**Exhibit 99**

 

**Boise Land & TimberHoldings Corp.**

**ConsolidatedStatements of Income**

(unaudited, in thousands)

 
| ** **                                     | ** ** | **Timber Holdings**            | ** ** | **Predecessor** | ** ** |
|------------------------------------------------|------------|--------------------------------|------------|-----------------|------------|
| ** **                                     | ** ** | **Three Months Ended June 30** | ** ** |
| ** **                                     | ** ** | **2005**                       | ** ** | **2004**        | ** ** |
| **Sales**                                      |       |                           |       |            |       |
| Fiber                                          |       |                           |       |            |       |
| Trade                                          |       | $                              | —     |            | $          | 18 |   |
| Related parties                                |       | —                         |       | 28,217          |       |
| Timberlands                                    |       | —                         |       | 1,543           |       |
|                                           |       | —                         |       | 29,778          |       |
| **Costs  and expenses**                        |       |                           |       |            |       |
| Materials, labor  and other operating expenses |       | —                         |       | 8,884           |       |
| Depreciation,  amortization and depletion      |       | —                         |       | 2,192           |       |
| Cost of  timberlands sold                      |       | —                         |       | (172            | )          |
| General and  administrative expenses           |       | 16                             |       | 1,529           |       |
| Other (income)  expense, net                   |       | —                         |       | (1,336          | )          |
|                                           |       | 16                             |       | 11,097          |       |
|                                           |       |                           |       |            |       |
| Gain on sale of  timberland assets             |       | 1,659                          |       | —          |       |
|                                           |       |                           |       |            |       |
| **Income  from operations**                    |       | 1,643                          |       | 18,681          |       |
|                                           |       |                           |       |            |       |
| Interest expense                               |       | —                         |       | (1,414          | )          |
| Interest income                                |       | 5,192                          |       | —          |       |
|                                           |       | 5,192                          |       | (1,414          | )          |
|                                           |       |                           |       |            |       |
| **Income  before income taxes**                |       | 6,835                          |       | 17,267          |       |
| Income tax  (provision) benefit                |       | 1,476                          |       | (6,703          | )          |
| **Net  income**                                | ** ** | **$**                          | **8,311**  | ** **      | **$**      | **10,564** | ** ** |

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

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**Boise Land& Timber Holdings Corp.**

**ConsolidatedStatements of Income**

(unaudited, in thousands)

 
| ** **                                     | ** ** | **Timber Holdings**          | ** ** | **Predecessor** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|-----------------|------------|
| ** **                                     | ** ** | **Six Months Ended June 30** | ** ** |
| ** **                                     | ** ** | **2005**                     | ** ** | **2004**        | ** ** |
| **Sales**                                      |       |                         |       |            |       |
| Fiber                                          |       |                         |       |            |       |
| Trade                                          |       | $                            | 5          |            | $          | 29 |   |
| Related parties                                |       | 17,609                       |       | 56,059          |       |
| Timberlands                                    |       | —                       |       | 87,031          |       |
|                                           |       | 17,614                       |       | 143,119         |       |
| **Costs  and expenses**                        |       |                         |       |            |       |
| Materials, labor  and other operating expenses |       | 2,303                        |       | 19,973          |       |
| Depreciation,  amortization and depletion      |       | 10,854                       |       | 4,205           |       |
| Cost of  timberlands sold                      |       | —                       |       | 24,220          |       |
| General and  administrative expenses           |       | 2,346                        |       | 3,457           |       |
| Other (income)  expense, net                   |       | (174                         | )          | (2,358          | )          |
|                                           |       | 15,329                       |       | 49,497          |       |
|                                           |       |                         |       |            |       |
| Gain on sale of  timberland assets             |       | 6,553                        |       | —          |       |
|                                           |       |                         |       |            |       |
| **Income  from operations**                    |       | 8,838                        |       | 93,622          |       |
|                                           |       |                         |       |            |       |
| Interest expense                               |       | (11,519                      | )          | (2,829          | )          |
| Interest income                                |       | 8,315                        |       | —          |       |
|                                           |       | (3,204                       | )          | (2,829          | )          |
|                                           |       |                         |       |            |       |
| **Income  before income taxes**                |       | 5,634                        |       | 90,793          |       |
| Income tax  (provision) benefit                |       | 1,476                        |       | (35,338         | )          |
| **Net  income**                                | ** ** | **$**                        | **7,110**  | ** **      | **$**      | **55,455** | ** ** |

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

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**Boise Land& Timber Holdings Corp.**

**ConsolidatedBalance Sheets**

(unaudited, in thousands)

 
| ** **                              | ** ** | **June 30, 2005** | ** **  | **December 31, 2004** | ** ** |
|-----------------------------------------|------------|-------------------|-------------|----------------------------|------------|
| **ASSETS**                              |       |              |        |                       |       |
|                                    |       |              |        |                       |       |
| **Current**                             |       |              |        |                       |       |
| Cash and cash  equivalents              |       | $                 | —      |                       | $          | 1 |   |
| Receivables                             |       | —            |        | 4                          |       |
| Inventories                             |       | —            |        | 828                        |       |
| Deferred income  taxes                  |       | 1,476             |        | —                     |       |
| Prepaid assets                          |       | —            |        | 1,809                      |       |
|                                    |       | 1,476             |        | 2,642                      |       |
|                                    |       |              |        |                       |       |
| **Property**                            |       |              |        |                       |       |
| Property and  equipment                 |       |              |        |                       |       |
| Land and land  improvements             |       | —            |        | 4,744                      |       |
| Buildings  and improvements             |       | —            |        | 715                        |       |
| Machinery  and equipment                |       | —            |        | 949                        |       |
|                                    |       | —            |        | 6,408                      |       |
|                                    |       |              |        |                       |       |
| Accumulated  depreciation               |       | —            |        | (138                       | )          |
|                                    |       | —            |        | 6,270                      |       |
|                                    |       |              |        |                       |       |
| Timber and  timberlands                 |       | —            |        | 1,628,426                  |       |
|                                    |       | —            |        | 1,634,696                  |       |
|                                    |       |              |        |                       |       |
| **Deferred  financing costs**           |       | —            |        | 4,833                      |       |
| **Investments  in affiliates**          |       | 250               |        | 250                        |       |
| **Note  receivable from related party** |       | 261,286           |        | —                     |       |
| **Other  assets**                       |       | —            |        | 300                        |       |
|                                    |       |              |        |                       |       |
| **Total  assets**                       | ** ** | **$**             | **263,012** | ** **                 | **$**      | **1,642,721** | ** ** |

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

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**Boise Land& Timber Holdings Corp.**

**ConsolidatedBalance Sheets (continued)**

(unaudited, in thousands except for share data)

 
| ** **                                                                                              | ** ** | **June 30, 2005** | ** **  | **December 31, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------------------|-------------|----------------------------|------------|
| **LIABILITIES  AND CAPITAL**                                                                            |       |                   |        |                       |       |
|                                                                                                    |       |                   |        |                       |       |
| **Current**                                                                                             |       |                   |        |                       |       |
| Current portion  of long-term debt                                                                      |       | $                      | —      |                       | $          | 12,250 |   |
| Accounts payable                                                                                        |       | 91                     |        | 2,500                      |       |
| Taxes payable                                                                                           |       | —                 |        | 1,840                      |       |
|                                                                                                    |       | 91                     |        | 16,590                     |       |
|                                                                                                    |       |                   |        |                       |       |
| **Debt**                                                                                                |       |                   |        |                       |       |
| Long-term debt,  less current portion                                                                   |       | —                 |        | 1,212,750                  |       |
| Note payable to  related party                                                                          |       | —                 |        | 157,509                    |       |
|                                                                                                    |       | —                 |        | 1,370,259                  |       |
|                                                                                                    |       |                   |        |                       |       |
| **Commitments  and contingent liabilities**                                                             |       |                   |        |                       |       |
|                                                                                                    |       |                   |        |                       |       |
| **Capital**                                                                                             |       |                   |        |                       |       |
| Common stock—par  value $.01; 65,317 shares authorized; 65,036 and 65,060 shares  outstanding |       | 1                      |        | 1                          |       |
| Additional  paid-in capital                                                                             |       | 276,061                |        | 276,122                    |       |
| Accumulated  losses                                                                                     |       | (13,141                | )           | (20,251                    | )          |
| **Total  capital**                                                                                      |       | 262,921                |        | 255,872                    |       |
|                                                                                                    |       |                   |        |                       |       |
| **Total  liabilities and capital**                                                                      | ** ** | **$**                  | **263,012** | ** **                 | **$**      | **1,642,721** | ** ** |

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

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**Boise Land & Timber Holdings Corp.**

**Consolidated Statements of CashFlows**

(unaudited,in thousands)

 
| ** **                                                                            | ** ** | **Timber Holdings**          | ** ** | **Predecessor** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------|------------|
| ** **                                                                            | ** ** | **Six Months Ended June 30** | ** ** |
| ** **                                                                            | ** ** | **2005**                     | ** ** | **2004**        | ** ** |
| **Cash  provided by (used for) operations**                                           |       |                         |       |            |       |
| Net income                                                                            |       | $                            | 7,110      |            | $          | 55,455 |   |
| Items in net  income not using (providing) cash                                       |       |                         |       |            |       |
| Depreciation,  depletion and amortization of deferred financing costs and other costs |       | 15,852                       |       | 4,205           |       |
| Related-party  interest expense                                                       |       | (8,315                       | )          | —          |       |
| Deferred income  tax provision (benefit)                                              |       | (1,476                       | )          | 389             |       |
| Gain on sale of Louisiana  timberlands                                           |       | —                       |       | (59,915         | )          |
| Gain on sale of  timberland assets                                                    |       | (6,553                       | )          | —          |       |
| Receivables                                                                           |       | 4                            |       | 21              |       |
| Inventories                                                                           |       | (118                         | )          | (940            | )          |
| Accounts payable  and accrued liabilities                                             |       | (3,728                       | )          | 1,150           |       |
| Current and  deferred income taxes                                                    |       | —                       |       | (389            | )          |
| Other                                                                                 |       | (170                         | )          | (590            | )          |
| Cash provided by  (used for) operations                                               |       | 2,606                        |       | (614            | )          |
|                                                                                  |       |                         |       |            |       |
| **Cash  provided by (used for) investment**                                           |       |                         |       |            |       |
| Expenditures for  property and equipment                                              |       | (25                          | )          | (824            | )          |
| Expenditures for  timber and timberlands                                              |       | (540                         | )          | (4,793          | )          |
| Proceeds from  sale of Louisiana timberlands                                     |       | —                       |       | 83,717          |       |
| Sale of  timberland assets, net                                                       |       | 1,632,005                    |       | —          |       |
| Note receivable  from related party                                                   |       | (251,312                     | )          | —          |       |
| Other                                                                                 |       | —                       |       | 597             |       |
| Cash provided by  investment                                                          |       | 1,380,128                    |       | 78,697          |       |
|                                                                                  |       |                         |       |            |       |
| **Cash  provided by (used for) financing**                                            |       |                         |       |            |       |
| Payments of  long-term debt                                                           |       | (1,225,000                   | )          | —          |       |
| Note payable to  related party                                                        |       | (157,509                     | )          | —          |       |
| Net equity  transactions with OfficeMax                                               |       | —                       |       | (71,628         | )          |
| Net debt  payments with OfficeMax                                                     |       | —                       |       | (6,455          | )          |
| Other                                                                                 |       | (226                         | )          | —          |       |
| Cash used for  financing                                                              |       | (1,382,735                   | )          | (78,083         | )          |
|                                                                                  |       |                         |       |            |       |
| **Increase  (decrease) in cash and cash equivalents**                                 |       | (1                           | )          | —          |       |
|                                                                                  |       |                         |       |            |       |
| **Balance  at beginning of the period**                                               |       | 1                            |       | —          |       |
|                                                                                  |       |                         |       |            |       |
| **Balance  at end of the period**                                                     | ** ** | **$**                        | **—** | ** **      | **$**      | **—** | ** ** |
|                                                                                  |       |                         |       |            |       |

 

See accompanying notes to unaudited quarterlyconsolidated financial statements.

 

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**Boise Land & TimberHoldings Corp.**

**Consolidated Statements ofCapital**

(unaudited, in thousands)

 
| ** **                              | ** ** | ** **          | ** ** | **Additional Paid-In Capital** | ** ** | ** **                     | ** ** | ** **                     | ** ** |
|-----------------------------------------|------------|---------------------|------------|--------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                              | ** ** | ** **          | ** ** | **Series A Common Stock** | ** ** | **Series B Common Stock** | ** ** | **Series C Common Stock** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **Common****Stock** | ** ** | **Shares**                     | ** ** | **Amount**                     | ** ** | **Shares**                     | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Accumulated Losses** | ** ** | **Total Capital** | ** ** |
| Balance at December 31,  2004      |       | $                   | 1          |                           | 7          |                           | $          | 30,040                         |       | 55 |   | $ | 246,082 |   | 4 |   | $ | — |   | $ | (20,251 | ) | $ | 255,872 |   |
|                                    |       |                |       |                           |       |                           |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Net income                              |       | —              |       | —                         |       | —                         |       | —                         |       | — |   | — |   | — |   | 7,110 |   | 7,110 |   |
| Repurchase of  equity units             |       | —              |       | —                         |       | —                         |       | —                         |       | (61 | ) | — |   | — |   | — |   | (61 | ) |
| Paid-in-kind dividend                   |       | —              |       | —                         |       | 1,607                          |       | —                         |       | (1,607 | ) | — |   | — |   | — |   | — |   |
|                                    |       |                |       |                           |       |                           |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| **Balance  at June 30, 2005** | ** ** | **$**               | **1**      | ** **                     | **7**      | ** **                     | **$**      | **31,647**                     | ** ** | **55** | ** ** | **$** | **244,414** | ** ** | **4** | ** ** | **$** | **—** | ** ** | **$** | **(13,141** | **)** | **$** | **262,921** | ** ** |
|                                    |       |                |       |                           |       |                           |       |                           |       |   |   |   |   |   |   |   |   |   |   |
|                                         |            |                     |            |                                |            |                                |            |                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Seeaccompanying notes to unaudited quarterly consolidated financial statements.

 

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***Notes to Unaudited Quarterly Consolidated Financial Statements***

##### ***DiscontinuedOperations***

At December 31,2004, our timberland assets were held for sale, and the operations of Boise Land &Timber Holding Corp. (Timber Holdings) met the definition of discontinuedoperations. In the accompanying financial statements, we have not shown ourassets as “Assets held for sale” or our liabilities as “Liabilities related toassets held for sale” on our Consolidated Balance Sheet. Since almost all ofthe assets and liabilities were disposed of, we believe that we are providingmore useful information by presenting the information as shown.

In February 2005, we soldall of our timberlands located across the Pacific Northwest, Louisiana,Alabama and Minnesota to Forest Capital Partners, LLC, for$1.65 billion in cash (Timberlands Sale). During the six months endedJune 30, 2005, we recorded a $6.6 million gain in our ConsolidatedStatement of Income. Proceeds from the sale were used to eliminate all of ourdebt, including a related-party loan from Boise Cascade, L.L.C. (Boise LLC),the wholly owned operating subsidiary of Boise Cascade Holdings, L.L.C.(Boise Holdings), and to make a related-party loan to Boise LLC. AtJune 30, 2005, our assets consisted of $1.5 million of deferredincome tax benefits, a $0.3 million investment in unconsolidatedaffiliates and a related-party receivable of $261.3 million from BoiseHoldings. The amount of the receivable will fluctuate with related-partyactivity.

***1.             Basis of Presentation***

                As used in these financial statements, the terms “TimberHoldings” and “we” include Boise Land & Timber Holdings Corp. and itsconsolidated subsidiaries. The term “predecessor” refers to the results of thetimberland assets of OfficeMax Incorporated (OfficeMax) or Boise Timberlands. OfficeMaxwas formerly Boise Cascade Corporation, the company that owned the timberlandsthrough October 28, 2004. In the predecessor periods, we refer toOfficeMax’s paper and forest products businesses as Boise Forest ProductsOperations.

                Wehave prepared the quarterly consolidated financial statements pursuant to therules and regulations of the Securities and Exchange Commission (SEC). Someinformation and footnote disclosures, which would normally be included infinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States, have been condensed or omittedpursuant to those rules and regulations. These quarterly consolidated financialstatements and notes should be read together with the consolidated financialstatements and notes filed with the SEC in Boise Cascade Company’s registrationstatement on Form S-4 (Registration No. 333-125768), as amended.

The quarterly consolidated financial statements havenot been audited by an independent registered public accounting firm, but inthe opinion of management, we have included all adjustments necessary topresent fairly the results for the periods. Net income for the three and sixmonths ended June 30, 2005 and 2004, involved estimates and accruals. Actualresults may vary from those estimates. Except as may be disclosed within these “Notesto Unaudited Consolidated Quarterly Financial Statements,” the adjustments madewere of a normal, recurring nature. Quarterly results are not necessarilyindicative of results that may be expected for the year.

                Theconsolidated financial statements present our operating results for the threeand six months ended June 30, 2005, and the results of OfficeMax’stimberland operations for the three and six months ended June 30, 2004. OfficeMaxhistorically managed its timberlands as part of its Boise Paper Solutions andBoise Building Solutions segments. These financial statements present thetimberland operations as a separate entity.

                Thepredecessor financial statements include accounts specifically attributed toBoise Timberlands and a portion of OfficeMax’s shared corporate general andadministrative expenses. The shared services included, but were not limited to,finance, accounting, legal, information technology and human resource functions.OfficeMax’s corporate general and administrative expenses were allocated to thepredecessor period based on specifically identifiable services used by BoiseTimberlands.

                Thepredecessor financial statements also include an allocation of OfficeMax’stotal debt and related interest expense based on average asset balances (seeNote 6, Debt). The predecessor’s results 

 

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have been or will be included in OfficeMax’sconsolidated tax returns. Income taxes in the predecessor periods of thesefinancial statements have been calculated as if Boise Timberlands were aseparate taxable entity (see Note 4, Income Taxes).

                Informationabout the allocations and related-party transactions are included inNote 3, Transactions With Related Parties.

***2.             Purchase and Sale of TimberlandAssets***

                On October 29, 2004, we acquired OfficeMax’stimberland assets for an aggregate consideration of $1,650.0 million,excluding fees and expenses (the Acquisition). We paid for the Acquisition with$15.0 million in cash and made contributions of $1,635.0 million toaffiliates, who in turn issued $1,635.0 million of timber installmentnotes to OfficeMax and an affiliate of OfficeMax. The $1,635.0 million ininstallment notes issued to OfficeMax were nonrecourse with respect to ForestProducts Holdings, L.L.C. (Parent), a newly formed holding companycontrolled by Madison Dearborn Partners, LLC, and its consolidatedsubsidiaries, and mature on January 29, 2020. In addition, we incurred$14.8 million of deferred financing costs and assumed $3.3 million ofliabilities, net of current assets acquired, for a net purchase price of$1,661.6 million.

On the Acquisition date,Parent and an affiliate of OfficeMax made an aggregate cash equity investmentof $276.1 million in us. The equity investment consisted of $197.6 millioninvested by Parent in exchange for 44,000 shares of Series B common stockand $78.5 million invested by an affiliate of OfficeMax in exchange for7,000 and 11,000 shares of Series A and Series B commonstock, respectively.

                In February 2005, we sold all of our timberlandassets for $1,650.0 million in cash. We recorded a $6.6 million gain,net of $18.0 million of transaction costs related to the sale. Proceedsfrom the sale were used to eliminate all of our debt, including a related-partyloan from Boise LLC, and to make a related-party loan to Boise LLC. AtJune 30, 2005, our assets consisted of $1.5 million of deferredincome tax benefits, a $0.3 million investment in unconsolidatedaffiliates and a related-party receivable of $261.3 million from BoiseHoldings. The amount of the receivable will fluctuate with related-partyactivity.

 

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**3.             *Transactions With RelatedParties***

                For the three and six monthsended June 30, 2005, we participated in Boise LLC’s centralized cashmanagement system. During the predecessor period presented, we participated inOfficeMax’s centralized cash management system. Cash receipts attributable toour operations were collected by Boise LLC and OfficeMax, and cashdisbursements were funded by Boise LLC and OfficeMax. For the six months endedJune 30, 2005, the net effect of these transactions has been reflected inour Consolidated Statement of Cash Flows as “Note payable to related party” and“Note receivable from related party.” For the six months ended June 30, 2004, the net effect of thesetransactions has been reflected in our predecessor financial statements as “Netequity transactions with OfficeMax” in the Consolidated Statement of Cash Flows.The following table includes the components of these related-party transactions(in thousands):
| ** **                                  | ** ** | **Timber****Holdings**       | ** **   | **Predecessor** | ** **  |
|---------------------------------------------|------------|------------------------------|--------------|-----------------|-------------|
| ** **                                  | ** ** | **Six Months Ended June 30** | ** **   |
| ** **                                  | ** ** | **2005**                     | ** **   | **2004**        | ** **  |
| Cash collections                            |       | $                            | (17,792      | )               | $           | (145,496 | ) |
| Payment of accounts payable                 |       | 15,016                       |         | 25,867          |        |
| Capital expenditures                        |       | 565                          |         | 5,617           |        |
| Income taxes                                |       | —                       |         | 34,949          |        |
| Net debt payments with OfficeMax       |       | —                       |         | 6,455           |        |
| Cash from sale of timberlands               |       | (1,632,005                   | )            | —          |        |
| Payments of long-term debt                  |       | 1,225,000                    |         | —          |        |
| Other                                       |       | 395                          |         | 980             |        |
|                                        |       |                         |         |            |        |
| Related-party notes payable and receivable  | ** ** | **$**                        | **(408,821** | )               |        |   |
|                                        |       |                         |         |            |        |
| Net equity transactions with OfficeMax | ** ** | ** **                   | ** **   | **$**           | **(71,628** | **)** |

 

                During the six months ended June 30,2005, and the predecessor period presented, we used services and administrativestaff of Boise LLC and OfficeMax, respectively. These included, but werenot limited to, finance, accounting, legal, information technology and humanresource functions. The costs allocated to Timber Holdings and our predecessorwere specifically identifiable as services used by us and our predecessor. Thesecosts are included in “General and administrative expenses” in the ConsolidatedStatements of Income. All cash advances necessary to fund the lease and/orpurchase of timberlands and other expenditures, to the extent not providedthrough internally generated funds, were provided by Boise LLC for the sixmonths ended June 30, 2005, and by OfficeMax in the predecessor periods. Theseamounts have been reflected in our Consolidated Statement of Cash Flows as “Notepayable to related party” and “Note receivable from related party” and in thepredecessor Consolidated Statement of Cash Flow as “Net equity transactionswith OfficeMax.”

                Priorto the Timberlands Sale, we were a major supplier of fiber to Boise LLCand, in the predecessor period, were a major supplier of fiber to Boise ForestProducts Operations. Sales of fiber to Boise LLC and Boise Forest ProductsOperations are reported as fiber sales to related parties on the ConsolidatedStatements of Income and were based on prices that approximated market prices.

                For the six months ended June 30, 2005, Boise Land &Timber Corp., a wholly owned direct subsidiary of Timber Holdings, leasedemployees from Boise LLC. During this period, most of the leased employeesparticipated in Boise LLC’s defined benefit plans, and most of theemployees were eligible for participation in Boise LLC’s definedcontribution plans. During the predecessor periods, most of Boise Timberlands’employees participated in OfficeMax’s defined benefit pension plans, and mostof the employees were eligible for participation in OfficeMax’s defined contributionplans. We have included the costs associated with employees who participated inthe plans in the Consolidated Statements of Income. These costs were notmaterial in any of the periods presented.

***4.             Income Taxes***

For federal income taxpurposes, the acquisition of Boise Timberlands was treated as an assetpurchase, and we had a tax basis in the acquired assets equal to the purchaseprice. As a result, we depleted assets with a higher tax basis after the dateof the Acquisition. Upon further analysis of our financial performance forfiscal year 2005 and our projected future taxable income, we reversed a portionof our income tax valuation allowance, as it is more likely than not that wewill earn sufficient future income to utilize the deferred tax benefits. Thereversal resulted in the increase in deferred income tax benefits of $1.5 millionat June 30, 2005, compared with $0 at December 31, 2004.

In the predecessor periods presented, BoiseTimberlands’ results have been or will be included in the consolidated incometax returns of OfficeMax. However, in the predecessor financial statements,income taxes have been provided based on a calculation of the income taxexpense that would have been incurred if Boise Timberlands had operated as aseparate taxpayer. Income taxes were provided for all items included in theConsolidated Statements of Income, regardless of when such items were 

 

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reported for tax purposes or when the taxes wereactually paid. Current tax liabilities were transferred to OfficeMax and areincluded in “Net equity transactions with OfficeMax.”

***5.             Leases***

                Asa result of the Timberlands Sale, we are no longer a party to any leaseobligations and have no contingent liability for any leases that were sold toForest Capital by our subsidiaries.

***6.             Debt***

                InOctober 2004, we entered into a six-year, $1,225.0 million Tranche Cterm loan. Borrowings under the term loan bore interest at floating rates. Wepaid approximately $14.8 million of fees and expenses associated withobtaining the term loan. The fees were amortized over three months, the periodthe debt was outstanding before being paid in full with the proceeds from theTimberlands Sale in February 2005. Accordingly, at June 30, 2005, we had no“Deferred financing costs” recorded on our Consolidated Balance Sheet.

                InOctober 2004, we also obtained a $164 million, 6% related-party loan fromBoise Holdings that was due to mature in October 2015. Proceeds from theTimberlands Sale were used to repay this related-party loan. Due torelated-party activity (see Note 3, Transactions With Related Parties),the balance on this loan was $157.5 million at the time we repaid it inFebruary 2005.

                Inthe predecessor periods presented, we participated in OfficeMax’s centralizedcash management system. Cash advances necessary to fund the purchase oftimberlands and major improvements to and replacements of property, to theextent not provided through internally generated funds, were provided byOfficeMax’s cash or funded with debt. In the predecessor periods presented,interest cost was allocated to us based on our average asset balances. Theinterest expense attributable to the debt allocated from OfficeMax is includedin our predecessor Consolidated Statements of Income.

***7.             Financial Instruments***

                Theestimated fair values of our financial instruments, such as receivables,payables and debt, are the same as their carrying values. For the six monthsended June 30, 2005, essentially all of our sales were to Boise LLC,which represents a concentration in the volume of business transacted and therevenue generated from these transactions.

                Concurrentwith the Timberlands Sale, we made a related-party loan to Boise LLC of$264.8 million. The principal amount of this loan is subject to adjustmentbased on transactions between us and Boise LLC and had a balance atJune 30, 2005, of $261.3 million. This note bears interest of 8% perannum, compounded semi-annually, and matures on February 4, 2015.

Prior to the TimberlandsSale, changes in interest rates exposed us to financial market risk. For thethree and six months ended June 30, 2005, we did not use any derivativefinancial instruments, such as interest rate swaps, rate hedge agreements orforward purchase contracts, to hedge underlying debt obligations or anticipatedtransactions. In the predecessor periods, OfficeMax allocated debt and interestcosts to us based on our average asset balances. OfficeMax occasionally usedderivative financial instruments, such as interest rate swaps, rate hedgeagreements and forward exchange contracts, to hedge underlying debt obligationsor anticipated transactions. The effects of these financial instruments are notincluded in our predecessor financial statements other than through OfficeMax’sallocations to us.

***8.             Commitments and Guarantees***

***Commitments***

                Asa result of the Timberlands Sale, we have no commitments, including nocommitments for leases or debt.

 

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***Guarantees***

Boise Cascade Company andTimber Holdings (collectively, “The Companies”) and their respective direct andindirect domestic subsidiaries, excluding foreign subsidiaries, are parties toan amended and restated Credit Agreement dated as of April 18, 2005, withJPMorgan Chase Bank, as Administrative Agent, and certain Lenders namedtherein and a related Guarantee and Collateral Agreement of the same date(collectively, the Bank Credit Agreements). Boise LLC, a wholly owneddirect subsidiary of Boise Cascade Company, acts as borrower under the BankCredit Agreements for the $837.9 million Tranche D term loan and a$475.0 million revolving credit facility that had no outstanding balanceat June 30, 2005, other than reimbursement obligations in respect to $62.2 millionof standby letters of credit issued under the revolving facility. In addition,Boise Land & Timber Corp., a wholly owned direct subsidiary ofTimber Holdings, acted as borrower under the original Bank Credit Agreementsfor the Tranche C term loan in the amount of $1,225.0 million, whichwas paid in full in February 2005 with the proceeds of the Timberlands Sale. Boise LLC’sloans and reimbursement obligations are guaranteed by The Companies and each oftheir domestic subsidiaries (other than Boise LLC). Prior to the repaymentby Boise Land & Timber Corp. of the Tranche C term loan, TheCompanies and each of their domestic subsidiaries (other than Boise Land &Timber Corp.) also guaranteed such loan.

Boise LLC and its wholly owned subsidiary, BoiseCascade Finance Corporation, have jointly issued $250.0 million of seniorfloating-rate notes due in 2012 and $400.0 million of 7.125% seniorsubordinated notes due in 2014. The senior notes are guaranteed on a seniorbasis and the subordinated notes on a subordinated basis by The Companies andeach of the domestic subsidiaries, excluding foreign subsidiaries, of TheCompanies, other than Boise LLC and Boise Cascade Finance Corporation,which are the issuers of the notes.

                Inconnection with the Timberlands Sale, we, along with Boise Holdings, haveagreed to indemnify the purchasers for any breach of representation, warranty,or covenant contained in the purchase agreement. Our indemnificationobligations, with certain exceptions, survive until February 4, 2006, and aresubject to a deductible of $16.5 million and an aggregate cap of $100.0 million.In addition, the purchasers have agreed that, if the events giving rise to anindemnification claim against us and Boise Holdings also give rise to anindemnification claim against OfficeMax under OfficeMax’s indemnificationobligations arising from its sale of the timberlands operations, the purchaserswill pursue remedies directly and exclusively against OfficeMax. In connectionwith the foregoing, Parent assigned to the purchasers all of its rights toindemnification by OfficeMax with respect to the timberlands operations.

***9.             Legal Proceedings and Contingencies***

                We are not aware of any litigation or administrativeproceedings involving Timber Holdings.

 

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