**Table of Contents**

** **

 

** **

**UNITED STATESSECURITIES AND 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 March 31,  2010**                                                                                                                                                                                                                                                          |
| ** **                                                                                                                                                                                                                                                                                                       | ** **                                                                                               |
| **o**                                                                                                                                                                                                                                                                                                            | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                                                                       | ** **                                                                                               |
| **For the transition period from                         to                       ** |

 

**Commission File Number:  333-122770**

 

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

(Exact name ofregistrant as specified in its charter)

** **

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

 

**1111West Jefferson Street**

**Suite 300Boise, Idaho 83702-5389**

(Address of principal executive offices) (Zip Code)

 

**(208)384-6161**

(Registrant’stelephone number, including area code)

 

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

 

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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405of 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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

Large accelerated filer o    Acceleratedfiler o   Non-accelerated filer x   Smaller reporting company o

 

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

 

The registrant, a limited liability company, has no voting ornonvoting equity held by nonaffiliates.

 

 

 

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Table of Contents

 

**Table of Contents**

 
| **PART I—FINANCIAL INFORMATION** |
|--------------------------------------------|
|                                       |   |   |   |
| Item 1.                                    | Financial Statements |   | 1 |
|                                       | Notes to Unaudited Quarterly Consolidated Financial  Statements |   | 6 |
|                                       |   |   1. | Nature of  Operations and Basis of Presentation |   | 6 |
|                                       |   |   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 |   | 9 |
|                                       |   |    6. | Leases |   | 10 |
|                                       |   |   7. | Income Taxes |   | 10 |
|                                       |   |   8. | Inventories |   | 11 |
|                                       |   |   9. | Property and  Equipment, Net |   | 11 |
|                                       |   | 10. | Goodwill and  Intangible Assets |   | 11 |
|                                       |   | 11. | Debt |   | 12 |
|                                       |   | 12. | Financial  Instrument Risk |   | 14 |
|                                       |   | 13. | New and  Recently Adopted Accounting Standards |   | 15 |
|                                       |   | 14. | Retirement and  Benefit Plans |   | 15 |
|                                       |   | 15. | Segment Information |   | 15 |
|                                       |   | 16. | Commitments and  Guarantees |   | 17 |
|                                       |   | 17. | Legal  Proceedings and Contingencies |   | 17 |
|                                       |   | 18. | Consolidating  Guarantor and Nonguarantor Financial Information |   | 18 |
|                                       |   |   |   |
| Item 2.                               | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   | 27 |
|                                       |   | Understanding Our Financial Information |   | 27 |
|                                       |   | Executive  Overview |   | 27 |
|                                       |   | Factors That Affect Our Operating Results |   | 28 |
|                                       |   | Our  Operating Results |   | 29 |
|                                       |   | Liquidity and Capital Resources |   | 33 |
|                                       |   | Contractual  Obligations |   | 35 |
|                                       |   | Off-Balance-Sheet Activities |   | 35 |
|                                       |   | Guarantees |   | 35 |
|                                       |   | Seasonal and Inflationary Influences |   | 35 |
|                                       |   | Employees |   | 35 |
|                                       |   | Environmental |   | 35 |
|                                       |   | Critical Accounting Estimates |   | 35 |
|                                       |   | New and Recently Adopted Accounting Standards |   | 36 |
|                                       |   |   |   |
| Item 3.                               | Quantitative and Qualitative  Disclosures About Market Risk |   | 36 |
|                                       |   |   |   |
| Item 4.                               | Controls and Procedures |   | 36 |
|                                       |   |   |   |
| **PART II—OTHER  INFORMATION**   |
| ** **                                 | ** ** | ** ** |
| Item 1.                               | Legal Proceedings |   | 38 |
|                                       |   |   |   |
| Item 1A.                              | Risk Factors |   | 38 |
|                                       |   |   |   |
| Item 2.                                    | Unregistered Sales of Equity Securities  and Use of Proceeds |   | 38 |
|                                       |   |   |   |
| Item 3.                                    | Defaults Upon Senior Securities |   | 38 |
|                                       |   |   |   |
| Item 4.                                    | (Removed and Reserved) |   | 38 |
|                                       |   |   |   |
| Item 5.                                    | Other Information |   | 38 |
|                                       |   |   |   |
| Item 6.                               | Exhibits |   | 38 |

 

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

 

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**PART I—FINANCIAL INFORMATION**

 

***ITEM 1.              FINANCIALSTATEMENTS***

 

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

**(unaudited)**

** **
| ** **                                                           | ** ** | **Three Months Ended********March 31** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                           | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                             | ** ** |
| **Sales**                                                            | ** ** | ** **                                  |       |   |   |
| Trade                                                                |       | $                                           | 477,422    |   | $ | 407,724 |   |
| Related parties                                                      |       | 9,831                                       |       | 5,703 |   |
|                                                                 |       | 487,253                                     |       | 413,427 |   |
|                                                                 |       |                                        |       |   |   |
| **Costs and expenses**                                               | ** ** | ** **                                  |       |   |   |
| Materials, labor, and other operating expenses                       |       | 425,901                                     |       | 381,071 |   |
| Materials, labor, and other operating expenses from  related parties |       | 6,222                                       |       | 12,290 |   |
| Depreciation and amortization                                        |       | 8,590                                       |       | 11,119 |   |
| Selling and distribution expenses                                    |       | 48,165                                      | * *   | 45,241 | * * |
| General and administrative expenses                                  |       | 7,458                                       |       | 6,925 |   |
| General and administrative expenses from related  party              |       | 1,576                                       |       | 2,433 |   |
| Other (income) expense, net                                          |       | (80                                         | )          | 2,681 |   |
|                                                                 |       | 497,832                                     |       | 461,760 |   |
|                                                                 | ** ** | ** **                                  |       |   |   |
| **Loss from operations**                                             |       | (10,579                                     | )          | (48,333 | ) |
|                                                                 |       |                                        |       |   |   |
| Equity in net income of affiliate                                    |       | 1,889                                       |       | 3,005 |   |
| Gain on sale of shares of equity affiliate                           |       | 25,308                                      |       | — |   |
| Impairment of investment in equity affiliate                         |       | —                                      |       | (43,039 | ) |
| Foreign exchange gain (loss)                                         |       | 147                                         |       | (332 | ) |
| Change in fair value of contingent value rights                      |       | —                                      |       | 194 |   |
| Gain on repurchase of long-term debt                                 |       | —                                      |       | 6,026 |   |
| Interest expense                                                     |       | (5,520                                      | )          | (5,616 | ) |
| Interest income                                                      |       | 194                                         |       | 397 |   |
|                                                                 |       | 22,018                                      |       | (39,365 | ) |
| ** **                                                           |       |                                        |       |   |   |
| **Income (loss) before income  taxes**                               |       | 11,439                                      |       | (87,698 | ) |
| Income tax provision                                                 |       | (45                                         | )          | (483 | ) |
| **Net income (loss)**                                                | ** ** | **$**                                       | **11,394** | ** ** | **$** | **(88,181** | **)** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Balance Sheets**

(unaudited)

 
| ** **                                       | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|--------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                       | ** ** | **2010**           | ** **    | **2009**              | ** ** |
| ** **                                       | ** ** | **(thousands)**    | ** **    |
| **ASSETS**                                       |       |               |          |                  |       |
| ** **                                       |       |               |          |                  |       |
| **Current**                                      |       |               |          |                  |       |
| Cash and cash equivalents                        |       | $                  | 336,084       |                  | $          | 287,101 |   |
| Receivables                                      |       |               |          |                  |       |
| Trade, less allowances of $2,293 and $1,584 |       | 151,537            |          | 95,398                |       |
| Related parties                                  |       | 946                |          | 2,604                 |       |
| Other                                            |       | 4,042              |          | 3,495                 |       |
| Inventories                                      |       | 268,513            |          | 232,774               |       |
| Prepaid expenses and other                       |       | 3,555              |          | 1,870                 |       |
|                                             |       | 764,677            |          | 623,242               |       |
|                                             |       |               |          |                  |       |
| **Property**                                     |       |               |          |                  |       |
| Property and equipment, net                      |       | 264,786            |          | 270,229               |       |
| Timber deposits                                  |       | 10,517             |          | 9,264                 |       |
|                                             |       | 275,303            |          | 279,493               |       |
|                                             |       |               |          |                  |       |
| **Investment in equity affiliate**               |       | —             |          | 62,967                |       |
| **Deferred financing costs**                     |       | 5,403              |          | 5,734                 |       |
| **Goodwill**                                     |       | 12,170             |          | 12,170                |       |
| **Intangible assets, net**                       |       | 8,916              |          | 8,919                 |       |
| **Other assets**                                 |       | 7,931              |          | 8,359                 |       |
| **Total assets**                                 | ** ** | **$**              | **1,074,400** | ** **            | **$**      | **1,000,884** | ** ** |

 

See accompanying notes tounaudited quarterly consolidated financial statements.

 

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

**Consolidated Balance Sheets (continued)**

(unaudited)

 
| ** **                                                                                                        | ** ** | **March 31,**                 | ** **    | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|---------------|-----------------------|------------|
| ** **                                                                                                        | ** ** | **2010**                           | ** **    | **2009**              | ** ** |
| ** **                                                                                                        | ** ** | **(thousands,  except unit data)** | ** **    |
| **LIABILITIES AND CAPITAL**                                                                                       |       |                               |          |                  |       |
| ** **                                                                                                        |       |                               |          |                  |       |
| **Current**                                                                                                       |       |                               |          |                  |       |
| Accounts payable                                                                                                  |       |                               |          |                  |       |
| Trade                                                                                                             |       | $                                  | 149,376       |                  | $          | 89,253 |   |
| Related parties                                                                                                   |       | 1,971                              |          | 2,449                 |       |
| Accrued liabilities                                                                                               |       |                               |          |                  |       |
| Compensation and benefits                                                                                         |       | 31,511                             |          | 27,887                |       |
| Interest payable                                                                                                  |       | 7,709                              |          | 3,644                 |       |
| Other                                                                                                             |       | 16,704                             |          | 16,695                |       |
|                                                                                                              |       | 207,271                            |          | 139,928               |       |
|                                                                                                              |       |                               |          |                  |       |
| **Debt**                                                                                                          |       |                               |          |                  |       |
| Long-term debt                                                                                                    |       | 303,146                            |          | 303,146               |       |
|                                                                                                              |       |                               |          |                  |       |
| **Other**                                                                                                         |       |                               |          |                  |       |
| Compensation and benefits                                                                                         |       | 112,305                            |          | 113,290               |       |
| Other long-term liabilities                                                                                       |       | 13,470                             |          | 14,301                |       |
|                                                                                                              |       | 125,775                            |          | 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                                               |       | 5,636                              |          | 5,202                 |       |
|                                                                                                              |       | 8,401                              |          | 7,967                 |       |
| ** **                                                                                                        |       |                               |          |                  |       |
| **Commitments and contingent liabilities**                                                                        |       |                               |          |                  |       |
|                                                                                                              |       |                               |          |                  |       |
| **Capital**                                                                                                       |       |                               |          |                  |       |
| Series A equity units — no par value; 66,000,000 units  authorized and outstanding                 |       | 90,662                             |          | 88,908                |       |
| Series B equity units — no par value; 550,000,000 units  authorized; 532,558,673 units outstanding |       | 339,145                            |          | 333,344               |       |
| Series C equity units — no par value; 44,000,000 units  authorized; 11,951,751 units outstanding   |       | —                             |          | —                |       |
| **Total capital**                                                                                                 |       | 429,807                            |          | 422,252               |       |
| ** **                                                                                                        |       |                               |          |                  |       |
| **Total liabilities and capital**                                                                                 | ** ** | **$**                              | **1,074,400** | ** **            | **$**      | **1,000,884** | ** ** |

 

See accompanying notes tounaudited quarterly consolidated financial statements.

 

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

**Consolidated Statements of Cash Flows**

(unaudited)

** **
| ** **                                                           | ** ** | **Three Months Ended********March 31** | ** **  |
|----------------------------------------------------------------------|------------|---------------------------------------------|-------------|
| ** **                                                           | ** ** | **2010**                                    | ** **  | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                             | ** **  |
| **Cash provided by (used for)  operations**                          |       |                                        |        |   |   |
| Net income (loss)                                                    |       | $                                           | 11,394      |   | $ | (88,181 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                                        |        |   |   |
| Equity in net income of affiliate                                    |       | (1,889                                      | )           | (3,005 | ) |
| 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 |       | 9,123                                       |        | 11,462 |   |
| Pension expense                                                      |       | 2,087                                       |        | 4,938 |   |
| Management equity units expense                                      |       | 434                                         |        | 778 |   |
| Gain on repurchase of long-term debt                                 |       | —                                      |        | (6,026 | ) |
| Facility closure and curtailment costs                               |       | —                                      |        | 2,754 |   |
| Other                                                                |       | (221                                        | )           | 57 |   |
| Decrease (increase) in working capital                               |       |                                        |        |   |   |
| Receivables                                                          |       | (55,027                                     | )           | (25,800 | ) |
| Inventories                                                          |       | (35,739                                     | )           | 13,174 |   |
| Prepaid expenses and other                                           |       | (389                                        | )           | (1,357 | ) |
| Accounts payable and accrued liabilities                             |       | 65,488                                      |        | 7,826 |   |
| Pension contributions                                                |       | (2,976                                      | )           | (25,045 | ) |
| Other                                                                |       | 155                                         |        | (1,350 | ) |
| Cash used for operations                                             |       | (32,868                                     | )           | (66,736 | ) |
|                                                                 |       |                                        |        |   |   |
| **Cash provided by (used for)  investment**                          |       |                                        |        |   |   |
| Proceeds from sale of shares of equity affiliate,  net               |       | 86,123                                      |        | — |   |
| Expenditures for property and equipment                              |       | (3,245                                      | )           | (4,229 | ) |
| Other                                                                |       | (1,027                                      | )           | 238 |   |
| Cash provided by (used for) investment                               |       | 81,851                                      |        | (3,991 | ) |
|                                                                 |       |                                        |        |   |   |
| **Cash provided by (used for)  financing**                           |       |                                        |        |   |   |
| Payments of long-term debt                                           |       | —                                      |        | (5,627 | ) |
| Tax distributions to members                                         |       | —                                      |        | (9,897 | ) |
| Repurchase of management equity units                                |       | —                                      |        | (8 | ) |
| Cash used for financing                                              |       | —                                      |        | (15,532 | ) |
|                                                                 |       |                                        |        |   |   |
| **Increase (decrease) in cash and  cash equivalents**                |       | 48,983                                      |        | (86,259 | ) |
|                                                                 |       |                                        |        |   |   |
| **Balance at beginning of the  period**                              |       | 287,101                                     |        | 275,803 |   |
|                                                                 |       |                                        |        |   |   |
| **Balance at end of the period**                                     | ** ** | **$**                                       | **336,084** | ** ** | **$** | **189,544** | ** ** |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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

**Consolidated Statements of Capital**

(unaudited)

 
| ** **                                                       | ** ** | **Series A********Equity Units** | ** ** | **Series B********Equity Units** | ** ** | **Series C********Equity Units** | ** **  | **Total**  | ** ** |
|------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|---------------------------------------|-------------|------------|------------|
| ** **                                                       | ** ** | **Units**                             | ** ** | **Amount**                            | ** ** | **Units**                             | ** **  | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Capital** | ** ** |
| ** **                                                       | ** ** | **(thousands)**                       | ** ** |
|                                                             |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Balance at  December 31, 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)                                                   |       | —                                |       | —                                |       | —                                |        | 11,394     |       | — |   | — |   | 11,394 |   |
| Other  comprehensive income (loss), net of tax (a) (b) |       |                                  |       |                                  |       |                                  |        |       |       |   |   |   |   |   |   |
| Unfunded  accumulated benefit obligation                         |       | —                                |       | —                                |       | —                                |        | 207        |       | — |   | — |   | 207 |   |
| Equity in other  comprehensive loss of equity affiliate          |       | —                                |       | —                                |       | —                                |        | (4,041     | )          | — |   | — |   | (4,041 | ) |
| Paid-in-kind  dividend                                           |       | —                                |       | 1,754                                 |       | —                                |        | (1,754     | )          | — |   | — |   | — |   |
| Other                                                            |       | —                                |       | —                                |       | —                                |        | (5         | )          | — |   | — |   | (5 | ) |
| **Balance  at March 31, 2010** (c)                          | ** ** | **66,000**                            | ** ** | **$**                                 | **90,662** | ** **                            | **532,559** | ** ** | **$**      | **339,145** | ** ** | **11,952** | ** ** | **$** | **—** | ** ** | **$** | **429,807** | ** ** |

 

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(a)               Totalcomprehensive income (loss) for the three months ended March 31, 2010 and2009, was $7.6 million and $(13.9) million, respectively.

 

(b)              Total othercomprehensive income (loss) for the three months ended March 31, 2010 and2009, was $(3.8) million and $74.3 million, respectively.

 

(c)               Accumulatedother comprehensive loss at March 31, 2010, and December 31, 2009,was $36.7 million and $32.9 million, respectively.

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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***Notes to Unaudited Quarterly Consolidated FinancialStatements***

 

***1.******                                     ******Nature of Operations andBasis of Presentation***

 

*Nature of Operations*

 

We are 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 of OfficeMax(the Forest Products Acquisition). As used in these consolidated financial statements,the terms “BC Holdings,” “we,” and “our” refer to Boise Cascade Holdings,L.L.C., and its consolidated subsidiaries. Our wholly owned subsidiary, BoiseCascade, L.L.C., is a leading U.S. wholesale distributor of building productsand one of the largest producers of engineered wood products and plywood inNorth America.

 

For the period of February 2008 to early March 2010,we were a significant shareholder of Boise Inc., a publicly traded NorthAmerican paper and packaging producer. We acquired our interest inBoise Inc. in connection with the sale of our Paper and Packaging &Newsprint assets in February 2008. In 2009, we sold about half of ourinvestment 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 equity method accounting.

 

We operate our business in the following threereportable segments: Building Materials Distribution, Wood Products, andCorporate and Other. See Note 15, Segment Information, for additionalinformation about our reportable segments.

 

*Basisof Presentation*

 

The quarterly consolidated financial statements havenot been audited by an independent registered public accounting firm but, inthe opinion of management, include all adjustments, consisting only of normal,recurring adjustments, necessary to present fairly the results for the periodspresented. The net income (loss) for the three months ended March 31, 2010and 2009, involved estimates and assumptions about future events. Theseestimates and the underlying assumptions affect the amounts of assets andliabilities reported, disclosures about contingent assets and liabilities, andreported amounts of revenues and expenses. 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. Quarterlyresults are not necessarily indicative of results that may be expected for thefull year.

 

*Subsequent Events*

 

We evaluated events and transactions subsequent to March 31, 2010, andup to the date these consolidated financial statements and notes were includedin this Form 10-Q and filed with the Securities and Exchange Commission.Except as disclosed in these Notes to Unaudited Quarterly ConsolidatedFinancial Statements, we have not identified any other events that wouldrequire recognition or disclosure in the consolidated financial statements andnotes to the financial statements.

 

*Reclassifications*

 

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

 

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

 

In connection with the sale of our Paper and Packaging &Newsprint assets, we received 37.9 million, or 49%, of Boise Inc.’s sharesof common stock. We recorded our investment in “Investment in equity affiliate”on our Consolidated Balance Sheet. The ownership interest provided us with theability to exercise significant influence. In 2009, we sold about half of our investment in Boise Inc.decreasing our ownership position to 18.3 million shares, or 23.5%, at December 31,2009. In first quarter 2010, we sold all of our remaining shares ofBoise Inc. and, as a result, discontinued the equity method of accounting.

 

During the three months ended March 31, 2010 and2009, we recorded $27.2 million of income and $40.0 million of netexpense related to our investment in Boise Inc. in our ConsolidatedStatements of Income (Loss), as follows:

 
|                                                       |       | **Three  Months Ended  March 31** |       |
|------------------------------------------------------------|------------|----------------------------------------|------------|
|                                                       |       | **2010**                               | ** ** | **2009** |   |
|                                                       |       | **(thousands)**                        |       |
|                                                       |       |                                   |       |   |   |
| Equity in net  income (loss) of Boise Inc.            |       | $                                      | 73         |   | $ | (952 | ) |
| Amortization of  basis differential                        |       | 1,816                                  |       | 4,982 |   |
| Loss on shares  issued for settlement of CVR liability (a) |       | —                                 |       | (1,025 | ) |
| Equity in net  income of affiliate                         |       | 1,889                                  |       | 3,005 |   |
| Gain on sale of  shares of equity affiliate (b)            |       | 25,308                                 |       | — |   |
| Impairment of  investment in equity affiliate (c)          |       | —                                 |       | (43,039 | ) |
| Total                                                      | ** ** | **$**                                  | **27,197** | ** ** | **$** | **(40,034** | **)** |

 

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(a)                                  During the threemonths ended March 31, 2009, we settled our obligation related to thecontingent value rights (CVRs) we issued to holders of Boise Inc. commonstock. In connection with the settlement in first quarter 2009, we transferredownership of 0.8 million Boise Inc. shares and recorded a $1.0 millionloss in “Equity in net income of affiliate” in our Consolidated Statement ofIncome (Loss) for the difference between the market price on the date wesettled our obligation with shares and the carrying amount of the sharesrecorded on our Balance Sheet. For more information, see Note 12,Financial Instrument Risk.

 

(b)                                 In first quarter2010, we sold 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). We reduced ourinvestment in Boise Inc. and our accumulated other comprehensive income relatedto our investment in Boise Inc. to zero. Under the terms of the indenturegoverning our 7.125% senior subordinated notes due 2014, we are required to usethe net proceeds from the sale of the Boise Inc. shares within one year torepay senior indebtedness, acquire additional assets, or make a tender offer atpar for a portion of the senior subordinated notes. See Note 11, Debt, formore information.

 

(c)                                  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. The fair value of our investment in Boise Inc. wascalculated based on our 37.1 million shares of Boise Inc. andBoise Inc.’s stock price of $0.61 on March 31, 2009. The carryingvalue of our investment was calculated as the sum of (1) the amountrecorded in “Investment in equity affiliate” on our Consolidated Balance Sheetand (2) the amount of accumulated other comprehensive income related toour investment in Boise Inc. recorded within “Series B equity units”on our Consolidated Balance Sheet.

 

We made the other-than-temporary-impairmentdetermination based primarily on the length of time and extent to which thefair value of our investment 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, in first quarter2009, we recorded a $43.0 million charge in “Impairment of investment inequity affiliate” in our Consolidated Statement of Income (Loss) and reduced by$40.8 million accumulated other comprehensive loss related to ourinvestment in Boise Inc. (which was accumulated monthly from recording ourproportionate share of Boise Inc.’s other comprehensive income or loss). Inaddition, we decreased “Investment in equity affiliate” $2.2 million toreduce the aggregate carrying value of our investment recorded on ourConsolidated Balance Sheet to its fair value of $0.61 per share on March 31,2009.

 

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***3.******                                     ******Transactions With RelatedParties***

 

In first quarter 2010, we sold our remaininginvestment in Boise Inc. (see Note 2, Investment in Equity Affiliate,for more information), and because of the disposition, Boise Inc. andBC Holdings are no longer related parties. The 2010 related-party activitywith Boise Inc. described below includes only those sales and costs andexpenses transacted prior to March 2010, when BC Holdings andBoise Inc. were related parties. As a result, beginning in March 2010,transactions with Louisiana Timber Procurement Company, L.L.C. (LTP)(discussed below) represent the only significant related-party activityrecorded in our Consolidated Financial Statements.

 

*Sales*

 

The $9.8 million and $5.7 million of related-partysales recorded in our Consolidated Statements of Income (Loss) for the threemonths ended March 31, 2010 and 2009, are for chip and pulpwood sales toBoise Inc. (for the period they were a related party) and LTP from our WoodProducts segment. The sales were made at prices designed to approximate market.LTP is an unconsolidated variable-interest entity that is 50% owned byBoise Cascade, L.L.C., and 50% owned by Boise Inc. LTP procuressaw timber, pulpwood, residual chips, and other residual wood fiber to meet thewood and fiber requirements of Boise Inc. and Boise Cascade, L.L.C. We arenot the primary beneficiary of LTP, as we do not have power to direct theactivities that most significantly impact the economic performance of LTP.Accordingly, we do not consolidate LTP’s results in our financial statements.

 

*Costs and Expenses*

 

During the three months ended March 31,2010 and 2009, we purchased $5.6 million and $11.2 million of fiberfrom LTP. We also recorded $0.3 million and $0.6 million ofrelated-party expenses for transportation services purchased fromBoise Inc. during the three months ended March 31, 2010 and 2009. Wepurchased the fiber and transportation services at prices that approximatedmarket prices. These costs are recorded in “Materials, labor, and otheroperating expenses from related parties” in our Consolidated Statements ofIncome (Loss).

 

In connection with the sale of our Paper and Packaging &Newsprint assets in February 2008, we entered into an Outsourcing ServicesAgreement under which Boise Inc. provides a number of corporate staff servicesto us at cost. These services include information technology, accounting, andhuman resource services. The agreement, as extended, expires on February 22,2012. The agreement automatically renews for successive one-year terms unlesseither party provides notice of termination to the other party at least12 months in advance of the expiration date. The Outsourcing ServicesAgreement gives us (but not Boise Inc.) the right to terminate all or anyportion of the services provided to us on 30 days’ notice, subject topayment of an absorption fee. The remaining absorption fee of $1.0 millionis allocated among the services provided under the contract and declines tozero in total and on an allocable basis through February 22, 2011. Duringthe three months ended March 31, 2010 and 2009, we recorded related-partyexpenses from the Outsourcing Services Agreement in our Consolidated Statementsof Income (Loss) as indicated in the table below. Expenses incurred under theOutsourcing Services Agreement in March 2010 are not related-partyexpenses and, therefore, are not included in the table below.

 
| ** **                                                           | ** ** | **Three  Months Ended  March 31** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                           | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(thousands)**                        | ** ** |
|                                                                 |       |                                   |       |   |   |
| Materials,  labor, and other operating expenses from related parties |       | $                                      | 332        |   | $ | 490 |   |
| Selling and  distribution expenses                                   |       | 456                                    |       | 694 |   |
| General and  administrative expenses from related party              |       | 1,576                                  |       | 2,433 |   |
|                                                                 | ** ** | **$**                                  | **2,364**  | ** ** | **$** | **3,617** | ** ** |

 

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*Tax Distributions*

 

We are a limited liability company, and the majorityof our businesses and assets are held and operated by limited liability companies,which are not subject to entity-level federal or state income taxation. We makecash distributions to permit the members of BC Holdings and affiliates topay income taxes. During the three months ended March 31, 2010, we made nocash tax distributions. During the three months ended March 31, 2009, wemade $9.9 million of cash tax distributions, which primarily related tothe net taxable gain on the sale of our Paper and Packaging &Newsprint assets. During the three months ended March 31, 2009, we paid$7.3 million to Forest Products Holdings (FPH), our majority owner. FPH inturn paid $4.9 million to Madison Dearborn Partners, our equity sponsor,and $2.4 million to management investors. For the three months ended March 31,2009, we paid $2.6 million to OfficeMax to fund their tax obligationsrelated 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 March 31, 2010, and December 31, 2009,we had $2.2 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 to our customers based on thevolume of their purchases. We provide the rebates to increase the sell-throughof our products. The rebates are recorded as a decrease in “Sales, Trade.” At March 31,2010, and December 31, 2009, we had $9.4 million and$9.9 million, respectively, of rebates payable to our customers recordedin “Accrued liabilities, Other” on our Consolidated Balance Sheets.

 

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

 

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

 
| ** **                             | ** ** | **Three  Months Ended********March 31** | ** ** |
|----------------------------------------|------------|----------------------------------------------|------------|
| ** **                             | ** ** | **2010**                                     | ** ** | **2009** | ** ** |
| ** **                             | ** ** | **(thousands)**                              | ** ** |
|                                   |       |                                         |       |   |   |
| Facility closures and curtailments (a) |       | $                                            | —     |   | $ | 4,676 |   |
| Changes in pension plans (b)           |       | —                                       |       | (747 | ) |
| Other, net                             |       | (80                                          | )          | (1,248 | ) |
| ** **                             | ** ** | **$**                                        | **(80**    | **)** | **$** | **2,681** | ** ** |

 

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(a)                                  In first quarter2009, we committed to indefinitely curtailing the lumber manufacturing facilityin La Grande, Oregon, and we recorded $4.4 million of expense in “Other(income) expense, net.” In addition, we recorded $2.5 million ofaccelerated depreciation in “Depreciation and amortization” and$0.6 million of expenses in “Materials, labor, and other operatingexpenses” in our Consolidated Statement of Income (Loss).

 

(b)                                 In March 2009,we amended 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.

 

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

 

We lease a portion of ourdistribution centers as well as other property and equipment under operatingleases. For purposes of determining straight-line rent expense, the lease termis calculated from the date we first take possession of the facility, includingany periods of free rent and any option periods we are reasonably assured ofexercising. Straight-line rent expense is also adjusted to reflect anyallowances or reimbursements provided by the lessor. Rental expense foroperating leases was $3.5 million and $3.3 million for the threemonths ended March 31, 2010 and 2009. Sublease rental income was notmaterial in any of the periods presented.

 

Fornoncancelable operating leases with remaining terms of more than one year, theminimum lease payment requirements are $9.5 million for the remainder of2010, $11.6 million in 2011, $10.7 million in 2012, $9.5 millionin 2013, $8.4 million in 2014, and $7.5 million in 2015, with totalpayments thereafter of $36.0 million. These future minimum lease paymentrequirements have not been reduced by sublease rentals due in the future undernoncancelable subleases. Minimum sublease income received in the future is notexpected to be material.

 

Substantially all lease agreements have fixed paymentterms based on the passage of time. Some lease agreements provide us with theoption to purchase the leased property. Additionally, some agreements containrenewal options averaging approximately three years, with fixed payment termssimilar to those in the original lease agreements.

 

***7.******                                     ******Income Taxes***

 

*TaxDistributions*

 

We are a limited liability company, and the majority of ourbusinesses and assets are held and operated by limited liability companies,which are not subject to entity-level federal or state income taxation. Theincome taxes with respect to these operations are payable by our equity holdersin accordance with their respective ownership percentages. We make cashdistributions to permit the members of BC Holdings and affiliates to pay thesetaxes. Both our senior credit facilities and the indenture governing our notespermit these distributions. See Note 3, Transactions With Related Parties,for more information.

 

*Income Tax (Provision) Benefit*

 

Ourincome tax provision generally consists of income taxes payable to states thatdo not allow for the income tax liability to be passed through to our equityholders, as well as income taxes payable by our separate subsidiaries that aretaxed as corporations. For the three months ended March 31,2010 and 2009, income tax expense was $45,000 and $0.5 million. Duringboth the three months ended March 31, 2010 and 2009, our effective taxrate for our separate subsidiaries that are taxed as corporations was 34.0%. AtMarch 31, 2010, and December 31, 2009, we had no deferred tax assetsrelated to our taxable subsidiaries recorded on our Consolidated BalanceSheets.

 

Excluding tax distributions to our equity holders (see Note 3,Transactions With Related Parties), we received or paid an insignificant amount of incometaxes, net, during the three months ended March 31, 2010 and 2009.

 

*Income Tax Uncertainties*

 

BC Holdings, or one of our subsidiaries, files federal income taxreturns in the U.S. and Canada and various state and foreign income tax returnsin the major state jurisdictions of Alabama, California, Idaho, Oregon, Texas,and Washington. We are subject to tax examinations from October 29, 2004(our inception) to present. In 2008, the United States Internal Revenue Servicecompleted an audit of BC Holdings’ 2005 and 2006 tax years and issued afinal audit report with a proposed adjustment. We responded with a request toappeal the adjustment. If we do not prevail in appeals, any incremental taxowed from the adjustment would be payable by our equity holders in accordancewith the allocation rules in our Operating Agreement. We do not expectcash distributions to members of BC Holdings and affiliates resulting fromthe adjustment, if any, to be significant.

 

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We recognize tax liabilities and adjust theseliabilities when our judgment changes as a result of the evaluation of newinformation not previously available or as new uncertainties occur. In thirdquarter 2007, the Canadian Revenue Agency began an audit of Boise AllJoist fortax years 2005 and 2006, which remains pending. At December 31, 2009, weincreased the amount of our unrecognized tax benefit by $5.8 million, as aresult of uncertainty surrounding the audit of the Canadian tax return of ouroperating subsidiary in Canada. We charged the $5.8 million ofunrecognized tax liabilities to income tax expense, with an offsettingadjustment to the valuation allowances on deferred tax assets related to BoiseAllJoist’s net operating losses. As a result, the net impact of recording theunrecognized tax benefit in our 2009 Consolidated Statement of Income (Loss)was zero, and because of sufficient net operating loss carryforwards from prioryears, we do not expect to pay cash taxes related to the uncertainty.

 

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

 

Inventoriesinclude the following:

 
| ** **                         | ** ** | **March 31,********2010** | ** **  | **December 31,  2009** | ** ** |
|------------------------------------|------------|--------------------------------|-------------|-----------------------------|------------|
| ** **                         | ** ** | **(thousands)**                | ** **  |
|                               |       |                           |        |                        |       |
| Finished goods and work in process |       | $                              | 224,284     |                        | $          | 187,215 |   |
| Logs                               |       | 27,489                         |        | 29,302                      |       |
| Other raw materials and supplies   |       | 16,740                         |        | 16,257                      |       |
| ** **                         | ** ** | **$**                          | **268,513** | ** **                  | **$**      | **232,774** | ** ** |

 

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

 

Property and equipment, net, consisted of thefollowing asset classes:

 
| ** **                    | ** ** | **March 31,  2010** | ** **  | **December 31,  2009** | ** ** |
|-------------------------------|------------|--------------------------|-------------|-----------------------------|------------|
| ** **                    | ** ** | **(thousands)**          | ** **  |
|                          |       |                     |        |                        |       |
| Land and land improvements    |       | $                        | 36,618      |                        | $          | 36,618 |   |
| Buildings and improvements    |       | 111,178                  |        | 110,268                     |       |
| Machinery and equipment       |       | 279,759                  |        | 279,455                     |       |
| Construction in progress      |       | 5,465                    |        | 4,156                       |       |
| ** **                    |       | 433,020                  |        | 430,497                     |       |
| Less accumulated depreciation |       | (168,234                 | )           | (160,268                    | )          |
|                          | ** ** | **$**                    | **264,786** | ** **                  | **$**      | **270,229** | ** ** |

 

***10.******                              ******Goodwilland Intangible Assets***

 

Goodwill represents the excess of purchase price andrelated costs over the value assigned to the net tangible and intangible assetsof businesses acquired. We assess our acquired goodwill and intangible assetswith indefinite lives for impairment at least annually in the absence of anindicator of possible impairment and immediately upon an indicator of possibleimpairment. We assess goodwill and intangible assets with indefinite lives inthe fourth quarter of each year using a discounted cash flow approach. We alsoevaluate the remaining useful lives of our finite-lived purchased intangibleassets to determine whether any adjustments to the useful lives are necessary.We completed our annual assessments in fourth quarter 2009 and determined thatthere was no impairment.

 

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Thecarrying amount of our goodwill by segment is as follows:

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

 

At March 31, 2010, and December 31, 2009, intangible assetsrepresent the values assigned to trade names and trademarks, customerrelationships, and a noncompete agreement. The trade names and trademarks havean indefinite life and are not amortized. Customer relationships were amortizedover five years, and the noncompete agreement is amortized over two years.

 

Intangible assets consisted of the following:

 
| ** **                 | ** ** | **March 31, 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                               |       | (9 | ) | 16 |   |
| ** **                 | ** ** | **$**                            | **11,025** | ** ** | **$** | **(2,109** | **)** | **$** | **8,916** | ** ** |

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

 

Intangible assetamortization expense was insignificant for each of the three-month periodsended March 31, 2010 and 2009. Amortization expense is not expected to besignificant for the remainder of 2010 or thereafter.

 

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

 

At March 31, 2010, and December 31, 2009,our long-term debt was as follows:

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

 

*Asset-Based Revolving CreditFacility*

 

In May 2009, Boise Cascade, L.L.C., and itsprincipal operating subsidiaries, Boise Building Solutions Manufacturing,L.L.C., and Boise Building Solutions Distribution, L.L.C., as borrowers,amended it’s five-year $350 million senior secured asset-based revolvingcredit facility with Bank of America (Revolving Credit Facility) to permanentlyreduce the lending commitments by $60.0 million, bringing the totalcommitments to $290.0 million. At both March 31, 2010, and December 31,2009, we had 

 

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$75.0 million of borrowings outstanding under theRevolving Credit Facility. On April 1, 2010, we borrowed an additional$45.0 million under the Revolving Credit Facility, bringing the totalamount outstanding to $120.0 million. On April 30, 2010, we repaidthe $120.0 million and we permanently reduced the lending commitments by alike amount, bringing the total commitments under the Revolving Credit Facilityto $170.0 million.

 

Interest rates under the Revolving Credit Facility arebased on either the prime rate or the London Interbank Offered Rate (LIBOR).Pricing is subject to quarterly adjustment based on the average availabilityunder the Revolving Credit Facility during the prior quarter. The range ofborrowing costs under the pricing grid is: (i) prime plus 1.00% to 1.50% or (ii) LIBOR plus 2.50% to3.00%. For the three months ended March 31, 2010 and 2009, the averageinterest rates for our borrowings under the Revolving Credit Facility were 2.8%and 3.0%. Letters of credit are subject to a 0.125% fronting fee payable to theissuing bank and a fee payable to the lenders equal to the product of theinterest rate spread applicable to LIBOR borrowings under the RevolvingCredit Facility and the daily average amount available for drawing under theoutstanding letters of credit.

 

The minimum and maximum borrowings under the RevolvingCredit Facility and the weighted average amount of borrowings outstanding underthe Revolving Credit Facility during the three months ended March 31,2010, were $75.0 million. The Revolving Credit Facility provides for acommitment fee of 0.50% per annum payable to the lenders on the average dailyunused portion of the Revolving Credit Facility. The Revolving Credit Facilityis guaranteed by our domestic subsidiaries (other than the three borrowersnoted above) and is secured by a first-priority security interest in the stockof our foreign subsidiaries and substantially all of our domestic assets,except for property, plant, and equipment.

 

Borrowings under the Revolving Credit Facility areconstrained by a borrowing base formula dependent upon levels of eligibleinventory and receivables, reduced by outstanding letters of credit, and, whenour fixed-charge coverage ratio is below 1:1, as it was on March 31, 2010,by a further requirement that we maintain a combination of unrestricted cashand borrowing base, less outstanding loans, at or in excess of the greater of$45 million or 15% of the borrowing base determined under the RevolvingCredit Facility. At March 31, 2010, our aggregate liquidity fromunrestricted cash and cash equivalents and unused borrowing capacity under theRevolving Credit Facility totaled $426.4 million. After reducing ourRevolving Credit Facility lending commitments by $120.0 million (asdiscussed above), our aggregate liquidity decreased approximately$58 million based on our March 31, 2010, borrowing base.

 

In addition, theRevolving Credit Facility contains a restriction on capital investments that isapplicable when a minimum availability threshold is not met. That covenant wasnot applicable on March 31, 2010. The Revolving Credit Facility alsocontains customary nonfinancial covenants, including a negative pledge covenantand restrictions on distributions to equity holders, acquisitions, anddivestitures. These covenants will become more restrictive if a minimumavailability threshold is not maintained.

 

*Letters of Credit*

 

At March 31, 2010, and December 31, 2009, wehad $17.1 million and $16.5 million of letters of credit outstanding.These letters of credit reduce our borrowing capacity under the RevolvingCredit Facility.

 

*SeniorSubordinated Notes*

 

In October 2004,Boise Cascade, L.L.C., issued $400.0 million of 7.125% senior subordinatednotes due in 2014. In July 2005, we completed an exchange offer wherebyall of our senior subordinated notes were exchanged for registered securitieswith identical terms (other than terms relating to registration rights) to thenotes issued in October 2004. We may redeem all or part of the notes atany time at redemption prices set forth in the indenture governing our 7.125%senior subordinated notes (Indenture). If we sell assets or experience specifickinds of changes in control, we may be required to purchase the notes. We repurchased $160.0 million of the notes at paron April 15, 2008. During the three months ended March 31, 2009, werepurchased $11.9 million of senior subordinated notes and recorded a$6.0 million gain in “Gain on repurchase of long-term debt” in ourConsolidated Statement of Income (Loss).

 

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We are obligated to use the net proceeds (as definedin the Indenture) from the sale of Boise Inc. shares (see Note 2,Investment in Equity Affiliate) within one year to repay senior indebtedness,acquire additional assets, or make a tender offer at par for a portion of thesenior subordinated notes. At March 31, 2010, and December 31, 2009,approximately $160 million and $78 million of cash, respectively, wasgoverned by the Indenture. We anticipate that the $120.0 million repaymentand commitment reduction of the Revolving Credit Facility on April 30,2010 (discussed above), in combination with our recent and expected capitalspending, will fulfill our obligation under the Indenture with respect to netavailable cash received in connection with the Boise Inc. stock sales.

 

*Other*

 

For the three months ended March 31, 2010 and 2009, cash payments forinterest, net of interest capitalized, were $0.9 million and $1.4 million,respectively.

 

At March 31, 2010,the book value of fixed-rate debt was $228.1 million, and the fair valuewas estimated to be $209.1 million. The difference between book value andfair value is derived from the difference between the period-end marketinterest rate and the stated rate of our fixed-rate, long-term debt. Weestimated the fair value based on quoted market prices for similar obligationswith like maturities.

 

***12.******                              ******Financial Instrument Risk***

 

In the normal course of business, we are exposed tofinancial risks such as changes in interest rates, credit risk, and foreigncurrency exchange rates. We do not use derivative instruments for speculativepurposes.

 

*Interest Rate Risk*

 

We are exposed to interest rate risk arising from fluctuations in interestrates on our cash and cash equivalents and bank credit facility. During thethree months ended March 31, 2010 and 2009, we did not use any interestrate derivatives to manage this risk.

 

*Concentration of Credit Risk*

 

We are exposed to creditrisk related to customer accounts receivables. In order to reduce this risk, weconsider customer concentrations and current economic trends and monitor thecreditworthiness of significant customers based on ongoing credit evaluations.At March 31, 2010, and December 31, 2009, the receivables from asingle customer accounted for approximately 13% and 14% of total receivables,respectively. No other customer accounted for 10% or more of total receivables.

 

*Foreign Currency Risk*

 

We have manufacturingoperations in the United States and Canada. As a result, we are exposed tomovements in the foreign currency exchange rate in Canada. During the three months ended March 31 2010 and2009, we did not useany foreign currency hedges.

 

*Contingent Value Rights*

 

As part of the sale ofour Paper and Packaging & Newsprint assets, Terrapin Partners VenturePartnership and Boise Cascade, L.L.C., issued 21.2 million contingentvalue rights (CVRs) to holders of Boise Inc. stock. During the three monthsended March 31, 2009, we settled our obligation related to the CVRs using0.8 million Boise Inc. shares and recorded a $1.0 million loss in “Equityin net income of affiliate” in our Consolidated Statement of Income (Loss) forthe difference between the Boise Inc. share price on the date we settledour obligation with shares and the carrying amount of the shares recorded onour Consolidated Balance Sheet.

 

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***13.******                              ******Newand Recently Adopted Accounting Standards***

 

In June 2009, theFinancial Accounting Standards Board (FASB) issued (SFAS) Statement ofFinancial Accounting Standards No. 167 or Accounting Standards Update(ASU) 2009-17, *Amendments to FASB Interpretation No. 46(R) *(FASBAccounting Standards Codification 810), which amends the consolidation guidanceapplicable to variable-interest entities (VIEs). SFAS No. 167 requiresthat entities evaluate former qualified special-purpose entities forconsolidation, changes the approach to determining a VIE’s primary beneficiaryfrom a quantitative assessment to a qualitative assessment, and increases thefrequency of required reassessment to determine whether a company is theprimary beneficiary of a VIE. It also requires additional year-end and interimdisclosures. We adopted ASU 2009-17 on January 1, 2010, and the adoptiondid not have a material impact on our financial position or results ofoperations.

 

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

 

***14.******                              ******Retirement and BenefitPlans***

 

The following tablepresents the pension benefit costs:

 
| ** **                                     | ** ** | **Pension Benefits**   | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **Three Months Ended** | ** ** |
| ** **                                     | ** ** | **March 31**      | ** ** |
| ** **                                     | ** ** | **2010**               | ** ** | **2009** | ** ** |
| ** **                                     | ** ** | **(thousands)**        | ** ** |
|                                           |       |                   |       |   |   |
| Service  cost                                  |       | $                      | 1,394      |   | $ | 2,953 |   |
| Interest  cost                                 |       | 5,075                  |       | 5,024 |   |
| Expected  return on plan assets                |       | (4,589                 | )          | (4,560 | ) |
| Recognized  actuarial loss                     |       | 163                    |       | 23 |   |
| Amortization  of prior service costs and other |       | 44                     |       | 46 |   |
| Curtailment  loss                              |       | —                 |       | 1,452 |   |
| Net periodic benefit cost                      | ** ** | **$**                  | **2,087**  | ** ** | **$** | **4,938** | ** ** |

 

In first quarter 2010, wemade $3.0 million in cash contributions to the pension plans. For theremainder of 2010, we expect that we will be required to contribute less than$1 million to the pension plans.

 

***15.******                        ******Segment Information***

 

We operate our businessusing three reportable segments: Building Materials Distribution, Wood Products, and Corporate and Other.There are no differences in our basis of measurement of segment profit or lossfrom those disclosed in Note 15, Segment Information, of the Notes toConsolidated Financial Statements in “Item 8. Financial Statements andSupplementary Data” in our 2009 Form 10-K.

 

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An analysis of ouroperations by segment is as follows:

 
| ** **                                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|-------------------------------------------------|------------|----------------|------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                      | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **Sales**      | ** ** | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | ** **     | ** ** | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                      | ** ** | **Trade**      | ** ** | **Parties** | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                      | ** ** | **(millions)** | ** ** |
| **Three Months Ended March 31, 2010**      |       |           |       |        |       |             |       |       |       |       |       |             |       |       |       |
| Building  Materials Distribution                |       | $              | 389.1      |        | $          | —           |       | $          | —     |       | $          | 389.1            |       | $          | (0.7       | ) | $ | 1.8 |   | $ | 1.1 |   |
| Wood  Products                                  |       | 88.3           |       | 9.9         |       | 49.8             |       | 148.0      |       | (6.6       | )          | 6.7              |       | 0.1        |       |
| Corporate  and Other                            |       | —         |       | —      |       | —           |       | —     |       | (3.1       | )          | 0.1              |       | (3.0       | )          |
|                                            |       | 477.4          |       | 9.9         |       | 49.8             |       | 537.1      |       | (10.4      | )          | 8.6              |       | (1.8       | )          |
| Intersegment  eliminations                      |       | —         |       | —      |       | (49.8            | )          | (49.8      | )          | —     |       | —           |       | —     |       |
| 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                               |       | —         |       | —      |       | —           |       | —     |       | (5.5       | )          | —           |       | —     |       |
| Interest  income                                |       | —         |       | —      |       | —           |       | —     |       | 0.2        |       | —           |       | —     |       |
| ** **                                      | ** ** | **$**          | **477.4**  | ** **  | **$**      | **9.9**          | ** ** | **$**      | **—** | ** ** | **$**      | **487.3**        | ** ** | **$**      | **11.4**   | ** ** | **$** | **8.6** | ** ** | **$** | **25.4** | ** ** |

 
| ** **                                       | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **Income** | ** ** | ** **       | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|----------------|------------|-------------|------------|------------------|------------|------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                       | ** ** | ** **     | ** ** | ** **  | ** ** | ** **       | ** ** | ** ** | ** ** | **(Loss)** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Sales**      | ** ** | **Before**  | ** ** | **Depreciation** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | ** **     | ** ** | **Related** | ** ** | **Inter-**       | ** ** | ** ** | ** ** | **Income** | ** ** | **and**          | ** ** | **EBITDA** | ** ** |
| ** **                                       | ** ** | **Trade**      | ** ** | **Parties** | ** ** | **segment**      | ** ** | **Total**  | ** ** | **Taxes**  | ** ** | **Amortization** | ** ** | **(d)**    | ** ** |
| ** **                                       | ** ** | **(millions)** | ** ** |
| **Three Months Ended March 31,  2009**      |       |           |       |        |       |             |       |       |       |       |       |             |       |       |       |
| Building Materials Distribution                  |       | $              | 334.9      |        | $          | —           |       | $          | 0.1        |       | $          | 335.0            |       | $          | (8.5       | ) | $ | 1.9 |   | $ | (6.6 | ) |
| Wood Products (b)                                |       | 72.8           |       | 5.7         |       | 38.0             |       | 116.5      |       | (37.6      | )          | 9.1              |       | (28.6      | )          |
| Corporate and Other                              |       | —         |       | —      |       | —           |       | —     |       | (2.6       | )          | 0.1              |       | (2.3       | )          |
|                                             |       | 407.7          |       | 5.7         |       | 38.1             |       | 451.5      |       | (48.7      | )          | 11.1             |       | (37.5      | )          |
| Intersegment eliminations                        |       | —         |       | —      |       | (38.1            | )          | (38.1      | )          | —     |       | —           |       | —     |       |
| Equity in net income of affiliate                |       | —         |       | —      |       | —           |       | —     |       | 3.0        |       | —           |       | 3.0        |       |
| 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                                 |       | —         |       | —      |       | —           |       | —     |       | (5.6       | )          | —           |       | —     |       |
| Interest income                                  |       | —         |       | —      |       | —           |       | —     |       | 0.4        |       | —           |       | —     |       |
| ** **                                       | ** ** | **$**          | **407.7**  | ** **  | **$**      | **5.7**          | ** ** | **$**      | **—** | ** ** | **$**      | **413.4**        | ** ** | **$**      | **(87.7**  | **)** | **$** | **11.1** | ** ** | **$** | **(71.4** | **)** |

** **

----

(a)                                  In first quarter 2010, we sold18.3 million Boise Inc. shares for net proceeds of $86.1 million, andwe recorded a $25.3 million gain on the sale of the shares in ourConsolidated Statement of Income (Loss). See Note 2, Investment in EquityAffiliate, for more information.

 

(b)                                 Included$7.5 million and $5.0 million of expenses in income (loss) beforetaxes and EBITDA, respectively, related to committing to indefinitelycurtailing the lumber manufacturing facility in La Grande, Oregon.

 

(c)                                  On March 31,2009, we concluded that our investment in Boise Inc. met the definition of otherthan temporarily impaired*.*Accordingly, we recorded a $43.0 million charge in “Impairment ofinvestment in equity affiliate” in our Consolidated Statement of Income (Loss) for the three months ended March 31,2009. See Note 2, Investment in Equity Affiliate, for more information.

 

(d)                                 EBITDArepresents income (loss) before interest (interest expense and interestincome), income taxes, and depreciation and amortization. EBITDA is the primarymeasure used by our chief operating decision makers to evaluate segmentoperating performance and to decide how to allocate resources to segments. We 

 

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believeEBITDA is useful to investors because it provides a means to evaluate theoperating performance of our segments and our company on an ongoing basis usingcriteria that are used by our internal decision makers and because it isfrequently used by investors and other interested parties when comparingcompanies in our industry that have different financing and capital structuresand/or tax rates. We believe EBITDA is a meaningful measure because it presentsa transparent view of our recurring operating performance and allows managementto readily view operating trends, perform analytical comparisons, and identifystrategies to improve operating performance. EBITDA, however, is not a measureof our liquidity or financial performance under generally accepted accountingprinciples (GAAP) and should not be considered as an alternative to net income(loss), income (loss) from operations, or any other performance measure derivedin accordance with GAAP or as an alternative to cash flow from operatingactivities as a measure of our liquidity. The use of EBITDA instead of netincome (loss) or segment income (loss) has limitations as an analytical tool,including the inability to determine profitability; the exclusion of interestexpense, interest income, and associated significant cash requirements; and theexclusion of depreciation and amortization. Management compensates for theselimitations by relying on our GAAP results. Our measures of EBITDA are notnecessarily comparable to other similarly titled captions of other companies dueto potential inconsistencies in the methods of calculation.

 

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

 
| ** **                     | ** ** | **Three Months Ended  March 31** | ** ** |
|--------------------------------|------------|---------------------------------------|------------|
| ** **                     | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| ** **                     | ** ** | **(millions)**                        | ** ** |
|                           |       |                                  |       |   |   |
| Net  income (loss)             |       | $                                     | 11.4       |   | $ | (88.2 | ) |
| Interest  expense              |       | 5.5                                   |       | 5.6 |   |
| Interest  income               |       | (0.2                                  | )          | (0.4 | ) |
| Income  tax provision          |       | —                                |       | 0.5 |   |
| Depreciation  and amortization |       | 8.6                                   |       | 11.1 |   |
| EBITDA                         | ** ** | **$**                                 | **25.4**   | ** ** | **$** | **(71.4** | **)** |

 

***16.******                              ******Commitments and Guarantees***

 

*Commitments*

 

We have commitments for leases and long-term debt thatare discussed further in Note 6, Leases, and Note 11, Debt. We are aparty to a number of long-term log and fiber supply agreements that arediscussed in Note 16, Commitments and Guarantees, of the Notes to Consolidated Financial Statements in “Item 8.Financial Statements and Supplementary Data” in our 2009 Form 10-K. In addition, we havepurchase obligations for goods and services, capital expenditures, and rawmaterials entered into in the normal course of business. At March 31,2010, there have been no material changes to our commitments outside the normalcourse of business, except as disclosed in Note 11, Debt.

 

# *Guarantees*

# * *

We provide guarantees,indemnifications, and assurances to others. Note 16, Commitments and Guarantees, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and SupplementaryData” in our 2009 Form 10-K describes the nature of our guarantees,including the approximate terms of the guarantees, how the guarantees arose,the events or circumstances that would require us to perform under theguarantees, and the maximum potential undiscounted amounts of future paymentswe could be required to make. As of March 31, 2010, there have been nomaterial changes to the guarantees disclosed in the 2009 Form 10-K, exceptthat the amount of borrowings guaranteed under the Revolving Credit Facilitydecreased $120.0 million, as discussed in Note 11, Debt.

 

***17.******                        ******Legal Proceedings andContingencies***

 

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

 

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

 

The followingconsolidating financial information presents the Statements of Income (Loss),Balance Sheets, and Cash Flows related to our business. Certain amounts inprior 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**

**ConsolidatingStatements of Income (Loss)**

**F****or the Three MonthsEnded March 31, 2010**

 
| ** **                                                                           | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** ** | **Boise  Cascade,******** L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                           | ** ** | **(thousands)**                                             |
| **Sales**                                                                            |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| Trade                                                                                |       | $                                                           | —     |                                    | $          | —                      |       | $                                 | 474,320    |             | $          | 3,102            |       | $ | — |   | $ | 477,422 |   |
| Intercompany                                                                         |       | —                                                      |       | —                                  |       | —                      |       | 3,034                             |       | (3,034           | )          | —           |       |
| Related parties                                                                      |       | —                                                      |       | —                                  |       | 9,831                       |       | —                            |       | —           |       | 9,831            |       |
|                                                                                 |       | —                                                      |       | —                                  |       | 484,151                     |       | 6,136                             |       | (3,034           | )          | 487,253          |       |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| **Costs and expenses**                                                               |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| Materials, labor, and other operating expenses                                       |       | —                                                      |       | —                                  |       | 422,528                     |       | 6,597                             |       | (3,224           | )          | 425,901          |       |
| Materials, labor, and other operating expenses from  related parties                 |       | —                                                      |       | —                                  |       | 6,222                       |       | —                            |       | —           |       | 6,222            |       |
| Depreciation and amortization                                                        |       | —                                                      |       | 97                                      |       | 8,017                       |       | 476                               |       | —           |       | 8,590            |       |
| Selling and distribution expenses                                                    |       | —                                                      |       | —                                  |       | 47,861                      |       | 304                               |       | —           |       | 48,165           |       |
| General and administrative expenses                                             |       | —                                                      |       | 1,574                                   |       | 5,694                       |       | —                            |       | 190              |       | 7,458            |       |
| General and administrative expenses from  related party                         |       | —                                                      |       | 1,576                                   |       | —                      |       | —                            |       | —           |       | 1,576            |       |
| Other (income) expense, net                                                          |       | —                                                      |       | —                                  |       | (35                         | )          | (45                               | )          | —           |       | (80              | )          |
|                                                                                 |       | —                                                      |       | 3,247                                   |       | 490,287                     |       | 7,332                             |       | (3,034           | )          | 497,832          |       |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| **Loss from operations**                                                             |       | —                                                      |       | (3,247                                  | )          | (6,136                      | )          | (1,196                            | )          | —           |       | (10,579          | )          |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| 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)                                                         |       | —                                                      |       | 43                                      |       | (50                         | )          | 154                               |       | —           |       | 147              |       |
| Interest expense                                                                     |       | —                                                      |       | (5,520                                  | )          | —                      |       | —                            |       | —           |       | (5,520           | )          |
| Interest income                                                                      |       | —                                                      |       | 60                                      |       | 134                         |       | —                            |       | —           |       | 194              |       |
|                                                                                 |       | 27,197                                                      |       | (5,417                                  | )          | 84                          |       | 154                               |       | —           |       | 22,018           |       |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before income taxes  and equity in net income (loss) of affiliates** |       | 27,197                                                      |       | (8,664                                  | )          | (6,052                      | )          | (1,042                            | )          | —           |       | 11,439           |       |
| Income tax provision                                                                 |       | —                                                      |       | (16                                     | )          | (29                         | )          | —                            |       | —           |       | (45              | )          |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| **Income (loss) before equity in net  income (loss) of affiliates**                  |       | 27,197                                                      |       | (8,680                                  | )          | (6,081                      | )          | (1,042                            | )          | —           |       | 11,394           |       |
|                                                                                 |       |                                                        |       |                                    |       |                        |       |                              |       |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                                       |       | (15,803                                                     | )          | (7,123                                  | )          | —                      |       | —                            |       | 22,926           |       | —           |       |
| **Net income (loss)**                                                                | ** ** | **$**                                                       | **11,394** | ** **                              | **$**      | **(15,803**                 | **)**      | **$**                             | **(6,081** | **)**            | **$**      | **(1,042**       | **)**      | **$** | **22,926** | ** ** | **$** | **11,394** | ** ** |

 

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

**ConsolidatingStatements of Income (Loss)**

**F****or the Three MonthsEnded March 31, 2009**

 
| ** **                                                                  | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **  | **Boise  Cascade,******** L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  guarantor  Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------|-------------|-----------------------------------------|------------|-----------------------------|------------|-----------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                                                  |       | **(thousands)**                                             |        |
| **Sales**                                                                   |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Trade                                                                       |       | $                                                           | —      |                                    | $          | —                      |       | $                                 | 406,469     |             | $          | 1,255            |       | $ | — |   | $ | 407,724 |   |
| Intercompany                                                                |       | —                                                      |        | —                                  |       | 3                           |       | 1,697                             |        | (1,700           | )          | —           |       |
| Related parties                                                             |       | —                                                      |        | —                                  |       | 5,703                       |       | —                            |        | —           |       | 5,703            |       |
|                                                                        |       | —                                                      |        | —                                  |       | 412,175                     |       | 2,952                             |        | (1,700           | )          | 413,427          |       |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Costs and expenses**                                                      |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Materials, labor, and other operating expenses                              |       | —                                                      |        | (64                                     | )          | 379,108                     |       | 3,727                             |        | (1,700           | )          | 381,071          |       |
| Materials, labor, and other operating expenses from  related parties        |       | —                                                      |        | —                                  |       | 12,290                      |       | —                            |        | —           |       | 12,290           |       |
| Depreciation and amortization                                               |       | —                                                      |        | 113                                     |       | 10,544                      |       | 462                               |        | —           |       | 11,119           |       |
| Selling and distribution expenses                                           |       | —                                                      |        | —                                  |       | 44,942                      |       | 299                               |        | —           |       | 45,241           |       |
| General and administrative expenses                                    |       | —                                                      |        | 1,587                                   |       | 5,338                       |       | —                            |        | —           |       | 6,925            |       |
| General and administrative expenses from  related party                |       | —                                                      |        | 2,433                                   |       | —                      |       | —                            |        | —           |       | 2,433            |       |
| Other (income) expense, net                                                 |       | —                                                      |        | (1,913                                  | )          | 4,736                       |       | (142                              | )           | —           |       | 2,681            |       |
|                                                                        |       | —                                                      |        | 2,156                                   |       | 456,958                     |       | 4,346                             |        | (1,700           | )          | 461,760          |       |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Loss from operations**                                                    |       | —                                                      |        | (2,156                                  | )          | (44,783                     | )          | (1,394                            | )           | —           |       | (48,333          | )          |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                         |       | 3,005                                                       |        | —                                  |       | —                      |       | —                            |        | —           |       | 3,005            |       |
| Impairment of investment in equity affiliate                                |       | (43,039                                                     | )           | —                                  |       | —                      |       | —                            |        | —           |       | (43,039          | )          |
| Foreign exchange loss                                                       |       | —                                                      |        | (247                                    | )          | (16                         | )          | (69                               | )           | —           |       | (332             | )          |
| Change in fair value of contingent value rights                             |       | —                                                      |        | 194                                     |       | —                      |       | —                            |        | —           |       | 194              |       |
| Gain on repurchase of long-term debt                                        |       | —                                                      |        | 6,026                                   |       | —                      |       | —                            |        | —           |       | 6,026            |       |
| Interest expense                                                            |       | —                                                      |        | (5,616                                  | )          | —                      |       | —                            |        | —           |       | (5,616           | )          |
| Interest income                                                             |       | —                                                      |        | 281                                     |       | 116                         |       | —                            |        | —           |       | 397              |       |
|                                                                        |       | (40,034                                                     | )           | 638                                     |       | 100                         |       | (69                               | )           | —           |       | (39,365          | )          |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Loss before income taxes and  equity in net income (loss) of affiliates** |       | (40,034                                                     | )           | (1,518                                  | )          | (44,683                     | )          | (1,463                            | )           | —           |       | (87,698          | )          |
| Income tax (provision) benefit                                              |       | —                                                      |        | (509                                    | )          | 26                          |       | —                            |        | —           |       | (483             | )          |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Loss before equity in net income  (loss) of affiliates**                  |       | (40,034                                                     | )           | (2,027                                  | )          | (44,657                     | )          | (1,463                            | )           | —           |       | (88,181          | )          |
|                                                                        |       |                                                        |        |                                    |       |                        |       |                              |        |             |       |             |       |
| **Equity in net income (loss) of  affiliates**                              |       | (48,147                                                     | )           | (46,120                                 | )          | —                      |       | —                            |        | 94,267           |       | —           |       |
| **Net income (loss)**                                                       | ** ** | **$**                                                       | **(88,181** | **)**                                   | **$**      | **(48,147**                 | **)**      | **$**                             | **(44,657** | **)**            | **$**      | **(1,463**       | **)**      | **$** | **94,267** | ** ** | **$** | **(88,181** | **)** |

 

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

**ConsolidatingBalance Sheets at March 31, 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           |                                    | $          | 335,989                     |       | $                                             | 19          |             | $          | 71               |       | $ | — |   | $ | 336,084 |   |
| Receivables                   |         |                                                        |        |                                    |       |                        |       |                                          |        |             |       |             |       |
| Trade, less allowances        |         | —                                                      |        | —                                  |       | 150,224                     |       | 1,313                                         |        | —           |       | 151,537          |       |
| Related parties               |         | —                                                      |        | 5                                       |       | 941                         |       | —                                        |        | —           |       | 946              |       |
| Intercompany                  |         | —                                                      |        | —                                  |       | 56                          |       | —                                        |        | (56              | )          | —           |       |
| Other                         |         | —                                                      |        | —                                  |       | 3,457                       |       | 675                                           |        | (90              | )          | 4,042            |       |
| Inventories                   |         | —                                                      |        | —                                  |       | 262,078                     |       | 6,435                                         |        | —           |       | 268,513          |       |
| Prepaid expenses and other    |         | —                                                      |        | 3,542                                   |       | 917                         |       | 150                                           |        | (1,054           | )          | 3,555            |       |
|                          |         | 5                                                           |        | 339,536                                 |       | 417,692                     |       | 8,644                                         |        | (1,200           | )          | 764,677          |       |
|                          |         |                                                        |        |                                    |       |                        |       |                                          |        |             |       |             |       |
| **Property**                  |         |                                                        |        |                                    |       |                        |       |                                          |        |             |       |             |       |
| Property and equipment, net   |         | —                                                      |        | 2,355                                   |       | 250,585                     |       | 11,846                                        |        | —           |       | 264,786          |       |
| Timber deposits               |         | —                                                      |        | —                                  |       | 10,517                      |       | —                                        |        | —           |       | 10,517           |       |
|                          |         | —                                                      |        | 2,355                                   |       | 261,102                     |       | 11,846                                        |        | —           |       | 275,303          |       |
| ** **                    |         |                                                        |        |                                    |       |                        |       |                                          |        |             |       |             |       |
| **Deferred financing costs**  |         | —                                                      |        | 5,403                                   |       | —                      |       | —                                        |        | —           |       | 5,403            |       |
| **Goodwill**                  |         | —                                                      |        | —                                  |       | 12,170                      |       | —                                        |        | —           |       | 12,170           |       |
| **Intangible assets, net**    |         | —                                                      |        | —                                  |       | 8,916                       |       | —                                        |        | —           |       | 8,916            |       |
| **Other assets**              |         | —                                                      |        | 19                                      |       | 7,912                       |       | —                                        |        | —           |       | 7,931            |       |
| **Investments in affiliates** |         | 438,203                                                     |        | 548,932                                 |       | —                      |       | —                                        |        | (987,135         | )          | —           |       |
| **Total assets**              | ** **   | **$**                                                       | **438,208** | ** **                              | **$**      | **896,245**                 | ** ** | **$**                                         | **707,792** | ** **       | **$**      | **20,490**       | ** ** | **$** | **(988,335** | **)** | **$** | **1,074,400** | ** ** |

 

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**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Balance Sheets at March 31, 2010 (continued)**

 
| ** **                                  | ** ** | **Boise  Cascade********Holdings,********L.L.C.  (Parent)** | ** **  | **Boise  Cascade,********L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** **  | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------------------|-------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------------|-------------|------------------|------------|------------------|------------|
| ** **                                  | ** ** | **(thousands)**                                             | ** **  |
| **LIABILITIES AND CAPITAL**                 | ** ** | ** **                                                  | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
|                                        |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Current**                                 |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Accounts payable                            |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Trade                                       |       | $                                                           | —      |                              | $          | 9,610                       |       | $                                             | 138,652     |             | $          | 1,114            |       | $ | — |   | $ | 149,376 |   |
| Related parties                             |       | —                                                      |        | 393                               |       | 1,578                       |       | —                                        |        | —           |       | 1,971            |       |
| Intercompany                                |       | —                                                      |        | —                            |       | —                      |       | 56                                            |        | (56              | )          | —           |       |
| Accrued liabilities                         |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Compensation and benefits                   |       | —                                                      |        | 13,707                            |       | 17,487                      |       | 317                                           |        | —           |       | 31,511           |       |
| Interest payable                            |       | —                                                      |        | 7,709                             |       | —                      |       | —                                        |        | —           |       | 7,709            |       |
| Other                                       |       | —                                                      |        | 1,426                             |       | 15,939                      |       | 483                                           |        | (1,144           | )          | 16,704           |       |
|                                        |       | —                                                      |        | 32,845                            |       | 173,656                     |       | 1,970                                         |        | (1,200           | )          | 207,271          |       |
|                                        |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Debt**                                    |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Long-term debt                              |       | —                                                      |        | 303,146                           |       | —                      |       | —                                        |        | —           |       | 303,146          |       |
|                                        |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Other**                                   | ** ** | ** **                                                  | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Compensation and benefits                   |       | —                                                      |        | 112,305                           |       | —                      |       | —                                        |        | —           |       | 112,305          |       |
| Other long-term liabilities                 |       | —                                                      |        | 9,746                             |       | 3,724                       |       | —                                        |        | —           |       | 13,470           |       |
|                                        |       | —                                                      |        | 122,051                           |       | 3,724                       |       | —                                        |        | —           |       | 125,775          |       |
|                                        |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Redeemable equity units**                 |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| Series B equity  units                 |       | 2,765                                                       |        | —                            |       | —                      |       | —                                        |        | —           |       | 2,765            |       |
| Series C equity  units                 |       | 5,636                                                       |        | —                            |       | —                      |       | —                                        |        | —           |       | 5,636            |       |
| Redeemable equity units                     |       | —                                                      |        | 8,401                             |       | —                      |       | —                                        |        | (8,401           | )          | —           |       |
|                                        |       | 8,401                                                       |        | 8,401                             |       | —                      |       | —                                        |        | (8,401           | )          | 8,401            |       |
|                                        |       |                                                        |        |                              |       |                        |       |                                          |        |             |       |             |       |
| **Commitments and contingent  liabilities** | ** ** | ** **                                                  | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| ** **                                  | ** ** | ** **                                                  | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| **Capital**                                 | ** ** | ** **                                                  | ** **  | ** **                        | ** ** | ** **                  | ** ** | ** **                                    | ** **  | ** **       | ** ** | ** **       | ** ** |
| Series A equity units                  |       | 90,662                                                      |        | —                            |       | —                      |       | —                                        |        | —           |       | 90,662           |       |
| Series B equity units                  |       | 339,145                                                     |        | —                            |       | —                      |       | —                                        |        | —           |       | 339,145          |       |
| Series C equity units                  |       | —                                                      |        | —                            |       | —                      |       | —                                        |        | —           |       | —           |       |
| Subsidiary equity                           |       | —                                                      |        | 429,802                           |       | 530,412                     |       | 18,520                                        |        | (978,734         | )          | —           |       |
| **Total capital**                           |       | 429,807                                                     |        | 429,802                           |       | 530,412                     |       | 18,520                                        |        | (978,734         | )          | 429,807          |       |
| **Total liabilities and capital**           | ** ** | **$**                                                       | **438,208** | ** **                        | **$**      | **896,245**                 | ** ** | **$**                                         | **707,792** | ** **       | **$**      | **20,490**       | ** ** | **$** | **(988,335** | **)** | **$** | **1,074,400** | ** ** |

 

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

**ConsolidatingBalance Sheets at December 31, 2009**

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

 

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**BoiseCascade 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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**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Three Months ended March 31, 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)                                                    |       | $                                                                       | 11,394     |                                    | $          | (15,803                     | )          | $                                             | (6,081     | )                | $          | (1,042           | )          | $ | 22,926 |   | $ | 11,394 |   |
| 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                            |       | 15,803                                                                  |       | 7,123                                   |       | —                      |       | —                                        |       | (22,926          | )          | —           |       |
| Depreciation and amortization of deferred financing  costs and other |       | —                                                                  |       | 630                                     |       | 8,017                       |       | 476                                           |       | —           |       | 9,123            |       |
| Pension expense                                                      |       | —                                                                  |       | 2,087                                   |       | —                      |       | —                                        |       | —           |       | 2,087            |       |
| Management equity units expense                                 |       | —                                                                  |       | 434                                     |       | —                      |       | —                                        |       | —           |       | 434              |       |
| Other                                                                |       | —                                                                  |       | (42                                     | )          | (1                          | )          | (178                                          | )          | —           |       | (221             | )          |
| Decrease (increase) in working capital                               |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 168                                     |       | (54,579                     | )          | (616                                          | )          | —           |       | (55,027          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                  |       | (33,792                     | )          | (1,947                                        | )          | —           |       | (35,739          | )          |
| Prepaid expenses and other                                           |       | —                                                                  |       | (1,539                                  | )          | 1,230                       |       | (80                                           | )          | —           |       | (389             | )          |
| Accounts payable and accrued liabilities                        |       | —                                                                  |       | 7,202                                   |       | 57,713                      |       | 573                                           |       | —           |       | 65,488           |       |
| Pension contributions                                                |       | —                                                                  |       | (2,976                                  | )          | —                      |       | —                                        |       | —           |       | (2,976           | )          |
| Other                                                                |       | —                                                                  |       | (284                                    | )          | 438                         |       | 1                                             |       | —           |       | 155              |       |
| Cash used for operations                                             |       | —                                                                  |       | (3,000                                  | )          | (27,055                     | )          | (2,813                                        | )          | —           |       | (32,868          | )          |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used  for) investment**                     |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| Proceeds from sale of shares of equity affiliate,  net               |       | 86,123                                                                  |       | —                                  |       | —                      |       | —                                        |       | —           |       | 86,123           |       |
| Expenditures for property and equipment                         |       | —                                                                  |       | —                                  |       | (3,144                      | )          | (101                                          | )          | —           |       | (3,245           | )          |
| Other                                                                |       | —                                                                  |       | 38                                      |       | (1,243                      | )          | 178                                           |       | —           |       | (1,027           | )          |
| Cash provided by (used for) investment                          |       | 86,123                                                                  |       | 38                                      |       | (4,387                      | )          | 77                                            |       | —           |       | 81,851           |       |
| ** **                                                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| **Cash provided by (used for)  financing**                           | ** ** | ** **                                                              | ** ** | ** **                              | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Parent/subsidiary equity transactions                                |       | (86,118                                                                 | )          | 86,118                                  |       | —                      |       | —                                        |       | —           |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (34,166                                 | )          | 31,442                      |       | 2,724                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                                |       | (86,118                                                                 | )          | 51,952                                  |       | 31,442                      |       | 2,724                                         |       | —           |       | —           |       |
|                                                                 |       |                                                                    |       |                                    |       |                        |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**           |       | 5                                                                       |       | 48,990                                  |       | —                      |       | (12                                           | )          | —           |       | 48,983           |       |
| **Balance at beginning of the period**                               |       | —                                                                  |       | 286,999                                 |       | 19                          |       | 83                                            |       | —           |       | 287,101          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **5**      | ** **                              | **$**      | **335,989**                 | ** ** | **$**                                         | **19**     | ** **       | **$**      | **71**           | ** ** | **$** | **—** | ** ** | **$** | **336,084** | ** ** |

 

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**BoiseCascade Holdings, L.L.C., and SubsidiariesConsolidating Statements of Cash FlowsFor the Three Months ended March 31, 2009**

 
| ** **                                                           | ** ** | **Boise********Cascade********Holdings,********L.L.C.********(Parent)** | ** ** | **Boise********Cascade,******** L.L.C.** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-********guarantor********Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                           | ** ** | **(thousands)**                                                         | ** ** |
| **Cash provided by (used  for) operations**                     |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| Net income (loss)                                                    |       | $                                                                       | (88,181    | )                                             | $          | (48,147                     | )          | $                                             | (44,657    | )                | $          | (1,463           | )          | $ | 94,267 |   | $ | (88,181 | ) |
| Items in net income (loss) not using (providing)  cash               |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| Equity in net income of affiliate (Boise Inc.)                       |       | (3,005                                                                  | )          | —                                        |       | —                      |       | —                                        |       | —           |       | (3,005           | )          |
| Impairment of investment in Boise Inc.                          |       | 43,039                                                                  |       | —                                        |       | —                      |       | —                                        |       | —           |       | 43,039           |       |
| Equity in net (income) loss of affiliates                            |       | 48,147                                                                  |       | 46,120                                        |       | —                      |       | —                                        |       | (94,267          | )          | —           |       |
| Depreciation and amortization of deferred financing  costs and other |       | —                                                                  |       | 456                                           |       | 10,544                      |       | 462                                           |       | —           |       | 11,462           |       |
| Pension expense                                                      |       | —                                                                  |       | 4,938                                         |       | —                      |       | —                                        |       | —           |       | 4,938            |       |
| Management equity units expense                                 |       | —                                                                  |       | 778                                           |       | —                      |       | —                                        |       | —           |       | 778              |       |
| Gain on repurchase of long-term debt                                 |       | —                                                                  |       | (6,026                                        | )          | —                      |       | —                                        |       | —           |       | (6,026           | )          |
| Facility closure and curtailment costs                               |       | —                                                                  |       | —                                        |       | 2,754                       |       | —                                        |       | —           |       | 2,754            |       |
| Other                                                                |       | —                                                                  |       | 54                                            |       | (66                         | )          | 69                                            |       | —           |       | 57               |       |
| Decrease (increase) in working capital                               |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| Receivables                                                          |       | —                                                                  |       | 872                                           |       | (26,180                     | )          | (458                                          | )          | (34              | )          | (25,800          | )          |
| Inventories                                                          |       | —                                                                  |       | —                                        |       | 12,739                      |       | 435                                           |       | —           |       | 13,174           |       |
| Prepaid expenses and other                                           |       | —                                                                  |       | (2,800                                        | )          | 1,558                       |       | (115                                          | )          | —           |       | (1,357           | )          |
| Accounts payable and accrued liabilities                        |       | —                                                                  |       | 2,879                                         |       | 4,970                       |       | (57                                           | )          | 34               |       | 7,826            |       |
| Pension contributions                                                |       | —                                                                  |       | (25,045                                       | )          | —                      |       | —                                        |       | —           |       | (25,045          | )          |
| Other                                                                |       | —                                                                  |       | (1,219                                        | )          | (127                        | )          | (4                                            | )          | —           |       | (1,350           | )          |
| Cash used for operations                                             |       | —                                                                  |       | (27,140                                       | )          | (38,465                     | )          | (1,131                                        | )          | —           |       | (66,736          | )          |
|                                                                 |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used  for) investment**                     |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| Expenditures for property and equipment                         |       | —                                                                  |       | (12                                           | )          | (3,854                      | )          | (363                                          | )          | —           |       | (4,229           | )          |
| Other                                                                |       | —                                                                  |       | (249                                          | )          | 558                         |       | (71                                           | )          | —           |       | 238              |       |
| Cash provided by (used for) investment                          |       | —                                                                  |       | (261                                          | )          | (3,296                      | )          | (434                                          | )          | —           |       | (3,991           | )          |
|                                                                 |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| **Cash provided by (used for)  financing**                           | ** ** | ** **                                                              | ** ** | ** **                                    | ** ** | ** **                  | ** ** | ** **                                    | ** ** | ** **       | ** ** | ** **       | ** ** |
| Payments of long-term debt                                           |       | —                                                                  |       | (5,627                                        | )          | —                      |       | —                                        |       | —           |       | (5,627           | )          |
| Tax distributions to members                                         |       | (9,897                                                                  | )          | —                                        |       | —                      |       | —                                        |       | —           |       | (9,897           | )          |
| Repurchase of management equity units                                |       | (8                                                                      | )          | —                                        |       | —                      |       | —                                        |       | —           |       | (8               | )          |
| Parent/subsidiary equity transactions                                |       | 9,904                                                                   |       | (9,904                                        | )          | —                      |       | —                                        |       | —           |       | —           |       |
| Due to (from) affiliates                                             |       | —                                                                  |       | (43,342                                       | )          | 41,760                      |       | 1,582                                         |       | —           |       | —           |       |
| Cash provided by (used for) financing                                |       | (1                                                                      | )          | (58,873                                       | )          | 41,760                      |       | 1,582                                         |       | —           |       | (15,532          | )          |
|                                                                 |       |                                                                    |       |                                          |       |                        |       |                                          |       |             |       |             |       |
| **Increase (decrease) in cash and  cash equivalents**                |       | (1                                                                      | )          | (86,274                                       | )          | (1                          | )          | 17                                            |       | —           |       | (86,259          | )          |
| **Balance at beginning of the period**                               |       | 1                                                                       |       | 275,726                                       |       | 20                          |       | 56                                            |       | —           |       | 275,803          |       |
| **Balance at end of the period**                                     | ** ** | **$**                                                                   | **—** | ** **                                    | **$**      | **189,452**                 | ** ** | **$**                                         | **19**     | ** **       | **$**      | **73**           | ** ** | **$** | **—** | ** ** | **$** | **189,544** | ** ** |

 

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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 Financial Condition andResults of Operations should be read in conjunction with our consolidatedfinancial statements and related notes in “Item 1. Financial Statements”of this Form 10-Q, as well as our 2009 Form 10-K. The followingdiscussion includes statements regarding our expectations with respect to ourfuture performance, liquidity, and capital resources. Such statements, alongwith any other nonhistorical statements in the discussion, are forward-looking.These forward-lookingstatements include, without limitation, any statement that may predict,indicate, or imply future results, performance, or achievements and may containthe words “may,” “will,” “expect,” “believe,” “should,” “plan,” “anticipate,”and other similar expressions. All of these forward-looking statements arebased on estimates and assumptions made by our management that, althoughbelieved by us to be reasonable, are inherently uncertain. These forward-looking statements are subject tonumerous risks and uncertainties, including, but not limited to, the risks anduncertainties described in “Part I, Item 1A. Risk Factors” in our2009 Form 10-K, as well as the factors listed in other documents we filewith the Securities and Exchange Commission (SEC). There have been no materialchanges to our risk factors during the three months ended March 31, 2010,from those listed in our 2009 Form 10-K. We do not assume an obligation toupdate any forward-looking statement. Our future actual results may differmaterially from those contained in or implied by any of the forward-lookingstatements in this Form 10-Q.

 

*Background*

 

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 weacquired the forest products and paper assets of OfficeMax (the Forest ProductsAcquisition). 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 using three reportable segments: (1) Building Materials Distribution, which is a wholesaledistributor of building materials, (2) Wood Products, which manufacturesand sells engineered wood products (EWP), plywood, particleboard, dimensionlumber, and high-quality ponderosa pine lumber, and (3) Corporate andOther, 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***

 

The U.S. economy began to improve in 2009, and realGross Domestic Product (GDP) in the U.S. grew an estimated 5.6% and 3.2% infourth quarter 2009 and first quarter 2010, respectively. However, U.S.unemployment remains high, at 9.7% in March 2010, and residentialconstruction remains low. Concerns continue over the level of residentialconstruction activity, number of foreclosures, availability and cost of credit,unemployment, and consumer and business confidence, which all affect thebusiness and economic environment in which we operate.

 

Demand for our productscorrelates with the level of residential construction activity in North America,which has historically been cyclical. The current downturn in the residentialconstruction market has become one of the most severe housing downturns in U.S.history. As of April 2010, the Blue Chip Economic Indicators consensusforecast for 2010 single- and multifamily housing starts in the U.S. wasapproximately 0.68 million units, compared with 0.55 million and0.91 million units of single- and multifamily housing starts in 2009 and2008, as reported by the U.S. Census Bureau. These amounts are significantlybelow historical trends of approximately 1.5 million units over the tenyears prior to 2010. As a result, we continue to manage our production levelsto our sales demand, which will likely cause us to continue to operate ourfacilities below their capacity. In addition, we continue to prudently manageour 

 

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working capital andcapital spending in this environment. We expect the downturn to continue toadversely affect our operating results in 2010; however, the annualized levelof housing starts appears to have stabilized, and many economists expect modestimprovement in 2010, compared with 2009. While near-term residentialconstruction is constrained in the U.S., positive long-term demographicfundamentals, including immigration, are expected to support householdformations, which in turn, are expected to support a recovery in newresidential housing demand.

 

Pricing for many of the commodity products wemanufacture and distribute increased during first quarter 2010. The priceincreases reflected supply-side issues and modest improvements in demand. Theindustry supply-side issues resulted from constrained inventory levels,curtailments, and a major earthquake in Chile that disrupted imports. Webelieve that as a result of these supply-side issues, market prices may bevolatile in the months ahead.

 

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

 

Our results of operationsand financial performance are influenced by a variety of factors, including thefollowing:

 

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

 

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

 

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

 

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

 

·                  Industry cycles and capacity utilization rates;

 

·                  Cost of compliance with government regulations;

 

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

 

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

 

·                  The financial condition and creditworthiness of ourcustomers;

 

·                  Major equipment failure;

 

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

 

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

 

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

 

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

 

In March 2010, the Patient Protection andAffordable Care Act and the Health Care and Education Reconciliation Act of2010 (the Acts) became law. Based on our preliminary review, the Acts do notappear to create any substantial, immediate costs. Because we do not subsidizeour retiree medical plans and do not provide retirees with post-65 medicalcoverage, the elimination of the tax deduction related to the Medicare Part Dsubsidy in the Patient Protection and Affordable Care Act will not affect ourfinancial statements. We are continuing to evaluate the impact of the Acts onour financial position and results of operations. Given the scope andcomplexity of the legislation, it is difficult to predict its future impact.

 

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***OurOperating Results***

 

The following tables setforth our operating results in dollars and as a percentage of sales for thethree months ended March 31, 2010 and 2009:

 
| ** **                                                                      | ** ** | **Three Months Ended********March 31** | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                      | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                                                      | ** ** | **(millions)**                              | ** ** |
| **Sales**                                                                       |       |                                        |       |   |   |
| Trade                                                                           |       | $                                           | 477.4      |   | $ | 407.7 |   |
| Related parties                                                                 |       | 9.9                                         |       | 5.7 |   |
|                                                                            |       | 487.3                                       |       | 413.4 |   |
|                                                                            |       |                                        |       |   |   |
| **Costs and expenses**                                                          |       |                                        |       |   |   |
| Materials, labor, and other operating expenses                                  |       | 425.9                                       |       | 381.1 |   |
| Materials, labor, and other operating expenses from  related parties            |       | 6.2                                         |       | 12.3 |   |
| Depreciation and amortization                                                   |       | 8.6                                         |       | 11.1 |   |
| Selling and distribution expenses                                               |       | 48.2                                        |       | 45.2 |   |
| General and administrative expenses                                             |       | 7.5                                         |       | 6.9 |   |
| General and administrative expenses from related  party                         |       | 1.6                                         |       | 2.4 |   |
| Other (income) expense, net                                                     |       | (0.1                                        | )          | 2.7 |   |
|                                                                            |       | 497.9                                       |       | 461.7 |   |
|                                                                            |       |                                        |       |   |   |
| **Loss from operations**                                                        | ** ** | **$**                                       | **(10.6**  | **)** | **$** | **(48.3** | **)** |
| ** **                                                                      | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| ** **                                                                      | ** ** | **(percentage of sales)**         | ** ** |
| **Sales**                                                                       |       |                                        |       |   |   |
| Trade                                                                           |       | 98.0                                        | %          | 98.6 | % |
| Related parties                                                                 |       | 2.0                                         |       | 1.4 |   |
|                                                                            |       | 100.0                                       | %          | 100.0 | % |
|                                                                            |       |                                        |       |   |   |
| **Costs and expenses**                                                          |       |                                        |       |   |   |
| Materials, labor, and other operating expenses,  including from related parties |       | 88.7                                        | %          | 95.1 | % |
| Depreciation and amortization                                                   |       | 1.8                                         |       | 2.7 |   |
| Selling and distribution expenses                                               |       | 9.9                                         |       | 10.9 |   |
| General and administrative expenses, including from  related party              |       | 1.8                                         |       | 2.3 |   |
| Other (income) expense, net                                                     |       | —                                      |       | 0.7 |   |
|                                                                            |       | 102.2                                       | %          | 111.7 | % |
|                                                                            |       |                                        |       |   |   |
| **Loss from operations**                                                        | ** ** | **(2.2**                                    | **)%**     | **(11.7** | **)%** |

 

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***Sales Volumes and Prices***

 

Set forth below are sales mixinformation for our Building Materials Distribution segment and segment salesvolumes and average net selling prices for the principal products sold by ourWood Products segment for the three months ended March 31, 2010 and 2009.

 
| ** **                                       | ** ** | **Three Months********Ended March 31**                | ** ** |
|--------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2010**                                                   | ** ** | **2009** | ** ** |
| ** **                                       | ** ** | **(millions)**                                             | ** ** |
| **Segment Sales**                                |       |                                                       |       |   |   |
| Building Materials  Distribution                 |       | $                                                          | 389.1      |   | $ | 335.0 |   |
| Wood Products                                    |       | $                                                          | 148.0      |   | $ | 116.5 |   |
|                                             |       |                                                       |       |   |   |
| ** **                                       | ** ** | **(percentage of Building Materials  Distribution sales)** | ** ** |
| **Product Line Sales**                           |       |                                                       |       |   |   |
| **Building Materials Distribution**              |       |                                                       |       |   |   |
| Commodity                                        |       | 50.9                                                       | %          | 48.1 | % |
| Engineered wood                                  |       | 11.0                                                       |       | 9.8 |   |
| General line                                     |       | 38.1                                                       |       | 42.1 |   |
|                                             |       |                                                       |       |   |   |
| ** **                                       | ** ** | **(millions)**                                             | ** ** |
| **Sales Volumes**                                |       |                                                       |       |   |   |
| **Wood Products**                                |       |                                                       |       |   |   |
| Laminated veneer lumber  (LVL) (cubic feet)      |       | 1.7                                                        |       | 1.1 |   |
| I-joists (equivalent  lineal feet)               |       | 24                                                         |       | 16 |   |
| Plywood (sq. ft.) (3/8”  basis)             |       | 234                                                        |       | 246 |   |
| Lumber (board feet)                              |       | 36                                                         |       | 30 |   |
| Particleboard (sq. ft.)  (3/4” basis)       |       | 20                                                         |       | 18 |   |
|                                             |       |                                                       |       |   |   |
| ** **                                       | ** ** | **(dollars per unit)**                                     | ** ** |
| **Average Net Selling Prices**                   | ** ** | ** **                                                 | ** ** | ** ** | ** ** |
| **Wood Products**                                | ** ** | ** **                                                 | ** ** | ** ** | ** ** |
| Laminated veneer lumber  (LVL) (cubic foot)      |       | $                                                          | 14.86      |   | $ | 15.24 |   |
| I-joists (1,000  equivalent lineal feet)         |       | 902                                                        |       | 900 |   |
| Plywood (1,000 sq. ft.)  (3/8” basis)       |       | 230                                                        |       | 200 |   |
| Lumber (1,000 board feet)                        |       | 415                                                        |       | 304 |   |
| Particleboard (1,000 sq.  ft.) (3/4” basis) |       | 305                                                        |       | 347 |   |

 

***Operating Results***

 

# ***Sales***

# * *

For the three months endedMarch 31, 2010, total sales increased $73.9 million, or 18%, to$487.3 million from $413.4 million during the three months ended March 31,2009. Compared with the same period a year ago, the increase was drivenprimarily by increased sales volumes and prices for most of our products.

 

*Building Materials Distribution.* Sales increased $54.1 million, or 16%, to $389.1 million for the three months ended March 31,2010, from $335.0 million for the three months ended March 31, 2009. The increase in sales was principally the result of an11% increase in net selling prices (primarily commodity price increases) and a5% increase in product volumes sold.

 

*WoodProducts.* Sales increased $31.5 million, or 27%, to$148.0 million for thethree months ended March 31, 2010, from $116.5 million for the threemonths ended March 31, 2009. The increase in sales was attributableprimarily to EWP sales volumes increasing over 50%, 37% higher lumber salesprices and 19% higher lumber sales volumes, and 15% higher plywood salesprices. The increased product prices largely reflect supply-side issuesresulting from constrained inventory levels, curtailments, modest improvementsin demand, and a disruption in imports.

 

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

##### *** ***

Materials, labor, and other operating expenses,including from related parties, increased$38.7 million, or 10%, to $432.1 million for the three months ended March 31,2010, compared with $393.4 million during the same period in the prioryear. The increase related to higher purchased materials costs (due to anincrease in pricing for commodity products we purchase and resell), as well asincreased sales volumes in our Building Materials Distribution segment. In ourWood Products segment, these costs increased due to increased manufacturingvolumes in response to the increase in sales. While total materials, labor, andother operating expenses, including from related parties, increased, the costsdecreased as a percent of sales, because the costs did not increase at the samerate as sales in the quarter.

 

Depreciation and amortization expenses decreased $2.5 million, or 23%,to $8.6 million for the three months ended March 31, 2010, comparedwith $11.1 million for the same period in the prior year. Depreciation infirst quarter 2009 included the acceleration of $2.5 million ofdepreciation on the assets at our La Grande, Oregon, lumber manufacturingfacility related to the decision to indefinitely curtail the operations infirst quarter 2009.

 

Selling and distribution expenses increased $3.0 million, or 6%, to$48.2 million for the threemonths ended March 31, 2010, compared with $45.2 million for the sameperiod in the prior year. The increase was due primarily to costs related tothe truss assembly operation and EWP sales office we acquired in Saco andBiddeford, Maine, in second quarter 2009, increased transportation costs in ourBuilding Materials Distribution segment in connection with increased salesvolumes, and to a lesser extent, additional lease expense for the relocation ofour facility in Maryland and expansion in Minneapolis. While total selling anddistribution expenses increased, they decreased as a percent of sales.

 

General andadministrative expenses, including from related parties, were relatively flat for the three months ended March 31,2010, compared with the same period in the prior year. Because of the increasein sales in the quarter, general and administrative expenses as a percent ofsales decreased 0.5% for the three months ended March 31, 2010, comparedwith the same period in the prior year.

 

Other (income) expense, net, changed $2.8 millionto $0.1 million of income for the three months ended March 31, 2010,compared with $2.7 million of net expense during the same period a yearago. In first quarter 2009, we recorded $4.4 million of expense for ourcommitment to indefinitely curtail our lumber manufacturing facility inLa Grande, Oregon. In addition, in first quarter 2009, we recognized a net$0.7 million noncash curtailment gain primarily related to amending ournonqualified salaried pension plans. For more information, see Note 5,Other (Income) Expense, Net, of the Notes to Unaudited Quarterly ConsolidatedFinancial Statements in “Item 1. Financial Statements” of this Form 10-Q.

 

***LossFrom Operations***

 

Our loss from operations decreased $37.7 million to a loss of $10.6 million for the three months ended March 31,2010, from a $48.3 million loss in the same period a year ago. Theimprovement resulted primarily from higher prices for the commodity products wedistribute and manufacture and lower conversion costs for all of our productlines in our Wood Products segment.

 

*BuildingMaterials Distribution.*  Segment loss decreased$7.8 million to $0.7 million forthe three months ended March 31, 2010, from $8.5 million for thethree months ended March 31, 2009. The improvement related to a 1.4%increase in gross margin, which was due primarily to rising prices for thecommodity products we distribute, partially offset by increased selling anddistribution expenses resulting from the increase in sales volume during thequarter.

 

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*Wood Products. *Segment loss decreased$31.0 million to $6.6 million for the three months ended March 31,2010, compared with a$37.6 million loss for the three months ended March 31, 2009. Overall, our operating results forthe three months ended March 31, 2010, were affected by favorable inputcosts (primarily lower conversion costs for all of our product lines and lowerwood costs) and improved product pricing, most of which related to plywood andlumber. In addition, the three months ended March 31, 2009, included $7.5million of expenses related to closing our lumber manufacturing facility in LaGrande, Oregon.

 

***Other***

 

*Investmentin Equity Affiliate*.  In connection with the sale of our Paper andPackaging & Newsprint assets, we received 37.9 million, or 49%,of Boise Inc.’s shares of common stock. We recorded our investment in “Investmentin equity affiliate” on our Consolidated Balance Sheet. The ownership interestprovided us with the ability to exercise significant influence. In 2009, we sold about half of our investmentin Boise Inc., decreasing our ownership position to 18.3 millionshares, or 23.5%, at December 31, 2009. In first quarter 2010, we sold allof our remaining shares of Boise Inc. and, as a result, discontinued theequity method of accounting.

 

During the three monthsended March 31, 2010 and 2009, we recorded $27.2 million of incomeand $40.0 million of net expense related to our investment in Boise Inc.in our Consolidated Statements of Income (Loss), as follows:

 
| ** **                                                 | ** ** | **Three Months Ended  March 31** | ** ** |
|------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                 | ** ** | **2010**                              | ** ** | **2009** | ** ** |
| ** **                                                 | ** ** | **(millions)**                        | ** ** |
|                                                       |       |                                  |       |   |   |
| Equity  in net income (loss) of Boise Inc.            |       | $                                     | 0.1        |   | $ | (1.0 | ) |
| Amortization  of basis differential                        |       | 1.8                                   |       | 5.0 |   |
| Loss  on shares issued for settlement of CVR liability (a) |       | —                                |       | (1.0 | ) |
| Equity  in net income of affiliate                         |       | 1.9                                   |       | 3.0 |   |
| Gain  on sale of shares of equity affiliate (b)            |       | 25.3                                  |       | — |   |
| Impairment  of investment in equity affiliate (c)          |       | —                                |       | (43.0 | ) |
| Total                                                      | ** ** | **$**                                 | **27.2**   | ** ** | **$** | **(40.0** | **)** |

 

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(a)                                  During the threemonths ended March 31, 2009, we settled our obligation related to thecontingent value rights (CVRs) we issued to holders of Boise Inc. commonstock. In connection with the settlement in first quarter 2009, we transferredownership of 0.8 million Boise Inc. shares and recorded a$1.0 million loss in “Equity in net income of affiliate” in ourConsolidated Statement of Income (Loss) for the difference between the marketprice on the date we settled our obligation with shares and the carrying amountof the shares recorded on our Balance Sheet. For more information, seeNote 12, Financial Instrument Risk, of the Notes to Unaudited QuarterlyConsolidated Financial Statements in “Item 1. Financial Statements” ofthis Form 10-Q.

 

(b)                                 In first quarter2010, we sold 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). We reduced ourinvestment in Boise Inc. and our accumulated other comprehensive income relatedto our investment in Boise Inc. to zero. Under the terms of the indenturegoverning our 7.125% senior subordinated notes due 2014, we are required to usethe net proceeds from the sale of the Boise Inc. shares within one year torepay senior indebtedness, acquire additional assets, or make a tender offer atpar for a portion of the senior subordinated notes. For more information, see “Liquidityand Capital Resources” of this Management’s Discussion and Analysis of FinancialCondition and Results of Operations.

 

(c)                                  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. The fair value of our investment in Boise Inc. wascalculated based on our 37.1 million shares of Boise Inc. andBoise Inc.’s stock price of $0.61 on March 31, 2009. The carryingvalue of our investment was calculated as the sum of (1) the amountrecorded in “Investment in equity affiliate” on our Consolidated Balance Sheetand (2) the amount of accumulated other comprehensive income related toour investment in Boise Inc. recorded within “Series B equity units”on our Consolidated Balance Sheet.

 

We made theother-than-temporary-impairment determination based primarily on the length oftime and extent to which the fair value of our investment had been tradingbelow its carrying value. As of March 31, 2009, Boise Inc.’s stockhad traded below our carrying value since we wrote the investment down in 

 

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September 2008.Accordingly, in first quarter 2009, we recorded a $43.0 million charge in “Impairmentof investment in equity affiliate” in our Consolidated Statement of Income(Loss) and reduced by $40.8 million accumulated other comprehensive lossrelated to our investment in Boise Inc. (which was accumulated monthly fromrecording our proportionate share of Boise Inc.’s other comprehensive income orloss). In addition, we decreased “Investment in equity affiliate”$2.2 million to reduce the aggregate carrying value of our investmentrecorded on our Consolidated Balance Sheet to its fair value of $0.61 per shareon March 31, 2009.

 

*Gain on repurchase of long-termdebt. *During the three months ended March 31, 2009,we repurchased $11.9 million of senior subordinated notes and recorded a$6.0 million gain.

 

*Incometax provision.*Our income tax provision generally consists of income taxes payable to statesthat do not allow for the income tax liability to be passed through to ourequity holders, as well as income taxes payable by our separate subsidiariesthat are taxed as corporations. For the three months ended March 31, 2010and 2009, income tax expense was $45,000 and $0.5 million. During both thethree months ended March 31, 2010 and 2009, our effective tax rate for ourseparate subsidiaries that are taxed as corporations was 34.0%.

 

***Liquidity and Capital Resources***

 

While the demand for new residential construction isforecasted to improve in 2010 over the low levels experienced in 2009,continued concerns over the level of residential construction activity, numberof foreclosures, availability and cost of credit, unemployment, and consumerand business confidence create uncertainty around the amount of cash flow wewill generate during the remainder of 2010. In response to the continuedeconomic uncertainty and to enhance our liquidity, we have and will continue tomatch production with market demand.

 

Despite the difficult conditions, we ended firstquarter 2010 with $336.1 million of cash, $303.1 million of long-termdebt, and $426.4 million of available liquidity. In first quarter 2010, wesold 18.3 million Boise Inc. shares for net proceeds of$86.1 million. We are obligated under the indenture governing our 7.125%senior subordinated notes (Indenture) to use the net proceeds (as defined inthe Indenture) from the sale of shares of Boise Inc. within one year torepay senior indebtedness, acquire additional assets, or make a tender offer atpar for a portion of the senior subordinated notes. At March 31, 2010,approximately $160 million of cash was governed by the Indenture. On April 1,2010, we borrowed an additional $45.0 million under the Revolving CreditFacility, bringing the total amount outstanding to $120.0 million. On April 30,2010, we used $120.0 million of cash on hand to repay amounts owed underthe Indenture (for more information, see Note 11, Debt, of the Notes toUnaudited Quarterly Consolidated Financial Statements in “Item 1.Financial Statements” of this Form 10-Q). We anticipate that thisrepayment, in combination with our recent and expected capital spending, willfulfill our obligation under the Indenture with respect to net available cashreceived in connection with the Boise Inc. stock sales.

 

We believe that our cash flows from operations,combined with our current cash levels and available borrowing capacity, will beadequate to fund debt service requirements and provide cash, as required, tosupport our ongoing operations, capital expenditures, lease obligations, andworking capital for at least the next 12 months.

 

***Sources and Uses of Cash***

 

We generate cash fromsales of our products and from short-term and long-term borrowings, as well asfrom cash proceeds from the sale of nonstrategic assets. Our primary uses ofcash are for expenses related to the manufacture and distribution of buildingproducts, including fiber, inventory purchased for resale, labor, energy, andchemicals. In addition to paying for ongoing operating costs, we use cash toinvest in our business, repay debt, and meet our contractual obligations andcommercial commitments. Below is a discussion of our sources and uses of cashfor operating activities, investing activities, and financing activities.

 

***OperatingActivities***

 

We operate in a cyclical industry, and our operating cash flows varyaccordingly. For the three months ended March 31, 2010 and 2009, ouroperating activities used $32.9 million and $66.7 million of 

 

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cash, respectively. Relativeto the three months ended March 31, 2009, the decrease in cash used byoperations relates primarily to the following:

 

·                  *Items in net income (loss) used$4.4 million of cash during the three months ended March 31, 2010,compared with $34.2 million during the same period in 2009.* The decrease is due primarily to reduced losses in our BuildingMaterials Distribution and Wood Products segments. As discussed under “OperatingResults” above, the improvement for the three months ended March 31, 2010,was primarily the result of higher sales prices for the commodity products wedistribute and manufacture and lower per-unit conversion costs for all of ourproduct lines in our Wood Products segment.

 

·                  *A decrease in cash contributionsto our pension plans.*  During the three months ended March 31, 2010, we used$3.0 million of cash to make pension contribution payments, compared with$25.0 million during the three months ended March 31, 2009.

 

·                  *The decrease in cash used byoperations discussed above was partially offset by $25.7 million of cashused for working capital increases in first quarter 2010, compared with$6.2 million of cash used in the same period a year ago*. Working capital is subject to cyclical operating needs, the timing ofthe collection of receivables, the payment of payables and expenses, and to alesser extent, seasonal fluctuations in our operations. The increase in workingcapital in first quarter 2010 was attributable primarily to higher receivablesand inventories, partially offset by an increase in accounts payable andaccrued liabilities. The increase in receivables in our Building MaterialsDistribution and Wood Products segments primarily reflects increased sales ofapproximately 49% and 43%, comparing sales for the month of March 2010with sales for the month of December 2009. The increases in inventories,accounts payable, and accrued liabilities in 2010 represent normal seasonalinventory build, whereas in 2009, we were able to reduce inventories throughoutthe first quarter as part of our effort to manage to the weakened demandenvironment in the housing market. The increases also relate to increasedpricing for the commodity products we purchased for resale in first quarter2010, compared with the same period a year ago.

 

***Investment Activities***

 

During the three monthsended March 31, 2010, we received $86.1 million of net proceeds fromthe sale of 18.3 million Boise Inc. shares. We used approximately$3.2 million of cash for purchases of property, plant, and equipment. Weexpect capital expenditures in 2010 to total approximately $35 million to$40 million, excluding acquisitions. This level of capital expenditurescould increase or decrease as a result of a number of factors, including ourfinancial results, future economic conditions, and timing of equipmentpurchases. Our capital spending in 2010 will be for expansion, businessimprovement and quality/efficiency projects, replacement projects, and ongoingenvironmental compliance.

 

During the three months ended March 31, 2009, weused $4.2 million of cash for purchases of property, plant, and equipment.

 

***FinancingActivities***

 

Cash used for financing activities was zero for thethree months ended March 31, 2010, compared with $15.5 million duringthe same period in 2009. During the three months ended March 31,2009, we repurchased $11.9 million of senior subordinated notes for$5.6 million, plus accrued interest. We also paid $9.9 million forthe final tax distributions to equity holders related to the taxable gain onthe sale of our Paper and Packaging & Newsprint assets.

 

For more information related to our debt structure,see the discussion under “Part II, Item 7. Management’s Discussionand Analysis of Financial Condition and Results of Operations” in our 2009 Form 10-K.Except as updated in Note 11, Debt, of the Notes to Unaudited QuarterlyFinancial 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 debtstructure.

 

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***Contractual Obligations***

 

For information on contractual obligations, seeContractual Obligations in “Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations” in our 2009 Annual Report on Form 10-K.At March 31, 2010, there have been nomaterial changes to our contractual obligations outside the normal course ofbusiness.

 

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

 

At March 31, 2010,and December 31, 2009, we had no material off-balance-sheet arrangementswith unconsolidated entities.

 

***Guarantees***

 

Note 16, Commitments and Guarantees, and Note 19, ConsolidatingGuarantor and Nonguarantor Financial Information, of the Notes to ConsolidatedFinancial Statements in “Item 8. Financial Statements and SupplementaryData” in our 2009 Form 10-K describe the nature of our guarantees,including the approximate terms of the guarantees, how the guarantees arose,the events or circumstances that would require us to perform under theguarantees, and the maximum potential undiscounted amounts of future paymentswe could be required to make. As of March 31, 2010, there have been no materialchanges to the guarantees disclosed in our 2009 Form 10-K.

 

***Seasonal and Inflationary Influences***

 

We are exposed to fluctuations in quarterly salesvolumes and expenses due to seasonal factors. These seasonal factors are commonin the building products industry. Seasonal changes in levels of buildingactivity affect our building products businesses, which are dependent onhousing starts, repair-and-remodel activities, and light commercialconstruction activities. We typically report lower sales in the first andfourth quarters due to the impact of poor weather on the construction market,and we generally have higher sales in the second and third quarters, reflectingan increase in construction due to more favorable weather conditions. Wetypically have higher working capital in the second and third quarters due tothe summer building season. Seasonally cold weather increases costs, especiallyenergy consumption, at most of our manufacturing facilities.

 

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

 

***Employees***

 

As of March 31, 2010, we had approximately 4,250 employees.Approximately 1,460, or 34%, of these employees work pursuant to collectivebargaining agreements. As of March 31, 2010, we had 12 collectivebargaining agreements, of which one agreement, representing 24 employees,was renewed in April 2010. We have no other agreements up for renewalduring the remainder of 2010. We do not expect material work interruptions orincreases in our costs during the course of the negotiations with ourcollective bargaining units. Nevertheless, if our expectations are notaccurate, we could experience a material labor disruption or significantlyincreased labor costs at one or more of our facilities, any of which couldprevent us from meeting customer demand or reduce our sales and profitability.

 

***Environmental***

 

For information onenvironmental issues, see Environmental in “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour 2009 Form 10-K.

 

***Critical Accounting Estimates***

 

Critical accounting estimates are those that are most important to theportrayal of our financial condition and results. These estimates requiremanagement’s most difficult, subjective, or complex judgments, often as aresult of the need to estimate matters that are inherently uncertain. We reviewthe development, selection, and disclosure of our critical accounting estimateswith the Audit Committee of our board of directors. For information aboutcritical accounting estimates, see Critical Accounting 

 

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Estimates in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in our 2009 Form 10-K. Asof March 31, 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***

 

For information relatedto new and recently adopted accounting standards, see Note 13, New andRecently Adopted Accounting Standards, of the Notes to Unaudited QuarterlyConsolidated Financial Statements in “Item 1. Financial Statements” inthis Form 10-Q.

 

***ITEM 3.******                                       ******QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK***

 

In the normal course of business, we are exposed tofinancial risks such as changes in interest rates, credit risk, and foreigncurrency exchange rates. We do not use derivative instruments for speculativepurposes.

 

*Interest Rate Risk*

 

We are exposed to interest rate risk arising from fluctuations in interestrates on our cash and cash equivalents and bank credit facility. During thethree months ended March 31, 2010 and 2009, we did not use any interestrate derivatives to manage this risk.

 

*Concentration of Credit Risk*

 

We are exposed to creditrisk related to customer accounts receivables. In order to reduce this risk, weconsider customer concentrations and current economic trends and monitor thecreditworthiness of significant customers based on ongoing credit evaluations.At March 31, 2010, and December 31, 2009, the receivables from asingle customer accounted for approximately 13% and 14% of total receivables,respectively. No other customer accounted for 10% or more of total receivables.

 

*Foreign Currency Risk*

 

We have manufacturingoperations in the United States and Canada. As a result, we are exposed tomovements in the foreign currency exchange rate in Canada. During the threemonths ended March 31, 2010 and 2009, we did not use any foreign currencyhedges.

 

*Contingent Value Rights*

 

As part of the sale of our Paper and Packaging &Newsprint assets, Terrapin Partners Venture Partnership and Boise Cascade,L.L.C., issued 21.2 million contingent value rights (CVRs) to holders ofBoise Inc. stock. During the three months ended March 31, 2009, we settledour obligation related to the CVRs using 0.8 million Boise Inc. shares andrecorded a $1.0 million loss in “Equity in net income of affiliate” in ourConsolidated Statement of Income (Loss) for the difference between theBoise Inc. share price on the date we settled our obligation with sharesand the carrying amount of the shares recorded on our Consolidated BalanceSheet.

 

***ITEM 4.******                                      ******CONTROLSAND PROCEDURES***

 

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

 

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*Evaluationof Disclosure Controls and Procedures*

 

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

 

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

 

Under an Outsourcing Services Agreement, Boise Inc. provides a number of corporate staffservices to us at cost. These services include information technology, accounting,and human resource services. Our management, with theparticipation of our CEO and CFO, has evaluated the effectiveness of the designand operation of our disclosure controls and procedures, including theeffectiveness of the services provided to us under the Outsourcing ServicesAgreement, as of the end of the quarter covered by this Form 10-Q. Basedon that evaluation, the CEO and CFO have concluded that, as of such date, ourdisclosure controls and procedures were effective in meeting the objectives forwhich they were designed and were operating at a reasonable assurance level.

 

*Limitationson the Effectiveness of Controls and Procedures*

 

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

 

*Changesin Internal Control Over Financial Reporting*

 

There have been no changes in our internal control overfinancial reporting that occurred during our first quarter ended March 31,2010, that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

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**PART II—OTHER INFORMATION**

 

***ITEM 1.******                                        ******LEGALPROCEEDINGS***

 

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

 

***ITEM 1A.******                               ******RISKFACTORS***

 

This report on Form 10-Qcontains forward-looking statements. Statements that are not historical orcurrent facts, including statements about our expectations, anticipatedfinancial results, projected capital expenditures, and future businessprospects, are forward-looking statements. You can identify these statements byour use of words such as “may,” “will,” “expect,” “believe,” “should,” “plan,” “anticipate,”and other similar expressions. You can find examples of these statementsthroughout this report, including “Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations.” We cannot guarantee that ouractual results will be consistent with the forward-looking statements we makein this report. You should review carefully the risk factors listed in “Item 1A.Risk Factors” of our 2009 Form 10-K, as well as those factors listed inother documents we file with the Securities and Exchange Commission (SEC).There have been no material changes to our risk factors for the three monthsended March 31, 2010, from those listed in our 2009 Form 10-K. We donot assume an obligation to update any forward-looking statement.

 

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

 

None.

 

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

 

None.

 

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

 

***ITEM 5.******                                          ******OTHER INFORMATION***

 

None.

 

***ITEM 6.******                                          ******EXHIBITS***

 

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

 

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**SIGNATURES**

 

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

 

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

 

Date:  May 11, 2010

 

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**BOISECASCADE HOLDINGS, L.L.C.**

 

**INDEX TO EXHIBITS**

 

Filed With theQuarterly Report on Form 10-Q for the Quarter Ended March 31, 2010

 
| **Number** | ** ** | **Description**                                                                   |
|------------|------------|-----------------------------------------------------------------------------------|
|       |       |                                                                              |
| 31.1       |       | CEO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|       |       |                                                                              |
| 31.2       |       | CFO Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |

 

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