                  | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                  | ** ** | **(thousands)**                                             | ** **  |
| **Sales**                                                                   |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                       |       | $                                                           | —      |                              | $          | —                      |       | $                                 | 916,440     |             | $          | 3,531            |       | $ | — |   | $ | 919,971 |   |
| Intercompany                                                                |       | —                                                      |        | —                            |       | 15                          |       | 3,968                             |        | (3,983           | )          | —           |       |
| Related parties                                                             |       | —                                                      |        | —                            |       | 14,636                      |       | —                            |        | —           |       | 14,636           |       |
|                                                                        |       | —                                                      |        | —                            |       | 931,091                     |       | 7,499                             |        | (3,983           | )          | 934,607          |       |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                      |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                              |       | —                                                      |        | —                            |       | 840,502                     |       | 8,366                             |        | (4,098           | )          | 844,770          |       |
| Materials, labor, and other operating expenses  from related parties        |       | —                                                      |        | —                            |       | 18,622                      |       | —                            |        | —           |       | 18,622           |       |
| Depreciation and amortization                                               |       | —                                                      |        | 227                               |       | 21,418                      |       | 922                               |        | —           |       | 22,567           |       |
| Selling and distribution expenses                                           |       | —                                                      |        | —                            |       | 92,417                      |       | 595                               |        | —           |       | 93,012           |       |
| General and administrative expenses                                    |       | —                                                      |        | 2,991                             |       | 10,682                      |       | —                            |        | 115              |       | 13,788           |       |
| General and administrative expenses from  related party                |       | —                                                      |        | 4,936                             |       | —                      |       | —                            |        | —           |       | 4,936            |       |
| Other (income) expense, net                                                 |       | —                                                      |        | (1,871                            | )          | 3,023                       |       | (222                              | )           | —           |       | 930              |       |
|                                                                        |       | —                                                      |        | 6,283                             |       | 986,664                     |       | 9,661                             |        | (3,983           | )          | 998,625          |       |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Loss from operations**                                                    |       | —                                                      |        | (6,283                            | )          | (55,573                     | )          | (2,162                            | )           | —           |       | (64,018          | )          |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| Equity in net income of affiliate  (Boise Inc.)                        |       | 33,311                                                      |        | —                            |       | —                      |       | —                            |        | —           |       | 33,311           |       |
| Impairment of investment in equity affiliate                                |       | (43,039                                                     | )           | —                            |       | —                      |       | —                            |        | —           |       | (43,039          | )          |
| Foreign exchange gain                                                       |       | —                                                      |        | 226                               |       | 133                         |       | 24                                |        | —           |       | 383              |       |
| Change in fair value of contingent value rights                             |       | —                                                      |        | 194                               |       | —                      |       | —                            |        | —           |       | 194              |       |
| Gain on repurchase of long-term debt                                        |       | —                                                      |        | 6,026                             |       | —                      |       | —                            |        | —           |       | 6,026            |       |
| Interest expense                                                            |       | —                                                      |        | (11,751                           | )          | —                      |       | —                            |        | —           |       | (11,751          | )          |
| Interest income                                                             |       | —                                                      |        | 395                               |       | 180                         |       | —                            |        | —           |       | 575              |       |
|                                                                        |       | (9,728                                                      | )           | (4,910                            | )          | 313                         |       | 24                                |        | —           |       | (14,301          | )          |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Loss before income taxes and  equity in net income (loss) of affiliates** |       | (9,728                                                      | )           | (11,193                           | )          | (55,260                     | )          | (2,138                            | )           | —           |       | (78,319          | )          |
| Income tax (provision) benefit                                              |       | —                                                      |        | (541                              | )          | 11                          |       | (21                               | )           | —           |       | (551             | )          |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Loss before equity in net income  (loss) of affiliates**                  |       | (9,728                                                      | )           | (11,734                           | )          | (55,249                     | )          | (2,159                            | )           | —           |       | (78,870          | )          |
|                                                                        |       |                                                        |        |                              |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                              |       | (69,142                                                     | )           | (57,408                           | )          | —                      |       | —                            |        | 126,550          |       | —           |       |
| **Net income (loss)**                                                       | ** ** | **$**                                                       | **(78,870** | **)**                             | **$**      | **(69,142**                 | **)**      | **$**                             | **(55,249** | **)**            | **$**      | **(2,159**       | **)**      | **$** | **126,550** | ** ** | **$** | **(78,870** | **)** |

 

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

**Consolidating Balance Sheets at June 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           |                              | $          | 264,423                     |       | $                                             | 17          |             | $          | 103              |       | $ | — |   | $ | 264,548 |   |
| Receivables                   |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade, less allowances        |       | —                                          |        | —                            |       | 155,092                     |       | 1,462                                         |        | —           |       | 156,554          |       |
| Related parties               |       | —                                          |        | —                            |       | 936                         |       | —                                        |        | —           |       | 936              |       |
| Intercompany                  |       | —                                          |        | —                            |       | 56                          |       | —                                        |        | (56              | )          | —           |       |
| Other                         |       | —                                          |        | (5                                | )          | 2,344                       |       | 711                                           |        | —           |       | 3,050            |       |
| Inventories                   |       | —                                          |        | —                            |       | 247,492                     |       | 6,456                                         |        | —           |       | 253,948          |       |
| Prepaid expenses and other    |       | —                                          |        | 2,413                             |       | 3,089                       |       | 162                                           |        | —           |       | 5,664            |       |
|                          |       | 5                                               |        | 266,831                           |       | 409,026                     |       | 8,894                                         |        | (56              | )          | 684,700          |       |
|                          |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Property**                  |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Property and equipment, net   |       | —                                          |        | 1,624                             |       | 249,780                     |       | 11,787                                        |        | —           |       | 263,191          |       |
| Timber deposits               |       | —                                          |        | —                            |       | 11,339                      |       | —                                        |        | —           |       | 11,339           |       |
|                          |       | —                                          |        | 1,624                             |       | 261,119                     |       | 11,787                                        |        | —           |       | 274,530          |       |
|                          |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Deferred financing costs**  |       | —                                          |        | 4,256                             |       | —                      |       | —                                        |        | —           |       | 4,256            |       |
| **Goodwill**                  |       | —                                          |        | —                            |       | 12,170                      |       | —                                        |        | —           |       | 12,170           |       |
| **Intangible assets, net**    |       | —                                          |        | —                            |       | 8,912                       |       | —                                        |        | —           |       | 8,912            |       |
| **Other assets**              |       | —                                          |        | 19                                |       | 7,449                       |       | —                                        |        | —           |       | 7,468            |       |
| **Investments in affiliates** |       | 443,145                                         |        | 551,842                           |       | —                      |       | —                                        |        | (994,987         | )          | —           |       |
| **Total assets**              | ** ** | **$**                                           | **443,150** | ** **                        | **$**      | **824,572**                 | ** ** | **$**                                         | **698,676** | ** **       | **$**      | **20,681**       | ** ** | **$** | **(995,043** | **)** | **$** | **992,036** | ** ** |

 

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

**Consolidating Balance Sheets at June 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                                       |       | $                                               | —      |                              | $          | 8,440                       |       | $                                             | 118,991     |             | $          | 1,340            |       | $ | — |   | $ | 128,771 |   |
| Related parties                             |       | —                                          |        | 393                               |       | 2,236                       |       | —                                        |        | —           |       | 2,629            |       |
| Intercompany                                |       | —                                          |        | —                            |       | —                      |       | 56                                            |        | (56              | )          | —           |       |
| Accrued liabilities                         |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Compensation and benefits                   |       | —                                          |        | 14,318                            |       | 21,452                      |       | 299                                           |        | —           |       | 36,069           |       |
| Interest payable                            |       | —                                          |        | 3,503                             |       | —                      |       | —                                        |        | —           |       | 3,503            |       |
| Other                                       |       | —                                          |        | 1,529                             |       | 18,386                      |       | 952                                           |        | —           |       | 20,867           |       |
|                                        |       | —                                          |        | 28,183                            |       | 161,065                     |       | 2,647                                         |        | (56              | )          | 191,839          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Debt**                                    |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Long-term debt                              |       | —                                          |        | 228,146                           |       | —                      |       | —                                        |        | —           |       | 228,146          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Other**                                   | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Compensation and benefits                   |       | —                                          |        | 115,095                           |       | —                      |       | —                                        |        | —           |       | 115,095          |       |
| Other long-term liabilities                 |       | —                                          |        | 10,003                            |       | 3,812                       |       | (9                                            | )           | —           |       | 13,806           |       |
|                                        |       | —                                          |        | 125,098                           |       | 3,812                       |       | (9                                            | )           | —           |       | 128,901          |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Redeemable equity units**                 |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Series B equity  units                 |       | 2,765                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 2,765            |       |
| Series C equity  units                 |       | 6,071                                           |        | —                            |       | —                      |       | —                                        |        | —           |       | 6,071            |       |
| Redeemable equity units                     |       | —                                          |        | 8,836                             |       | —                      |       | —                                        |        | (8,836           | )          | —           |       |
|                                        |       | 8,836                                           |        | 8,836                             |       | —                      |       | —                                        |        | (8,836           | )          | 8,836            |       |
|                                        |       |                                            |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Commitments and contingent  liabilities** | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                  | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                 | ** ** | ** **                                      | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A equity units                  |       | 92,435                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | 92,435           |       |
| Series B equity units                  |       | 341,879                                         |        | —                            |       | —                      |       | —                                        |        | —           |       | 341,879          |       |
| Series C equity units                  |       | —                                          |        | —                            |       | —                      |       | —                                        |        | —           |       | —           |       |
| Subsidiary equity                           |       | —                                          |        | 434,309                           |       | 533,799                     |       | 18,043                                        |        | (986,151         | )          | —           |       |
| **Total capital**                           |       | 434,314                                         |        | 434,309                           |       | 533,799                     |       | 18,043                                        |        | (986,151         | )          | 434,314          |       |
| **Total liabilities and capital**           | ** ** | **$**                                           | **443,150** | ** **                        | **$**      | **824,572**                 | ** ** | **$**                                         | **698,676** | ** **       | **$**      | **20,681**       | ** ** | **$** | **(995,043** | **)** | **$** | **992,036** | ** ** |

 

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

**Consolidating 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 Subsidiaries**

**Consolidating Statements of Cash Flows**

**For the Six Months Ended June 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)                                                    |       | $                                                                       | 15,726     |                                    | $          | (11,471                     | )          | $                                             | 11,135     |             | $          | (2,850           | )          | $ | 3,186 |   | $ | 15,726 |   |
| 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 Boise Inc.                                 |       | (25,308                                                                 | )          | —                                  |       | —                      |       | —                                        |       | —           |       | (25,308          | )          |
| Equity in net (income) loss of affiliates                            |       | 11,471                                                                  |       | (8,285                                  | )          | —                      |       | —                                        |       | (3,186           | )          | —           |       |
| Depreciation and amortization of deferred  financing costs and other |       | —                                                                  |       | 2,066                                   |       | 16,046                      |       | 951                                           |       | —           |       | 19,063           |       |
| Pension expense                                                      |       | —                                                                  |       | 3,865                                   |       | —                      |       | —                                        |       | —           |       | 3,865            |       |
| Management equity units expense                                 |       | —                                                                  |       | 869                                     |       | —                      |       | —                                        |       | —           |       | 869              |       |
| Other                                                                |       | —                                                                  |       | 156                                     |       | 130                         |       | (90                                           | )          | —           |       | 196              |       |
| Decrease (increase) in working capital                               |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 91                                      |       | (48,485                     | )          | (801                                          | )          | (9,316           | )          | (58,511          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                  |       | (19,206                     | )          | (1,968                                        | )          | —           |       | (21,174          | )          |
| Prepaid expenses and other                                           |       | —                                                                  |       | (11                                     | )          | (1,995                      | )          | (92                                           | )          | —           |       | (2,098           | )          |
| Accounts payable and accrued liabilities                        |       | —                                                                  |       | 1,663                                   |       | 35,932                      |       | 1,250                                         |       | 9,316            |       | 48,161           |       |
| Pension contributions                                                |       | —                                                                  |       | (3,070                                  | )          | —                      |       | —                                        |       | —           |       | (3,070           | )          |
| Other                                                                |       | —                                                                  |       | 1,566                                   |       | 341                         |       | (8                                            | )          | —           |       | 1,899            |       |
| Cash used for operations                                             |       | —                                                                  |       | (12,561                                 | )          | (6,102                      | )          | (3,608                                        | )          | —           |       | (22,271          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used  for) investment**                     |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Proceeds from sale of shares of equity affiliate,  net               |       | 86,123                                                                  |       | —                                  |       | —                      |       | —                                        |       | —           |       | 86,123           |       |
| Expenditures for property and equipment                         |       | —                                                                  |       | —                                  |       | (9,479                      | )          | (518                                          | )          | —           |       | (9,997           | )          |
| Other                                                                |       | —                                                                  |       | 535                                     |       | (2,034                      | )          | 91                                            |       | —           |       | (1,408           | )          |
| Cash provided by (used for) investment                          |       | 86,123                                                                  |       | 535                                     |       | (11,513                     | )          | (427                                          | )          | —           |       | 74,718           |       |
| ** **                                                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| **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                                |       | (86,118                                                                 | )          | 86,118                                  |       | —                      |       | —                                        |       | —           |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (21,668                                 | )          | 17,613                      |       | 4,055                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                                |       | (86,118                                                                 | )          | (10,550                                 | )          | 17,613                      |       | 4,055                                         |       | —           |       | (75,000          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**           |       | 5                                                                       |       | (22,576                                 | )          | (2                          | )          | 20                                            |       | —           |       | (22,553          | )          |
| **Balance at beginning of the  period**                              |       | —                                                                  |       | 286,999                                 |       | 19                          |       | 83                                            |       | —           |       | 287,101          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **5**      | ** **                              | **$**      | **264,423**                 | ** ** | **$**                                         | **17**     | ** **       | **$**      | **103**          | ** ** | **$** | **—** | ** ** | **$** | **264,548** | ** ** |

 

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**Boise Cascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Six Months Ended June 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)                                                    |       | $                                                                       | (78,870    | )                                       | $          | (69,142                           | )          | $                                             | (55,249    | )                | $          | (2,159           | )          | $ | 126,550 |   | $ | (78,870 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                  |       | (33,311                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (33,311          | )          |
| Impairment of investment in Boise Inc.                          |       | 43,039                                                                  |       | —                                  |       | —                            |       | —                                        |       | —           |       | 43,039           |       |
| Equity in net (income) loss of affiliates                            |       | 69,142                                                                  |       | 57,408                                  |       | —                            |       | —                                        |       | (126,550         | )          | —           |       |
| Depreciation and amortization of deferred  financing costs and other |       | —                                                                  |       | 1,497                                   |       | 21,417                            |       | 922                                           |       | —           |       | 23,836           |       |
| Pension expense                                                      |       | —                                                                  |       | 7,461                                   |       | —                            |       | —                                        |       | —           |       | 7,461            |       |
| Management equity units expense                                 |       | —                                                                  |       | 1,496                                   |       | —                            |       | —                                        |       | —           |       | 1,496            |       |
| Gain on repurchase of long-term debt                                 |       | —                                                                  |       | (6,026                                  | )          | —                            |       | —                                        |       | —           |       | (6,026           | )          |
| Facility closure and curtailment costs                               |       | —                                                                  |       | —                                  |       | 1,968                             |       | —                                        |       | —           |       | 1,968            |       |
| Other                                                                |       | —                                                                  |       | (408                                    | )          | (582                              | )          | (24                                           | )          | —           |       | (1,014           | )          |
| Decrease (increase) in working capital, net  of acquisitions    |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 697                                     |       | (52,692                           | )          | (981                                          | )          | 164              |       | (52,812          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                  |       | 38,746                            |       | 1,157                                         |       | —           |       | 39,903           |       |
| Prepaid expenses and other                                           |       | —                                                                  |       | (1,039                                  | )          | (2,085                            | )          | (157                                          | )          | —           |       | (3,281           | )          |
| Accounts payable and accrued liabilities                        |       | —                                                                  |       | (1,605                                  | )          | 43,582                            |       | (447                                          | )          | (164             | )          | 41,366           |       |
| Pension contributions                                                |       | —                                                                  |       | (25,064                                 | )          | —                            |       | —                                        |       | —           |       | (25,064          | )          |
| Other                                                                |       | —                                                                  |       | (205                                    | )          | (2,440                            | )          | 27                                            |       | —           |       | (2,618           | )          |
| Cash used for operations                                             |       | —                                                                  |       | (34,930                                 | )          | (7,335                            | )          | (1,662                                        | )          | —           |       | (43,927          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **Cash provided by (used for)  investment**                          |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| Expenditures for property and equipment                         |       | —                                                                  |       | (17                                     | )          | (7,530                            | )          | (555                                          | )          | —           |       | (8,102           | )          |
| Acquisition of businesses and facilities                             |       | —                                                                  |       | —                                  |       | (4,598                            | )          | —                                        |       | —           |       | (4,598           | )          |
| Other                                                                |       | —                                                                  |       | 216                                     |       | 1,517                             |       | 45                                            |       | —           |       | 1,778            |       |
| Cash provided by (used for) investment                          |       | —                                                                  |       | 199                                     |       | (10,611                           | )          | (510                                          | )          | —           |       | (10,922          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **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                                         |       | (10,719                                                                 | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (10,719          | )          |
| Repurchase of management equity units                                |       | (18                                                                     | )          | —                                  |       | —                            |       | —                                        |       | —           |       | (18              | )          |
| Parent/subsidiary equity transactions                                |       | 10,737                                                                  |       | (10,737                                 | )          | —                            |       | —                                        |       | —           |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (20,196                                 | )          | 17,945                            |       | 2,251                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                           |       | —                                                                  |       | (36,560                                 | )          | 17,945                            |       | 2,251                                         |       | —           |       | (16,364          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                              |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**           |       | —                                                                  |       | (71,291                                 | )          | (1                                | )          | 79                                            |       | —           |       | (71,213          | )          |
| **Balance at beginning of the  period**                              |       | 1                                                                       |       | 275,726                                 |       | 20                                |       | 56                                            |       | —           |       | 275,803          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **1**      | ** **                              | **$**      | **204,435**                       | ** ** | **$**                                         | **19**     | ** **       | **$**      | **135**          | ** ** | **$** | **—** | ** ** | **$** | **204,590** | ** ** |

 

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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, as well as the factors listed inother documents we file with the Securities and Exchange Commission (SEC).There have been no material changes to our risk factors during the six monthsended June 30, 2010, from those listed in our 2009 Form 10-K. We donot assume an obligation to update any forward-looking statement. Our futureactual results may differ materially from those contained in or implied by anyof the forward-looking statements in this Form 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 ownedsubsidiary, Boise Cascade, L.L.C., is a leading U.S. wholesale distributor ofbuilding products and one of the largest producers of engineered wood productsand plywood 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 engineered wood products (EWP), plywood,particleboard, dimension lumber, and high-quality ponderosa pine lumber, and (3) Corporateand Other, which includes corporate support staff services, related assets andliabilities, and foreign exchange gains and losses. These segments representdistinct businesses that are managed separately because of differing productsand services. Each of these businesses requires distinct operating andmarketing strategies. Management reviews the performance of the company basedon these segments. For more information see Note 15, Segment Information,of the Notes to Unaudited Quarterly Consolidated Financial Statements in “Item 1.Financial Statements” of this Form 10-Q.

 

***Executive Overview***

 

TheU.S. economy continued to show small signs of improvement in second quarter2010, following gross domestic product growth in the second half of 2009 andthe first quarter of 2010. However, U.S. unemployment remains high, at 9.5% in June 2010.Concerns continue over the low level of residential construction activity,falling home prices, number of foreclosures, tight credit conditions, high debtlevels, and consumer and business confidence, which all affect the business andeconomic environment in which we operate. These conditions are beyond ourcontrol and may have a significant impact on our business, results ofoperations, cash flows, and financial position.

 

Comparedwith the first six months of 2009, pricing for many of the commodity productswe manufacture and distribute increased. The composite lumber and panel priceswere approximately 55% and 66% higher, on average, in second quarter 2010,compared with the same period in 2009, and markets were unusually volatileduring the second quarter. Prices rose sharply from the start of the yearthrough April 2010 and began to retreat in early May. Composite lumber andpanel prices dropped from $367 and $474 at their peak in April 2010 andfell quickly to $247 and $328, respectively, by late June.

 

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Webelieve the dramatic drop is the result of a supply-driven run-up in prices inthe first four months of the year, which resulted from constrained dealerinventory levels, curtailments, and disrupted imports. Once buyers filledinventory needs and industry supply responded to the higher prices, pricessharply declined. The unusual volatility adversely affected gross margins inour Building Materials Distribution segment, which declined approximately 1.1%in the second quarter, compared with the same period a year ago. Since the endof June, pricing has been less volatile, but commodity wood products pricescontinue to erode.

 

Demandfor our products correlates with the level of residential construction activityin North America, which has historically been cyclical. As of July 2010,the Blue Chip Economic Indicators consensus forecast for 2010 single- andmultifamily housing starts in the U.S. was approximately 0.66 millionunits, which is significantly below historical trends of approximately1.5 million units over the ten years prior to 2010. New starts forresidential construction fell 19% from April to June 2010 to anannual rate of 0.55 million units, their lowest level since October 2009,and building permits, a sign of future construction, were below an annual rateof 0.60 million units. The drop is believed to be partially attributableto the end of the government’s tax incentive for first-time home buyers, whichended in April of this year.

 

Becausethe housing recovery is likely to be slow and uneven, we continue to manage ourproduction levels to our sales demand, which will likely cause us to continueto operate our facilities below their capacity. In addition, we continue toprudently manage our working capital and capital spending in this environment.We expect the downturn to continue to adversely affect our operating results in2010; however, we do expect modest improvement in 2010, compared with 2009.While near-term residential construction remains weak in the U.S., positivelong-term demographic fundamentals, including immigration, are expected tosupport household formations, which in turn are expected to support an eventualrecovery in new residential housing demand.

 

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

 

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

 

·                  Generaleconomic conditions, including but not limited to housing starts,repair-and-remodel activity and light commercial construction, foreclosurerates, interest rates, unemployment rates, and relative currency values;

 

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

 

·                  Availabilityand affordability of raw materials, including wood fiber, energy, andchemicals;

 

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

 

·                  Industry cyclesand capacity utilization rates;

 

·                  Cost ofcompliance with government regulations;

 

·                  Legislative orregulatory environments, requirements, or changes affecting the businesses in whichwe are engaged;

 

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

 

·                  The financialcondition and creditworthiness of our customers;

 

·                  Major equipmentfailure;

 

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

 

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

 

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

 

·                  The otherfactors described in “Part I, Item 1A. Risk Factors” in our 2009Form 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 six months ended June 30, 2010 and 2009:

 

 
| ** **                                                                     | ** ** | **Three Months Ended  June 30** | ** ** | **Six Months Ended  June 30** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                     | ** ** | **2010**                                       | ** ** | **2009**                                     | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                     | ** ** | **(millions)**                                 | ** ** |
| **Sales**                                                                      |       |                                           |       |                                         |       |   |   |   |   |
| Trade                                                                          |       | $                                              | 646.3      |                                         | $          | 512.3 |   | $ | 1,123.7 |   | $ | 920.0 |   |
| Related parties (a)                                                            |       | 5.2                                            |       | 8.9                                          |       | 15.0 |   | 14.6 |   |
|                                                                           |       | 651.5                                          |       | 521.2                                        |       | 1,138.7 |   | 934.6 |   |
|                                                                           |       |                                           |       |                                         |       |   |   |   |   |
| **Costs and expenses**                                                         |       |                                           |       |                                         |       |   |   |   |   |
| Materials, labor, and other operating expenses                                 |       | 557.8                                          |       | 463.7                                        |       | 983.7 |   | 844.8 |   |
| Materials, labor, and other operating expenses  from related parties (a)       |       | 10.6                                           |       | 6.3                                          |       | 16.8 |   | 18.6 |   |
| Depreciation and amortization                                                  |       | 8.6                                            |       | 11.5                                         |       | 17.2 |   | 22.6 |   |
| Selling and distribution expenses                                              |       | 52.6                                           |       | 47.8                                         |       | 100.8 |   | 93.0 |   |
| General and administrative expenses                                            |       | 11.2                                           |       | 6.9                                          |       | 18.6 |   | 13.8 |   |
| General and administrative expenses from related  party (a)                    |       | —                                         |       | 2.5                                          |       | 1.6 |   | 4.9 |   |
| Other (income) expense, net                                                    |       | 0.1                                            |       | (1.8                                         | )          | — |   | 0.9 |   |
|                                                                           |       | 640.9                                          |       | 536.9                                        |       | 1,138.7 |   | 998.6 |   |
|                                                                           |       |                                           |       |                                         |       |   |   |   |   |
| **Income (loss) from operations**                                              | ** ** | **$**                                          | **10.6**   | ** **                                   | **$**      | **(15.7** | **)** | **$** | **—** | ** ** | **$** | **(64.0** | **)** |
| ** **                                                                     | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **(percentage of sales)**            | ** ** |
| **Sales**                                                                      |       |                                           |       |                                         |       |   |   |   |   |
| Trade                                                                          |       | 99.2                                           | %          | 98.3                                         | %          | 98.7 | % | 98.4 | % |
| Related parties (a)                                                            |       | 0.8                                            |       | 1.7                                          |       | 1.3 |   | 1.6 |   |
|                                                                           |       | 100.0                                          | %          | 100.0                                        | %          | 100.0 | % | 100.0 | % |
|                                                                           |       |                                           |       |                                         |       |   |   |   |   |
| **Costs and expenses**                                                         |       |                                           |       |                                         |       |   |   |   |   |
| Materials, labor, and other operating expenses,  including related parties (a) |       | 87.3                                           | %          | 90.2                                         | %          | 87.9 | % | 92.4 | % |
| Depreciation and amortization                                                  |       | 1.3                                            |       | 2.2                                          |       | 1.5 |   | 2.4 |   |
| Selling and distribution expenses                                              |       | 8.1                                            |       | 9.2                                          |       | 8.9 |   | 9.9 |   |
| General and administrative expenses, including  related party (a)         |       | 1.7                                            |       | 1.8                                          |       | 1.7 |   | 2.0 |   |
| Other (income) expense, net                                                    |       | —                                         |       | (0.4                                         | )          | — |   | 0.1 |   |
|                                                                           |       | 98.4                                           | %          | 103.0                                        | %          | 100.0 | % | 106.8 | % |
|                                                                           |       |                                           |       |                                         |       |   |   |   |   |
| I**ncome (loss)  from operations**                                             | ** ** | **1.6**                                        | **%**      | **(3.0**                                     | **)%**     | **—** | **%** | **(6.8** | **)%** |

 

----

(a)                                  As of the March 2010sale of our remaining investment in Boise Inc., Boise Inc. was no longer arelated party. As a result, beginning in March 2010, transactions withLouisiana Timber Procurement Company, L.L.C., represent the only significantrelated-party activity recorded in the financial statements. For moreinformation, see Note 3, Transactions With Related Parties, of the Notesto 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 andsix months ended June 30, 2010 and 2009.

 
| ** **                                       | ** ** | **Three Months Ended********June 30**                                 | ** ** | **Six Months Ended********June 30** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                       | ** ** | **2010**                                                                             | ** ** | **2009**                                           | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                       | ** ** | **(millions)**                                                                       | ** ** |
| **Segment Sales**                                |       |                                                                                 |       |                                               |       |   |   |   |   |
| Building Materials Distribution                  |       | $                                                                                    | 515.4      |                                               | $          | 433.7 |   | $ | 904.6 |   | $ | 768.7 |   |
| Wood Products                                    |       | 199.4                                                                                |       | 134.4                                              |       | 347.4 |   | 250.9 |   |
|                                             |       |                                                                                 |       |                                               |       |   |   |   |   |
| ** **                                       | ** ** | **(percentage of Building Materials********Distribution sales)** | ** ** |
|                                             |       |                                                                                 |       |                                               |       |   |   |   |   |
| **Product Line Sales**                           |       |                                                                                 |       |                                               |       |   |   |   |   |
| **Building Materials Distribution**              | ** ** | ** **                                                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Commodity                                        |       | 50                                                                                   | %          | 44                                                 | %          | 50 | % | 46 | % |
| Engineered wood                                  |       | 11                                                                                   | %          | 11                                                 | %          | 11 | % | 10 | % |
| General line                                     |       | 39                                                                                   | %          | 45                                                 | %          | 39 | % | 44 | % |
|                                             |       |                                                                                 |       |                                               |       |   |   |   |   |
| ** **                                       | ** ** | **(millions)**                                                                       | ** ** |
| **Sales Volumes**                                |       |                                                                                 |       |                                               |       |   |   |   |   |
| **Wood Products**                                |       |                                                                                 |       |                                               |       |   |   |   |   |
| Laminated veneer lumber  (LVL) (cubic feet)      |       | 1.9                                                                                  |       | 1.4                                                |       | 3.6 |   | 2.5 |   |
| I-joists (equivalent lineal  feet)               |       | 32                                                                                   |       | 22                                                 |       | 56 |   | 38 |   |
| Plywood (sq. ft.) (3/8”  basis)             |       | 279                                                                                  |       | 246                                                |       | 513 |   | 492 |   |
| Lumber (board feet)                              |       | 39                                                                                   |       | 35                                                 |       | 75 |   | 65 |   |
| Particleboard (sq. ft.)  (3/4” basis)       |       | 20                                                                                   |       | 21                                                 |       | 40 |   | 39 |   |
|                                             |       |                                                                                 |       |                                               |       |   |   |   |   |
| ** **                                       | ** ** | **(dollars per unit)**                                                     | ** ** |
| **Average Net Selling Prices**                   | ** ** | ** **                                                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Wood Products**                                | ** ** | ** **                                                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Laminated veneer lumber  (LVL) (cubic foot)      |       | $                                                                                    | 15.37      |                                               | $          | 15.30 |   | $ | 15.13 |   | $ | 15.27 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 938                                                                                  |       | 911                                                |       | 923 |   | 906 |   |
| Plywood (1,000 sq. ft.)  (3/8” basis)       |       | 290                                                                                  |       | 210                                                |       | 263 |   | 205 |   |
| Lumber (1,000 board  feet)                       |       | 471                                                                                  |       | 317                                                |       | 444 |   | 311 |   |
| Particleboard (1,000 sq.  ft.) (3/4” basis) |       | 320                                                                                  |       | 343                                                |       | 313 |   | 345 |   |

 

***Operating Results***

 

***Sales***

 

Forthe three months ended June 30, 2010, total sales increased$130.3 million, or 25%, to $651.5 million from $521.2 millionduring the three months ended June 30, 2009. For the six months endedJune 30, 2010, total sales increased $204.1 million, or 22%, to$1,138.7 million from $934.6 million for the same period in the prioryear. In both periods, the increase in sales was driven primarily by higheryear-over-year net selling prices for the products our Building MaterialsDistribution segment distributes and an increase in product prices and salesvolumes in our Wood Products segment.

 

*Building Materials Distribution.*  Sales increased $81.7 million, or 19%,to $515.4 million for thethree months ended June 30, 2010, from $433.7 million for the threemonths ended June 30, 2009. During the six months ended June 30,2010, sales increased $135.9 million, or 18%, to $904.6 million from$768.7 million for the same period in the prior year. The increase in sales for both comparison periods wasprincipally the result of higher prices, specifically a 23% increase in averagenet selling prices for the three months ended June 30, 2010, and a 14%increase for the six-month period ended June 30, 2010, stemming from thesupply-driven run-up in prices that resulted from constrainedinventory levels, curtailments, and a disruption in imports. Also contributingto the increase in sales during the six months ended June 30, 2010, was a4% increase in sales volume.

 

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*Wood Products.* Sales increased $65.0 million, or 48%, to$199.4 million for thethree months ended June 30, 2010, from $134.4 million for the threemonths ended June 30, 2009. During the six months ended June 30,2010, sales increased $96.5 million, or 38%, to $347.4 million from$250.9 million in the same period a year ago. The increasein sales for the three andsix months ended June 30, 2010, was driven primarily by an increase in thevolume of EWP, plywood, and lumber sold and an increase in plywood and lumberprices during the period. Compared with the three and six months endedJune 30, 2009, EWP volumes increased about 40% and 45%, plywood volumesincreased 14% and 4%, and lumber volumes increased 11% and 15%. Plywood pricesincreased 38% and 28% for the three and six months ended June 30, 2010,and lumber prices increased 49% and 43% in the same periods.

 

***Costs and Expenses***

 

Materials, labor, and otheroperating expenses, including from related parties, increased $98.4 million, or 21%, to $568.4 million for the three months endedJune 30, 2010, compared with $470.0 million during the same period inthe prior year. For the six months ended June 30, 2010, these expensesincreased $137.1 million, or 16%, to $1,000.5 million, compared with$863.4 million in the same period in the prior year. During both the threeand six months ended June 30, 2010, materials, labor, and other operatingexpenses, including from related parties, increased due to higher purchasedmaterials costs in our Building Materials Distribution segment. In addition,the increases were also attributable to an increase in sales volume during thefirst half of the year in our Building Materials Distribution segment and anincrease in sales volume in both the three and six months ended June 30,2010, in our Wood Products segment. While total materials, labor, and otheroperating expenses, including from related parties, increased, the costsdecreased as a percent of sales, as these costs did not increase at the samepace as sales.

 

Depreciation andamortization expenses decreased $2.9 million, or 25%, to $8.6 millionfor the three months ended June 30, 2010, compared with $11.5 millionfor the same period in the prior year. For the six months ended June 30,2010, these expenses decreased $5.4 million, or 24%, to$17.2 million, compared with $22.6 million for the same period in theprior year. The decreases are due primarily to accelerating $2.6 millionand $5.2 million of depreciation for the three- and six-month periodsended June 30, 2009, respectively, on the assets at our La Grande,Oregon, lumber manufacturing facility following our decision to close theoperations at that facility.

 

Sellingand distribution expenses increased $4.8 million,or 10%, to $52.6 million forthe three months ended June 30, 2010, compared with $47.8 million forthe same period in the prior year. During the six months ended June 30,2010, these costs increased $7.8 million, or 8%, to $100.8 million,compared with $93.0 million during the same period in 2009. For bothcomparison periods, the increases were due to increased occupancy-relatedexpenses at the building materials distribution facilities we added or expandedin the last year, increased transportation costs, and increased compensationand benefit costs. While total selling and distribution expenses increased, thecosts decreased as a percent of sales, because these costs did not increase atthe same pace as sales.

 

Generaland administrative expenses, including from related parties, increased $1.8 million, or 20%, to$11.2 million for the threemonths ended June 30, 2010, compared with $9.4 million for the sameperiod in the prior year. For the six months ended June 30, 2010, generaland administrative expenses increased $1.5 million, or 8%, to$20.2 million, compared with $18.7 million for the same period in2009. The increase in general and administrative expensesfor the three and six months ended June 30, 2010, was principally theresult of higher compensation and benefit costs. While total general andadministrative expenses, including from related parties, increased, comparedwith the same periods in 2009, the costs decreased as a percent of sales,because these costs did not increase at the same pace as sales.

 

For the three and six months ended June 30, 2010, other (income)expense, net, was insignificant. Other (income) expense, net, for the three andsix months ended June 30, 2009, included $0.9 million of income and$3.4 million of expense related to closing our lumber manufacturing facility inLa Grande, Oregon. The six months ended June 30, 2009, also includeda net $0.7 million noncash curtailment gain related to amending ourdefined benefit pension plan for salaried employees and nonqualified salariedpension plans so that no future benefits would accrue in the plans afterDecember 31, 2009.

 

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

 

Ourincome (loss) from operations increased$26.3 million to $10.6 million of income for thethree months ended June 30, 2010, from a $15.7 million loss in thesame period in 2009. Income (loss) from operations increased $64.0 million to break even for the six months endedJune 30, 2010, compared with a $64.0 million loss during the sameperiod in the prior year. Relative to the three and six months endedJune 30, 2009, our improved operating results were driven primarily byimproved product prices. Also contributing to the improved results for thethree and six months ended June 30, 2010, were favorable per-unitconversion costs in our Wood Products segment. These changes are discussed inmore detail below.

 

*Building Materials Distribution.*  Despite an increase in sales, segment incomedecreased $0.3 million to $7.3 million for the three months ended June 30, 2010, from$7.6 million for the three months ended June 30, 2009. The decreasein income was driven by increased occupancy-related expenses at the buildingmaterials distribution facilities we added or expanded in the last year, and a1.1% decrease in gross margin, which was due primarily tolower-of-cost-or-market adjustments recorded as a result of the steep declinein commodity product prices during second quarter 2010. During the six monthsended June 30, 2010, segment income increased $7.4 million to $6.5 million of income from a$0.9 million loss in the same period in 2009. The increase was drivenprimarily by a 14% increase in average net selling prices and a 4% increase insales volume, while selling and distribution expenses decreased as a percent ofsales.

 

*Wood Products. *Segmentincome increased$27.4 millionto $8.2 million of income forthe three months ended June 30, 2010,compared with a $19.2 million loss for the three months endedJune 30, 2009. During thesix months ended June 30, 2010, segment income increased $58.4 million to $1.6 million of income,compared with a $56.8 million loss in the same period in 2009. In both thethree and six months ended June 30, 2010, the increases in segment incomewere driven primarily by favorable plywood prices, which increased 38% and 28%for the three and six months ended June 30, 2010, and to a lesser extent,favorable lumber prices, which increased 49% and 43% during the same periods.Compared with the three and six months ended June 30, 2009, favorable per-unitconversion costs also contributed to the improved financial results. Inaddition, the Wood Products segment loss for the three and six months endedJune 30, 2009, included $1.7 million and $9.2 million,respectively, of expenses related to closing our lumber manufacturing facilityin 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.

 

Duringthe three months ended June 30, 2009, we recorded $30.3 million ofincome related to our investment in Boise Inc. in our ConsolidatedStatements of Income (Loss), compared with $27.2 million of income and$9.7 million of net expense during the six months ended June 30, 2010and 2009, as follows:

 
| ** **                                             | ** ** | **Three Months  Ended June 30** | ** ** | **Six Months  Ended June 30** | ** ** |
|--------------------------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                             | ** ** | **2009**                                       | ** ** | **2010**                                     | ** ** | **2009** | ** ** |
| ** **                                             | ** ** | **(millions)**                                 | ** ** |
|                                                   |       |                                           |       |                                         |       |   |   |
| Equity in net income of Boise Inc.                |       | $                                              | 24.2       |                                         | $          | 0.1 |   | $ | 23.3 |   |
| Amortization of basis differential                     |       | 6.1                                            |       | 1.8                                          |       | 11.0 |   |
| Loss on shares issued for settlement of CVR  liability |       | —                                         |       | —                                       |       | (1.0 | ) |
| Equity in net income of affiliate                      |       | 30.3                                           |       | 1.9                                          |       | 33.3 |   |
| Gain on sale of shares of equity affiliate (a)         |       | —                                         |       | 25.3                                         |       | — |   |
| Impairment of investment in equity affiliate (b)       |       | —                                         |       | —                                       |       | (43.0 | ) |
| Total                                                  | ** ** | **$**                                          | **30.3**   | ** **                                   | **$**      | **27.2** | ** ** | **$** | **(9.7** | **)** |

 

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(a)                                  In first quarter 2010, wesold 18.3 million Boise Inc. shares for net proceeds of$86.1 million, and we recorded a $25.3 million gain on the sale ofthe shares in our Consolidated Statement of Income (Loss) for the six monthsended June 30, 2010. We reduced our investment in Boise Inc. and ouraccumulated other comprehensive income related to our investment in 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 sixmonths ended June 30, 2009, we recorded a $43.0 million charge in “Impairmentof investment in equity affiliate” in our Consolidated Statement of Income(Loss).

 

*Gain onrepurchase of long-term debt. *During the sixmonths ended June 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 June 30, 2010 and 2009,income tax expense was $0.1 million. Income tax expense was$0.1 million and $0.6 million for the six months ended June 30,2010 and 2009.

 

***Liquidity and Capital Resources***

 

Continued concerns over thelevel of residential construction activity, number of foreclosures,availability and cost of credit, unemployment, and consumer and businessconfidence create uncertainty around the amount of cash flow we will generateduring the remainder of 2010. In response to the continued economic uncertaintyand to enhance our liquidity, we have and will continue to match productionwith market demand.

 

Despite the difficultconditions, we ended the second quarter of 2010 with $264.5 million ofcash, $228.1 million of long-term debt, and $374.8 million of availableliquidity. In first quarter 2010, we sold 18.3 million Boise Inc.shares for net proceeds of $86.1 million. We are obligated under theindenture governing our 7.125% senior subordinated notes (Indenture) to use thenet proceeds (as defined in the Indenture) from the sale of Boise Inc.shares within one year to repay senior indebtedness, acquire additional assets,or make a tender offer at par for a portion of the senior subordinated notes.At June 30, 2010, approximately $34 million of cash related to thesale of Boise Inc. shares was governed by the Indenture. We anticipatethat this amount will be used toward capital spending and that this willfulfill our remaining obligation under the Indenture.

 

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***

 

We operate in acyclical industry, and our operating cash flows vary accordingly. During thesix months ended June 30, 2010, we used $22.3 million of cash foroperating activities due to a $33.6 million increase in working capitalsince the end of 2009, offset partially by $12.5 million of income (net ofnoncash income and expenses). Working capital is subjectto cyclical operating needs, the timing of the

 

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collection of receivables,the payment of payables and expenses, and to a lesser extent, seasonalfluctuations in our operations. The change in working capital during the sixmonths ended June 30, 2010, was attributable primarily to higherreceivables and inventories, offset partially by an increase in accountspayable and accrued liabilities. The increase in receivables in our BuildingMaterials Distribution and Wood Products segments primarily reflects increasedsales of approximately 56% and 58%, respectively, comparing sales for the monthof June 2010 with sales for the month of December 2009, and higherproduct prices. The increases in inventories, accounts payable, and accruedliabilities in 2010 represent a normal seasonal inventory build in our BuildingMaterials Distribution segment and the impact of higher product prices.

 

Duringthe six months ended June 30, 2009, we used $43.9 million of cash foroperating activities due to a $41.4 million loss from operations (net ofnoncash income and expenses) and a $25.1 million contribution to ourpension plans, which was partially offset by $25.2 million of cashgenerated by the reduction of working capital. The losses during the periodwere the result of lower gross margin dollars available in our BuildingMaterials Distribution segment to cover relatively fixed expenses, such asoccupancy, payroll, and delivery costs, as sales volumes declined from the sameperiod in 2009. Also, in our Wood Products segment, the loss was drivenprimarily by pricing and volume declines for plywood, which were partiallyoffset by favorable input costs and productivity improvements. The decrease inworking capital during the six months ended June 30, 2009, was primarilyattributable to a decrease in inventory in our Wood Products segment, whichreflected seasonality as well as reduced inventory as part of our effort tomanage to the weakened demand environment in the housing market, and seasonallyhigher accounts payable in our Building Materials Distribution segment. Thepositive working capital changes in inventory and accounts payable werepartially offset by higher receivables in our Building Materials Distributionand Wood Products segments, which primarily reflect increased sales for themonth of June 2009, compared with sales in December 2008.

 

***Investment Activities***

 

Duringthe six months ended June 30, 2010, we received $86.1 million of netproceeds from the sale of 18.3 million Boise Inc. shares. We usedapproximately $10.0 million of cash for purchases of property, plant, andequipment, which included $4.5 million of expenditures for a new veneerdryer (dryer eight) at our facility in Medford, Oregon. We expect the dryer toreduce our costs through higher productivity and reduced seasonal purchases ofdry veneer. We expect capital expenditures in 2010 to total approximately$35 million to $40 million, excluding acquisitions. This level ofcapital expenditures could increase or decrease as a result of a number offactors, including our financial results, future economic conditions, andtiming of equipment purchases. Our capital spending in 2010 will be forexpansion, business improvement and quality/efficiency projects, replacementprojects, and ongoing environmental compliance.

 

During the six months endedJune 30, 2009, we used approximately $8.1 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 six months of 2009. We purchased a sawmill in Pilot Rock, Oregon, whichhas improved our regional fiber integration in our Wood Products segment and atruss assembly operation and EWP sales office in Saco and Biddeford, Maine,respectively.

 

***Financing Activities***

 

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

 

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

 

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*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 ourrecent and expected capital spending, will fulfill our obligation under theIndenture with respect to net available cash received in connection with theBoise Inc. stock sales.

 

2009

 

During the six months endedJune 30, 2009, we repurchased $11.9 million of senior subordinatednotes for $5.6 million, plus accrued interest. In addition, we repaid, andsubsequently reborrowed, $60.0 million of outstanding borrowings under theRevolving Credit Facility. In connection with the $60.0 million payment onthe Revolving Credit Facility, we amended the Revolving Credit Facility topermanently reduce the lending commitments by $60.0 million, bringing thetotal commitments from $350 million to $290 million. This debt reduction,in combination with capital spending, fulfilled our obligations under thesenior subordinated notes indenture with respect to net available cash receivedin connection with the June 2008 sale of the note receivable fromBoise Inc. and the July 2008 sale of our Brazilian subsidiary.

 

Duringthe six months ended June 30, 2009, we also made $10.7 million of taxdistributions to equity holders, most of which related to the taxable gain onthe sale of our Paper and Packaging & Newsprint assets.

 

***Contractual Obligations***

 

For information oncontractual obligations, see Contractual Obligations in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in our 2009 Annual Report on Form 10-K. At June 30, 2010, there have been 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 six months ended June 30,2010, we repaid the $75.0 million Revolving Credit Facility balance thatwas outstanding at December 31, 2009.

 

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

 

AtJune 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 June 30, 2010, therehave 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.

 

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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 June 30, 2010, we had approximately4,300 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 thenegotiations with our collective bargaining units. Nevertheless, if ourexpectations are not accurate, we could experience a material labor disruptionor significantly increased labor costs at one or more of our facilities, any ofwhich could prevent us from meeting customer demand or reduce our sales 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 are inherentlyuncertain. We review the 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 ofJune 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***

 

Inthe normal course of business, we are exposed to financial risks such aschanges in interest rates, credit risk, and foreign currency exchange rates. Wedo not use derivative instruments for speculative purposes.

 

*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 six months ended June 30, 2010 and 2009, we did notuse any interest rate derivatives to manage this risk.

 

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*Concentration of Credit Risk*

 

Weare exposed to credit risk related to customer accounts receivables. In orderto reduce this risk, we consider customer concentrations and current economictrends and monitor the creditworthiness of significant customers based onongoing credit evaluations. At June 30, 2010, and December 31, 2009,the receivables from a single customer accounted for approximately 17% and 14%of total receivables, respectively. No other customer accounted for 10% or moreof total receivables.

 

*ForeignCurrency Risk*

 

Approximately 3% of our netsales are denominated in currencies other than the U.S. dollar, and we do notbelieve our total exposure to currency fluctuations is significant.

 

*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 conditionsincluding 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.

 

***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-14of the Securities Exchange Act of 1934, as amended, requires that we includethese certifications with this report. This Controls and Procedures sectionincludes information concerning the disclosure controls and procedures referredto in the certifications. You should read this section in conjunction with thecertifications.

 

*Evaluation of Disclosure Controls and Procedures*

 

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

 

We evaluate the effectiveness of 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 that changeas 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 by this Form 10-Q. Based on that evaluation, the CEO and CFO haveconcluded that, as of such date, our disclosure controls and procedures wereeffective in meeting the objectives for which they were designed and wereoperating at a reasonable assurance level.

 

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* *

*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 goalsunder all 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 June 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 expect to receive afuture payment as a class participant in a class action litigation regardingoriented-strand-board (OSB) pricing. We were and continue to be a majorpurchaser of OSB. At this time, we do not have definitive information regardingour share of the industry settlement nor the timing of the receipt of anysettlement amounts and therefore, we have not recorded any amount related tothe potential settlement in our financial statements. We believe the determinationmay occur before the end of 2010.

 

***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. You can findexamples of these statements throughout this report, including “Item 2.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” of 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 for the six months ended June 30, 2010, fromthose listed in our 2009 Form 10-K. We do not assume an obligation toupdate 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***

 

None.

 

***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:  August 12, 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 EndedJune 30, 2010

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                             |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                        |
| 10.1*      |       | Third  Amendment (dated as of April 15, 2010) to Loan and Security Agreement  dated February 22, 2008, among Boise Cascade, L.L.C., certain of its  subsidiaries, and Bank of America, N.A., as Agent for Lenders |
|       |       |                                                                                                                                                                                                                        |
| 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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*ThisAmendment was reported in the company’s Form 8-K Current Report filed April 15,2010.

 

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