Condensed Notes to Unaudited Quarterly Consolidated Financial Statements
1. Nature of Operations and Basis of Presentation
Boise Inc. is a large, diverse manufacturer and seller of packaging and paper products. Our operations began in February 2008. We are headquartered in Boise, Idaho, and we operate largely in the United States but have recently expanded our operations into Europe, Mexico, and Canada. We manufacture and sell corrugated containers and sheets, protective packaging products and papers associated with packaging, such as label and release papers, and newsprint. Additionally, we manufacture linerboard and corrugating medium, which are combined to make corrugated board, the base raw material in our corrugated sheets and containers. We are the third-largest North American manufacturer of communication papers such as office papers, commercial printing papers, envelope papers, and forms.
Our organizational structure is noted below:
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Boise Inc.
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BZ Intermediate Holdings LLC
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Boise Paper Holdings, L.L.C.
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Packaging Segment
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Paper Segment
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Corporate Segment
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See Note
6
, Segment Information, for additional information about our three reportable segments, Packaging, Paper, and Corporate and Other (support services).
The unaudited quarterly consolidated financial statements included herein are those of the following:
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Boise Inc. and its wholly owned subsidiaries, including BZ Intermediate Holdings LLC (BZ Intermediate).
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BZ Intermediate and its wholly owned subsidiaries, parent company to Boise Paper Holdings, L.L.C. (Boise Paper Holdings).
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In these unaudited quarterly consolidated financial statements, unless the context indicates otherwise, the terms "the Company," "we," "us," "our," or "Boise" refer to Boise Inc. and its consolidated subsidiaries, including BZ Intermediate. There are no significant differences between the results of operations, financial condition, and cash flows of Boise Inc. and those of BZ Intermediate other than income taxes and common stock activity. Some amounts in prior periods' consolidated financial statements have been reclassified to conform with the current period's presentation, none of which were considered material.
The quarterly consolidated financial statements presented have not been audited by an independent registered public accounting firm but, in the opinion of management, include all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the results for the periods presented. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. Quarterly results are not necessarily indicative of results that may be expected for the full year. These condensed notes to unaudited quarterly consolidated financial statements should be read in conjunction with our 2011 Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and the other reports we file with the Securities and Exchange Commission (SEC).
2. St. Helens Charges
In September 2012, we committed to a plan to cease paper production on our one remaining paper machine (H2) at our St. Helens, Oregon, paper mill by December 31, 2012. The cessation is a result of the machine's inability to compete in the marketplace over the long-term, due primarily to high fiber costs and declining product demand. This reduces our annual uncoated freesheet capacity by almost 60,000 tons and will result in the loss of approximately 100 jobs, primarily at the mill. The H3 machine, which is owned by Cascades Tissue Group, continues to operate on the site, and we continue to lease them supporting assets.
During the three and nine months ended September 30, 2012, we recorded
$31.3 million
of pretax costs primarily related to our plan to cease paper production at the mill in our Paper segment. In our Consolidated Statements of Income, we recorded
$27.4 million
of shutdown costs in "St. Helens charges" and
$3.9 million
in "Materials, labor, and other operating expenses" related to inventory write-downs and other one-time costs incurred in the quarter. At September 30, 2012,
$4.1 million
of costs were recorded in “Accrued liabilities, Compensation and benefits”,
$0.7 million
in “Accrued liabilities, Other”, and
$10.4 million
in “Other long-term liabilities” on our Consolidated Balance Sheet.
An analysis of the St. Helens costs is as follows (in thousands):
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Noncash
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Cash (a)
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Total Costs
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Asset write-down
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$
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11,193
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(b)
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$
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—
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$
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11,193
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Inventory write-down
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1,982
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—
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1,982
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Employee-related costs
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—
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4,136
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4,136
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Pension curtailment loss
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1,059
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—
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1,059
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Increase in asset retirement obligations (Note 16)
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—
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10,353
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10,353
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Other
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—
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2,565
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2,565
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$
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14,234
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$
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17,054
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$
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31,288
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____________
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(a)
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We expect to pay most of the
$6.7 million
of employee-related and other costs in early 2013 and the remaining amounts over a longer term.
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(b)
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During the quarter, we assessed the St. Helens long-lived assets for impairment. Our assessment was based upon, among other things, our estimates of the amount of future net cash flows to be generated by the long-lived assets (Level 3 inputs) and our estimates of the current fair value of the assets. Considerable management judgment is necessary to evaluate estimated future cash flows. The assumptions used in our impairment evaluations are consistent with our operating plans.
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3. Acquisition of Hexacomb
On December 1, 2011, we acquired Hexacomb Corporation and its affiliated companies and all of the honeycomb packaging-related assets of Pregis Mexico (Hexacomb) for
$125 million
(Hexacomb Acquisition), subject to post-closing adjustments. In connection with the acquisition, we allocated the purchase price to the assets acquired and liabilities assumed based on estimates of the fair value at the date of the acquisition. See Note 3, Acquisitions, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 2011 Form 10-K. During the
nine months ended September 30, 2012
, we recorded approximately
$1.5 million
of purchase price adjustments that decreased goodwill. These adjustments related primarily to changes in deferred tax liabilities that resulted from further analysis of the tax basis of acquired assets and liabilities and other tax adjustments. The purchase price continues to be preliminary due to unresolved tax matters; however, purchase accounting will be finalized in fourth quarter 2012.
4. Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Net income per common share is not applicable to BZ Intermediate because it does not have common shares. Boise Inc.'s basic and diluted net income per share is calculated as follows (dollars and shares in thousands, except per-share data):
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Three Months Ended
September 30
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Nine Months Ended
September 30
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2012
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2011
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2012
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2011
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Net income
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$
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3,603
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$
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28,364
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$
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38,603
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$
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58,955
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Weighted average number of common shares for basic net income per common share (a)
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100,144
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115,657
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99,772
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101,250
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Incremental effect of dilutive common stock equivalents:
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Restricted stock and restricted stock units
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650
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2,298
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1,123
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2,579
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Performance units
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233
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—
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235
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—
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Common stock warrants (a)
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—
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—
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—
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2,960
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Stock options (b)
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3
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—
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1
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2
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Weighted average number of common shares for diluted net income per common share
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101,030
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117,955
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101,131
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106,791
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Net income per common share:
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Basic
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$
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0.04
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$
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0.25
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$
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0.39
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$
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0.58
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Diluted
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$
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0.04
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$
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0.24
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$
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0.38
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$
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0.55
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____________
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(a)
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During the nine months ended September 30, 2011, warrant holders exercised their warrants, resulting in the issuance of
38.4 million
common shares. We repurchased
21.2 million
common shares in the second half of 2011.
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(b)
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We excluded
0.8 million
and
0.3 million
of stock options from the computation of diluted net income per share because they were antidilutive for both the three and
nine months ended September 30, 2012
and
2011
, respectively.
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5. Income Taxes
For the three and
nine months ended
September 30, 2012
, we recorded
$2.6 million
and
$24.6 million
of income tax expense and had an effective tax rate of
41.8%
and
38.9%
, respectively. During the three and
nine months ended
September 30, 2012
, the primary reason for the difference from the federal statutory income tax rate of
35%
was the effect of state income taxes.
For the three and
nine months ended
September 30, 2011
, we recorded
$18.1 million
and
$37.9 million
of income tax expense and had an effective tax rate of
39.0%
and
39.1%
, respectively. During the three and
nine months ended
September 30, 2011
, the primary reason for the difference from the federal statutory income tax rate of
35%
was the effect of state income taxes and discrete tax items.
Uncertain Income Tax Positions
We recognize tax liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available or as new uncertainties occur. We recognize interest and penalties related to uncertain tax positions as income tax expense in the Consolidated Statements of Income. Interest expense and penalties relating to uncertain tax positions were
nominal
for all periods presented.
Other
Due to Internal Revenue Code Section 382, changes in our ownership limit the amount of net operating losses that we may utilize in any one year. To the extent the annual limitation is not used in any year, the unutilized limitation amount will carry over and add to the limitation in the subsequent tax year. However, we believe it is more likely than not that our net operating losses will be fully realized before they expire.
We file federal income tax returns in the U.S., state income tax returns in various state jurisdictions, and foreign income tax returns in various foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. BZ Intermediate is a wholly owned, consolidated entity of Boise Inc., and its tax return is filed under the consolidated tax return of Boise Inc. Domestic tax years beginning in 2009 and certain foreign tax jurisdictions are subject to examination by taxing authorities, although net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which utilized. The jurisdictions which would be subject to examination include the U.S. federal jurisdiction and various state and foreign jurisdictions.
As of
September 30, 2012
, we had not recognized U.S. deferred income taxes on our cumulative total of undistributed earnings for non-U.S. subsidiaries. Determining the unrecognized deferred tax liability related to investments in these non-U.S. subsidiaries that are indefinitely reinvested is not practicable. We currently intend to indefinitely reinvest those earnings in operations outside the United States.
During the
nine months ended
September 30, 2012
, refunds received, net of cash paid for taxes, were
$0.2 million
. Cash paid for taxes, net of refunds received, was
$1.9 million
during the
nine months ended
September 30, 2011
.
6. Segment Information
We operate and report our business in three reportable segments: Packaging, Paper, and Corporate and Other (support services). These segments represent distinct businesses that are managed separately because of differing products and services. Each of these businesses requires distinct operating and marketing strategies. Management reviews the performance of the Company based on these segments. There are no differences in our basis of segmentation or in our basis of measurement of segment profit or loss from those disclosed in Note 6, Segment Information, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K.
An analysis of operations by segment is as follows (dollars in millions):
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Sales
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Income (Loss) Before Income Taxes
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Depreciation,
Amortization, and Depletion
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EBITDA
(c)
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Three Months Ended
September 30, 2012
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Trade
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Related
Parties
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Inter-
segment
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Total
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Packaging
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$
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270.9
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$
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14.1
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$
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0.7
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$
|
285.7
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$
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22.7
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$
|
14.8
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$
|
37.5
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Paper
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352.0
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—
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18.0
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370.0
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5.5
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(a)
|
21.8
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27.3
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(a)
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Corporate and Other
|
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8.2
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—
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8.5
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16.8
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(6.5
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)
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0.9
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(5.6
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)
|
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Intersegment eliminations
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—
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—
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(27.2
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)
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(27.2
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)
|
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—
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—
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—
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$
|
631.1
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|
|
$
|
14.1
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|
$
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—
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|
$
|
645.2
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|
|
21.6
|
|
|
$
|
37.5
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|
|
$
|
59.2
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|
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Interest expense
|
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|
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(15.5
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)
|
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|
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Interest income
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|
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—
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$
|
6.2
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Sales
|
|
Income (Loss) Before Income Taxes
|
|
Depreciation,
Amortization, and Depletion
|
|
EBITDA
(c)
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Three Months Ended
September 30, 2011
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Trade
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Related
Parties
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Inter-
segment
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Total
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Packaging
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$
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238.2
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$
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12.3
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$
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1.0
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|
|
$
|
251.6
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$
|
32.0
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$
|
13.0
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|
$
|
45.1
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Paper
|
|
372.5
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—
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|
18.1
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|
|
390.6
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|
36.1
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|
22.5
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|
|
58.6
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Corporate and Other
|
|
8.6
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—
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|
|
9.2
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|
17.8
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|
|
(6.0
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)
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|
0.9
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|
|
(5.2
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)
|
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Intersegment eliminations
|
|
—
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|
|
—
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|
|
(28.3
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)
|
|
(28.3
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)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
619.4
|
|
|
$
|
12.3
|
|
|
$
|
—
|
|
|
$
|
631.7
|
|
|
62.2
|
|
|
$
|
36.4
|
|
|
$
|
98.5
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(15.7
|
)
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46.5
|
|
|
|
|
|
|
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|
|
|
|
|
Sales
|
|
Income (Loss) Before Income Taxes
|
|
Depreciation,
Amortization, and Depletion
|
|
EBITDA
(c)
|
|
Nine Months Ended
September 30, 2012
|
|
Trade
|
|
Related
Parties
|
|
Inter-
segment
|
|
Total
|
|
|
|
|
Packaging
|
|
$
|
796.0
|
|
|
$
|
44.7
|
|
|
$
|
2.1
|
|
|
$
|
842.8
|
|
|
$
|
70.0
|
|
|
$
|
45.5
|
|
|
$
|
115.5
|
|
|
Paper
|
|
1,063.0
|
|
|
—
|
|
|
52.6
|
|
|
1,115.6
|
|
|
59.0
|
|
(a)
|
64.3
|
|
|
123.3
|
|
(a)
|
Corporate and Other
|
|
24.1
|
|
|
—
|
|
|
28.0
|
|
|
52.1
|
|
|
(19.6
|
)
|
|
2.6
|
|
|
(17.0
|
)
|
|
Intersegment eliminations
|
|
—
|
|
|
—
|
|
|
(82.6
|
)
|
|
(82.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
1,883.2
|
|
|
$
|
44.7
|
|
|
$
|
—
|
|
|
$
|
1,927.9
|
|
|
109.3
|
|
|
$
|
112.4
|
|
|
$
|
221.7
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(46.3
|
)
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Income (Loss) Before Income Taxes
|
|
Depreciation,
Amortization, and Depletion
|
|
EBITDA
(c)
|
|
Nine Months Ended
September 30, 2011
|
|
Trade
|
|
Related
Parties
|
|
Inter-
segment
|
|
Total
|
|
|
|
|
Packaging
|
|
$
|
664.6
|
|
|
$
|
31.1
|
|
|
$
|
2.6
|
|
|
$
|
698.3
|
|
|
$
|
73.2
|
|
(b)
|
$
|
36.9
|
|
|
$
|
110.0
|
|
(b)
|
Paper
|
|
1,084.4
|
|
|
—
|
|
|
52.4
|
|
|
1,136.8
|
|
|
90.3
|
|
|
66.9
|
|
|
157.1
|
|
|
Corporate and Other
|
|
23.5
|
|
|
—
|
|
|
27.1
|
|
|
50.6
|
|
|
(18.6
|
)
|
|
2.7
|
|
|
(15.9
|
)
|
|
Intersegment eliminations
|
|
—
|
|
|
—
|
|
|
(82.1
|
)
|
|
(82.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
1,772.5
|
|
|
$
|
31.1
|
|
|
$
|
—
|
|
|
$
|
1,803.6
|
|
|
144.8
|
|
|
$
|
106.4
|
|
|
$
|
251.3
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(48.2
|
)
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96.9
|
|
|
|
|
|
|
____________
|
|
(a)
|
In September 2012, we committed to a plan to cease paper production on our one remaining paper machine (H2) at our St. Helens, Oregon, paper mill. For the three and nine months ended September 30, 2012, we recorded pretax charges totaling
$31.3 million
in our Paper segment. See Note 2, St. Helens Charges, for more information.
|
|
|
(b)
|
In connection with the Tharco purchase price allocation, inventories were written up to their estimated fair market value. As the related inventories were sold, we recognized
$2.2 million
of expense in "Materials, labor, and other operating expenses" in our Consolidated Statement of Income for the nine months ended September 30, 2011.
|
|
|
(c)
|
EBITDA represents income before interest (interest expense and interest income), income tax provision, and depreciation, amortization, and depletion. EBITDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance and to decide how to allocate resources to segments. We believe EBITDA is useful to investors because it provides a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that are used by our internal decision makers and because it is frequently used by investors and other interested parties in the evaluation of companies. We believe EBITDA is a meaningful measure because it presents a transparent view of our recurring operating performance and allows management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. For example, we believe that the inclusion of items such as taxes, interest expense, and interest income distorts management’s ability to assess and view the core operating trends in our segments. EBITDA, however, is not a measure of our liquidity or financial performance under generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, income from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of EBITDA instead of net income or segment income (loss) has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense, interest income, and associated significant cash requirements; and the exclusion of depreciation, amortization, and depletion, which represent significant and unavoidable operating costs given the capital expenditures needed to maintain our businesses. Management compensates for these limitations by relying on our GAAP results. Our measures of EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.
|
The following is a reconciliation of net income to EBITDA for Boise Inc. and BZ Intermediate (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Net income
|
$
|
3.6
|
|
(a)
|
$
|
28.4
|
|
|
$
|
38.6
|
|
(a)
|
$
|
59.0
|
|
Interest expense
|
15.5
|
|
|
15.7
|
|
|
46.3
|
|
|
48.2
|
|
Interest income
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
Income tax provision
|
2.6
|
|
|
18.1
|
|
|
24.6
|
|
|
37.9
|
|
Depreciation, amortization, and depletion
|
37.5
|
|
|
36.4
|
|
|
112.4
|
|
|
106.4
|
|
EBITDA
|
$
|
59.2
|
|
(a)
|
$
|
98.5
|
|
|
$
|
221.7
|
|
(a)
|
$
|
251.3
|
|
7. Debt
At September 30, 2012 and December 31, 2011, our long-term debt and the interest rates on that debt were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
|
Amount
|
|
Interest Rate
|
|
Amount
|
|
Interest Rate
|
Tranche A term loan, due 2016
|
$
|
175,000
|
|
|
2.22
|
%
|
|
$
|
200,000
|
|
|
2.30
|
%
|
9% senior notes, due 2017
|
300,000
|
|
|
9.00
|
|
|
300,000
|
|
|
9.00
|
|
8% senior notes, due 2020
|
300,000
|
|
|
8.00
|
|
|
300,000
|
|
|
8.00
|
|
Long-term debt
|
775,000
|
|
|
7.08
|
|
|
800,000
|
|
|
6.95
|
|
Current portion of long-term debt
|
—
|
|
|
—
|
|
|
(10,000
|
)
|
|
2.30
|
|
Long-term debt, less current portion
|
$
|
775,000
|
|
|
7.08
|
%
|
|
$
|
790,000
|
|
|
7.01
|
%
|
As of
September 30, 2012
, our debt consisted of the following:
|
|
•
|
The Revolving Credit Facility
: A five-year nonamortizing
$500 million
senior secured revolving credit facility with variable annual interest. In addition to paying interest, we pay an annual commitment fee for undrawn amounts at a rate of either
0.35%
or
0.50%
depending on our total leverage ratio.
|
|
|
•
|
The Tranche A Term Loan Facility
: A five-year amortizing
$200 million
senior secured loan facility with variable annual interest.
|
|
|
•
|
The
9%
Senior Notes
: An eight-year nonamortizing
$300 million
senior unsecured debt obligation with fixed annual interest of
9%
.
|
|
|
•
|
The
8%
Senior Notes
: A ten-year nonamortizing
$300 million
senior unsecured debt obligation with fixed annual interest of
8%
.
|
Interest on our Revolving Credit Facility and the Tranche A Term Loan Facility (collectively the Credit Facilities) is determined at our election and is based on an alternate base rate or the London Interbank Offered Rate (LIBOR), which is our current election, plus an applicable spread based on our total leverage ratio. Our total leverage ratio is essentially our total net debt divided by our trailing four quarters of Adjusted Consolidated EBITDA (as defined in the credit agreement). At
September 30, 2012
, the interest rate on our Credit Facilities is LIBOR plus 200 basis points. Based on our current election of one-month LIBOR, we pay interest on the Credit Facilities monthly in arrears.
At
September 30, 2012
, and
December 31, 2011
, we had
no
borrowings outstanding under our Revolving Credit Facility. We had availability of
$492.7 million
under our Revolving Credit Facility at
September 30, 2012
, which is net of outstanding letters of credit of
$7.3 million
.
The Credit Facilities and senior note agreements contain certain restrictions relating to dividend payments, capital expenditures, financial ratios, guarantees, and the incurrence of additional indebtedness, which are discussed in Note 7, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K.
Subject to specified exceptions, the Credit Facilities require that the proceeds from certain asset sales, casualty insurance, and certain debt issuances be used to pay down outstanding borrowings. During the nine months ended September 30, 2012, we made
$25.0 million
of long-term debt payments on our Tranche A Term
Loan,
$17.5 million
of which were voluntary and eliminate our required principal payment obligations until December 31, 2013.
As of
September 30, 2012
, required debt principal repayments were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
Thereafter
|
Required debt principal repayments
|
$
|
—
|
|
|
$
|
5,000
|
|
|
$
|
20,000
|
|
|
$
|
30,000
|
|
|
$
|
120,000
|
|
|
$
|
600,000
|
|
At
September 30, 2012
, and
December 31, 2011
, we had
$27.8 million
and
$31.0 million
, respectively, of costs recorded in "Deferred financing costs" on our Consolidated Balance Sheets. We record the amortization of deferred financing costs in interest expense using the effective interest method over the term of the loans. For the three months ended
September 30, 2012
and
2011
, we recorded
$1.1 million
and
$1.5 million
, respectively, and for the
nine months ended
September 30, 2012
and
2011
, we recorded
$3.3 million
and
$4.5 million
, respectively, of amortization expense in "Interest expense" in our Consolidated Statements of Income.
For the
nine months ended
September 30, 2012
and
2011
, cash payments for interest were
$30.3 million
and
$30.6 million
, respectively.
With the exception of the Credit Facilities, our debt is fixed-rate debt. At
September 30, 2012
, the book value of our fixed-rate debt was
$600.0 million
, and the fair value was estimated to be
$662.3 million
. The difference between the book value and fair value is due to the difference between the period-end market interest rate and the stated rate of our fixed-rate, long-term debt. We estimated the fair value of our fixed-rate debt using quoted market prices (Level 1 inputs), discussed further in Note
8
, Financial Instruments.
8. Financial Instruments
Our primary objective in holding derivative financial instruments is to manage cash flow risk. We do not use derivative instruments for speculative purposes.
We enter into transactions to hedge the variable cash flow risk of natural gas purchases. At
September 30, 2012
, these derivatives included caps and call spreads, which we account for as economic hedges, and swaps, which are accounted for as cash flow hedges. As of
September 30, 2012
, we had entered into derivative instruments related to the following approximate percentages of our forecasted natural gas purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2012
|
|
November 2012
Through
March 2013
|
|
April 2013
Through
October 2013
|
|
November 2013
Through
March 2014
|
|
April 2014
Through
October 2014
|
|
November 2014
Through
March 2015
|
|
April 2015
Through
October 2015
|
Approximate percent hedged
|
83
|
%
|
|
87
|
%
|
|
73
|
%
|
|
53
|
%
|
|
48
|
%
|
|
43
|
%
|
|
37
|
%
|
Economic Hedges
For derivative instruments that are designated as economic hedges, the gain or loss on the derivatives is recognized in "Materials, labor, and other operating expenses" in the Consolidated Statements of Income. During the three and nine months ended September 30, 2012 and 2011, we recognized an insignificant amount of expense and/or income related to natural gas contracts we account for as economic hedges.
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of "Accumulated other comprehensive income (loss)" on our Consolidated Balance Sheets and is recognized in "Materials, labor, and other operating expenses" in our Consolidated Statements of Income in the period in which the hedged transaction affects earnings. Financial instruments designated as cash flow hedges are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in the cash flows of the related underlying exposures. The fair value of the instruments is reclassified out of accumulated other comprehensive income (loss) to earnings if the hedge ceases to be highly effective or if the hedged transaction is no longer probable. At
September 30, 2012
, and December 31,
2011
, we had
$1.0 million
and
$3.7 million
of losses, respectively, net of tax, recorded in "Accumulated other comprehensive income (loss)" on our Consolidated Balance Sheets related to our natural gas contracts. Based on
September 30, 2012
pricing, the estimated loss, net of tax, to be recognized in earnings during the next 12 months is
$1.0 million
.
The effects of our cash flow hedging instruments on our Consolidated Balance Sheets and Consolidated Statements of Income were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss Recognized in Accumulated Other Comprehensive Income
|
|
Loss Reclassified From Accumulated Other Comprehensive Income Into Earnings
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Natural gas contracts
|
$
|
(2,919
|
)
|
|
$
|
1,355
|
|
|
$
|
(1,688
|
)
|
|
$
|
1,355
|
|
|
$
|
389
|
|
|
$
|
—
|
|
|
$
|
2,701
|
|
|
$
|
—
|
|
Fair Value Measurements
The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) establishes a fair value hierarchy, which prioritizes the inputs of valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). Where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value (Level 1). If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly (Level 2). If quoted prices for identical or similar assets are not available or are unobservable, we may use internally developed valuation models, whose inputs include bid prices and third-party valuations utilizing underlying asset assumptions (Level 3). Outstanding financial derivative instruments expose us to credit loss in the event of nonperformance by the counterparties to the agreements. We monitor credit ratings of counterparties to the agreements, which are large financial institutions, to consider the impact, if any, on the determination of fair value. No significant adjustments were made in any periods presented.
Fair Values of Derivative Instruments
At
September 30, 2012
, and
December 31, 2011
, the fair value of our financial instruments was determined based on New York Mercantile Exchange (NYMEX) price quotations under the terms of the contracts, using current market information as of the reporting date. The derivatives were valued by us using third-party valuations based on quoted prices for similar assets and liabilities. Accordingly, all of our fair value measurements use Level 2 inputs.
All of our derivative instruments are recorded in "Accrued liabilities, Other" and "Other long-term liabilities" on our Consolidated Balance Sheets. We offset asset and liability balances, by counterparty, where legal right of offset exists. The following table presents the fair value of these instruments at
September 30, 2012
, and
December 31, 2011
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Level 2: Significant Other Observable Inputs
|
|
September 30, 2012
|
|
December 31, 2011
|
Natural gas contracts
|
|
|
|
Cash flow hedges
|
$
|
1,850
|
|
|
$
|
6,022
|
|
Economic hedges
|
2,234
|
|
|
2,370
|
|
Total
|
$
|
4,084
|
|
|
$
|
8,392
|
|
Derivative instruments in an asset position at
September 30, 2012
, were not material. We did not have any derivative instruments in an asset position at
December 31, 2011
.
9. Retirement and Benefit Plans
The components of net periodic benefit cost are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Service cost
|
$
|
646
|
|
|
$
|
746
|
|
|
$
|
2,086
|
|
|
$
|
3,224
|
|
Interest cost
|
6,135
|
|
|
6,385
|
|
|
18,460
|
|
|
19,196
|
|
Expected return on plan assets
|
(6,856
|
)
|
|
(6,179
|
)
|
|
(20,435
|
)
|
|
(18,402
|
)
|
Amortization of actuarial loss
|
2,445
|
|
|
1,405
|
|
|
7,662
|
|
|
4,189
|
|
Amortization of prior service costs and other
|
3
|
|
|
13
|
|
|
8
|
|
|
38
|
|
Plan curtailment loss
|
1,059
|
|
|
—
|
|
|
1,125
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
3,432
|
|
|
$
|
2,370
|
|
|
$
|
8,906
|
|
|
$
|
8,245
|
|
Our funding practice for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that we determine to be appropriate considering the funded status of the plan, tax deductibility, our cash flows from operations, and other factors. During the
nine months ended September 30, 2012
, we contributed
$27.2 million
to our pension plans, which exceeds our 2012 minimum required contributions.
10. Stockholders' Equity and Share-Based Compensation
Special Dividend
On March 21, 2012, we paid a special cash dividend of
$0.48
per common share to Boise Inc. shareholders of record at the close of business on March 9, 2012. The dividend payment was
$47.5 million
.
Share-Based Compensation
Under the Boise Inc. Incentive and Performance Plan (the Plan), the compensation committee of our board of directors has the ability to authorize the grant of various types of stock- and cash-based awards. Awards granted under the Plan vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the Plan are from our authorized but unissued shares or from treasury shares. Share-based compensation costs in BZ Intermediate's financial statements represent expenses for restricted stock, restricted stock units, stock options, and performance units of Boise Inc., which have been pushed down to BZ Intermediate for accounting purposes. Additional information regarding the Plan and awards can be found in Note 11, Share-Based Compensation, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K.
Restricted Stock and Performance Unit Awards.
For restricted stock and restricted stock units (collectively restricted stock), the awards generally vest over a three-year period. Performance unit awards granted are subject to adjustment based on the achievement of defined percentages of the two-year average return on net operating assets (RONOA). Because the RONOA component contains a performance condition, we record compensation expense, net of estimated forfeitures, over the requisite service period based on the most probable number of awards expected to vest. Any shares not vested are forfeited. The fair values of the restricted stock and performance unit awards were based on the closing market price of our common stock on the date of grant, and compensation expense is recorded over the awards' vesting periods. These awards are eligible to participate in dividend payments, if any, which we accrue to be paid upon the vesting of those awards.
The following table presents the restricted stock and performance unit award activity for the nine months ended September 30, 2012 (shares in thousands):
|
|
|
|
|
|
|
|
|
Restricted Stock Awards and Performance Units
|
|
Nonvested Shares
|
|
Weighted Average Grant-Date Fair Value
|
Outstanding at December 31, 2011
|
2,524
|
|
|
$
|
2.55
|
|
Granted
|
716
|
|
|
8.06
|
|
Vested
|
(2,048
|
)
|
|
1.23
|
|
Forfeited
|
(27
|
)
|
|
5.51
|
|
Outstanding at September 30, 2012
|
1,165
|
|
|
$
|
8.20
|
|
Stock Option Awards.
From time to time we grant nonqualified stock options to members of management. The stock options have a contractual term of
ten
years. These awards are eligible to participate in dividend payments, if any, which we accrue to be paid upon the vesting of those awards.
A summary of our stock option activity is presented in the following table (number of options in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Life (in years)
|
|
Aggregate Intrinsic Value (millions)
|
Outstanding at December 31, 2011
|
333
|
|
|
$
|
8.53
|
|
|
|
|
|
Granted
|
508
|
|
|
8.22
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
Outstanding at September 30, 2012
|
841
|
|
|
$
|
8.34
|
|
|
9.1
|
|
$
|
0.4
|
|
The weighted average fair value of the stock options granted was
$3.97
per share. We recognize compensation expense over the awards' vesting period. We calculated the fair value using a Black-Scholes-Merton option-pricing model based on the market price of our common stock at the grant date and the assumptions specific to the underlying options. We based the expected volatility assumption on our historical stock performance and the volatility of related industry stocks. We did not have sufficient historical data to provide a reasonable basis upon which to estimate expected life; therefore, we used the "simplified method" to determine the expected life assumption for the options. We based the risk-free interest rate upon yields of U.S. Treasury issues with terms similar to the expected life of the options.
The following table presents the range of assumptions used to calculate the fair value of stock options for the
nine months ended
September 30, 2012
:
|
|
|
|
|
Black-Scholes-Merton assumptions:
|
|
|
|
Expected volatility
|
50.0%
|
-
|
50.1%
|
Expected life (years)
|
5.9
|
-
|
6.0
|
Risk-free interest rate
|
1.08%
|
-
|
1.39%
|
Expected dividend yield
|
—
|
|
—
|
Compensation Expense.
Most of our share-based compensation expense was recorded in "General and administrative expenses" in our Consolidated Statements of Income. Total recognized share-based compensation expense related to restricted stock, performance units, and stock options, net of estimated forfeitures, is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Restricted stock awards and performance units
|
$
|
1,365
|
|
|
$
|
794
|
|
|
$
|
3,674
|
|
|
$
|
2,409
|
|
Stock options
|
262
|
|
|
111
|
|
|
682
|
|
|
267
|
|
Total share-based compensation expense
|
$
|
1,627
|
|
|
$
|
905
|
|
|
$
|
4,356
|
|
|
$
|
2,676
|
|
The unrecognized compensation expense for all share-based awards at
September 30, 2012
, is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
Unrecognized Compensation Expense
|
|
Remaining Weighted Average Recognition Period (in years)
|
Restricted stock awards and performance units
|
$
|
5,543
|
|
|
1.6
|
Stock options
|
2,014
|
|
|
2.1
|
Total unrecognized share-based compensation expense
|
$
|
7,557
|
|
|
1.7
|
11. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. All of our goodwill is recorded in our Packaging segment.
Changes in the carrying amount of our goodwill are as follows (dollars in thousands):
|
|
|
|
|
|
Goodwill
|
Balance at January 1, 2011
|
$
|
—
|
|
Goodwill acquired
|
162,169
|
|
Foreign currency translation adjustments
|
(478
|
)
|
Balance at December 31, 2011
|
161,691
|
|
Foreign currency translation adjustments
|
148
|
|
Additions (reductions) (a)
|
(1,545
|
)
|
Balance at September 30, 2012
|
$
|
160,294
|
|
____________
|
|
(a)
|
For further information regarding the Hexacomb acquisition, including purchase price adjustments, see Note
3
, Acquisition of Hexacomb.
|
Intangible Assets
Intangible assets represent primarily the values assigned to customer relationships, trademarks and trade names, technology, and noncompete agreements. We had
$150.0 million
and
$159.1 million
of intangible assets at
September 30, 2012
, and December 31, 2011, net of
$23.7 million
and
$14.3 million
of accumulated amortization, respectively. During the three months ended
September 30, 2012
and
2011
, we recorded intangible asset amortization of
$3.0 million
and
$1.8 million
, respectively. During the
nine months ended
September 30, 2012
and
2011
, we recorded intangible asset amortization of
$9.3 million
and
$4.7 million
, respectively. Foreign intangible assets are affected by foreign currency translation.
12. Concentrations of Risk
Business
Sales to OfficeMax Incorporated (OfficeMax) represent a concentration in the volume of business transacted and in revenue generated from those transactions. Sales to OfficeMax were
$121.6 million
and
$125.3 million
, respectively, during the three months ended
September 30, 2012
and
2011
, representing
19%
and
20%
of total sales for those periods. Sales to OfficeMax were
$373.5 million
and
$369.7 million
, respectively, during the
nine months ended
September 30, 2012
and
2011
, representing
19%
and
20%
of total sales for those periods. At
September 30, 2012
, and
December 31, 2011
, we had
$41.9 million
and
$35.3 million
, respectively, of accounts receivable due from OfficeMax. We expect OfficeMax to continue to represent a concentration of our revenues and transacted business. Any significant change in the willingness of OfficeMax to purchase our products or a significant deterioration in the financial condition of OfficeMax that affects their ability to pay could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Labor
As of
September 30, 2012
, we had approximately
5,400
employees. Approximately
51%
of these employees worked pursuant to collective bargaining agreements. Approximately
5%
worked pursuant to collective bargaining agreements that will expire within one year.
13. Inventories
The majority of our inventories are valued at the lower of cost or market, where cost is based on the average cost method of inventory valuation. Manufactured inventories include costs for materials, labor, and factory overhead. Other inventories are valued at the lower of either standard cost, which approximates cost based on the actual first-in, first-out usage pattern, or market.
Inventories include the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
Finished goods
|
$
|
163,644
|
|
|
$
|
155,588
|
|
Work in process
|
37,476
|
|
|
41,172
|
|
Fiber
|
46,445
|
|
|
38,469
|
|
Other raw materials and supplies
|
73,405
|
|
|
72,076
|
|
|
$
|
320,970
|
|
|
$
|
307,305
|
|
14. Property and Equipment
Property and equipment consisted of the following asset classes (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
Land
|
$
|
28,820
|
|
|
$
|
34,735
|
|
Buildings and improvements
|
254,265
|
|
|
248,174
|
|
Machinery and equipment
|
1,438,610
|
|
|
1,375,069
|
|
Construction in progress
|
49,859
|
|
|
44,563
|
|
|
1,771,554
|
|
|
1,702,541
|
|
Less accumulated depreciation
|
(562,797
|
)
|
|
(467,272
|
)
|
|
$
|
1,208,757
|
|
|
$
|
1,235,269
|
|
Depreciation expense for the three months ended
September 30, 2012
and
2011
, was
$32.9 million
and
$32.6 million
, respectively. During the
nine months ended
September 30, 2012
and
2011
, depreciation expense was
$98.4 million
and
$96.3 million
, respectively.
15. Leases
We lease our distribution centers, as well as other property and equipment, under operating leases. For purposes of determining straight-line rent expense, the lease term is calculated from the date of possession of the facility, including any periods of free rent and any renewal option periods that are reasonably assured of being exercised. Straight-line rent expense is also adjusted to reflect any allowances or reimbursements provided by the lessor. Rental expense for operating leases was
$7.3 million
and
$6.2 million
for the three months ended
September 30, 2012
and
2011
, respectively, and during the
nine months
ended
September 30, 2012
and
2011
, rental expense was
$22.0 million
and
$17.3 million
, respectively. Sublease rental income was not material in any of the periods presented.
16. Asset Retirement Obligations
We accrue for asset retirement obligations in the period in which they are incurred if sufficient information is available to reasonably estimate the fair value of the obligation. Fair value estimates are determined using Level 3 inputs in the fair value hierarchy. The fair value of our asset retirement obligations are measured using expected
future cash outflows discounted at the company's credit-adjusted risk-free interest rate. When we record the liability, we capitalize the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its settlement value, and the capitalized cost is depreciated over the useful life of the related asset. Occasionally, we become aware of events or circumstances that require us to revise our future estimated cash flows. When revisions become necessary, we recalculate our obligation and adjust our asset and liability accounts utilizing appropriate discount rates. Upon settlement of the liability, we will recognize a gain or loss for any difference between the settlement amount and the liability recorded.
At
September 30, 2012
, asset retirement obligations related predominantly to landfill closure, wastewater treatment pond dredging, and closed-site monitoring costs and were recorded primarily in "Other long-term liabilities" on the Consolidated Balance Sheets. These liabilities are based on the best estimate of costs and are updated periodically to reflect current technology, laws and regulations, inflation, and other economic factors. No assets are legally restricted for purposes of settling asset retirement obligations. The table below describes changes to the asset retirement obligations for the nine months ended
September 30, 2012
(dollars in thousands):
|
|
|
|
|
Asset retirement obligation at December 31, 2011
|
$
|
10,041
|
|
Liabilities incurred
|
—
|
|
Accretion expense
|
390
|
|
Payments
|
—
|
|
Revisions in estimated cash flows (Note 2)
|
10,353
|
|
Asset retirement obligation at September 30, 2012
|
$
|
20,784
|
|
We have additional asset retirement obligations with indeterminate settlement dates. The fair value of these asset retirement obligations cannot be estimated due to the lack of sufficient information to estimate the settlement dates of the obligations. These asset retirement obligations include, for example, (i) removal and disposal of potentially hazardous materials related to equipment and/or an operating facility if the equipment and/or facilities were to undergo major maintenance, renovation, or demolition and (ii) storage sites or owned facilities for which removal and/or disposal of chemicals and other related materials are required if the operating facility is closed. We will recognize a liability in the period in which sufficient information becomes available to reasonably estimate the fair value of these obligations.
17. Transactions With Related Parties
Related-Party Sales
Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is 50% owned by Boise Inc. and 50% owned by Boise Cascade Holdings, L.L.C. (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of Boise Inc. and Boise Cascade in Louisiana. We are the primary beneficiary of LTP, as we have the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate LTP in our financial statements in our Packaging segment. At
September 30, 2012
, and
December 31, 2011
, the carrying amounts of LTP's assets and liabilities on our Consolidated Balance Sheets were
$4.4 million
and
$3.3 million
, respectively, which related primarily to noninventory working capital items. During the three months ended
September 30, 2012
and
2011
, we recorded
$14.1 million
and
$12.3 million
, respectively, and during the
nine months ended
September 30, 2012
and
2011
, we recorded
$44.7 million
and
$31.1 million
, respectively, of LTP sales to Boise Cascade in "Sales, Related parties" in the Consolidated Statements of Income and approximately the same amount of expenses in "Materials, labor, and other operating expenses." The sales were at prices designed to approximate market prices.
Related-Party Costs and Expenses
During the three months ended
September 30, 2012
and
2011
, fiber purchases from related parties were
$5.3 million
and
$4.8 million
, respectively, and during the
nine months ended
September 30, 2012
and
2011
, fiber purchases from related parties were
$14.7 million
and
$13.6 million
, respectively. Most of these purchases related to log and chip purchases by LTP from Boise Cascade's wood products business. Costs associated with these purchases were recorded as "Fiber costs from related parties" in the Consolidated Statements of Income.
18. New and Recently Adopted Accounting Standards
In July 2012, the FASB issued Accounting Standards Update (ASU) 2012-02, Intangibles — Goodwill and Other (Topic 350):
Testing Indefinite-Lived Intangible Assets for Impairment.
This ASU gives entities testing indefinite-lived intangible assets for impairment the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, the entity is not required to take further action. However, if an entity concludes otherwise, a quantitative impairment test is required. This guidance is effective for annual and interim impairment tests beginning January 1, 2013, with early adoption permitted. We do not believe the adoption of this update will have a material effect on our financial position and results of operations.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210):
Disclosures about Offsetting Assets and Liabilities
. This ASU improves reporting and transparency of offsetting (netting) assets and liabilities and the related effects on the financial statements. This guidance is effective for annual and interim reporting periods beginning January 1, 2013. We do not believe the adoption of this update will have a material effect on our financial position and results of operations.
In September 2011, the FASB issued ASU 2011-08, Intangibles — Goodwill and Other (Topic 350):
Testing Goodwill for Impairment
. This ASU gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. We adopted the provisions of this guidance January 1, 2012, and it had no effect on our financial position and results of operations.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income
, which amends current comprehensive income guidance. This ASU increases the prominence of other comprehensive income in financial statements. Under this ASU, we have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of equity. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220):
Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05
. This ASU indefinitely defers the ASU 2011-05 provision to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). This requirement will be further deliberated by the FASB at a future date. We adopted the provisions of this guidance January 1, 2012. The adoption of this guidance resulted in adding the Consolidated Statements of Comprehensive Income to our Consolidated Financial Statements.
There were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.
19. Commitments, Guarantees, Indemnifications, and Legal Proceedings
Commitments
We have financial commitments for long-term debt and lease payments, and we are a party to a number of long-term log and fiber supply agreements that are discussed in Note 7, Debt, Note 14, Leases, and Note 19, Commitments, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K. In addition, we have other financial obligations that we enter into in the normal course of our business to purchase goods and services and to make capital improvements to our facilities. Due to recent legislation, our 2012 and 2013 minimum required contributions to our pension plans decreased from $20.1 million to
$12.1 million
and from $24.6 million to
$10.2 million
, respectively. However, during the nine months ended
September 30, 2012
, we contributed
$27.2 million
to our plans. During the nine months ended September 30, 2012, we made
$25.0 million
of long-term debt payments on our Tranche A Term Loan,
$17.5 million
of which were voluntary and eliminate our required principal payment obligations until December 31, 2013. As discussed in Note
2
, St. Helens Charges, asset retirement obligations
increased
$10.4 million
during third quarter 2012, and we expect to pay these costs over a longer term. Except as noted above, at
September 30, 2012
, there have been no other material changes to the amounts disclosed in our 2011 Form 10-K.
Guarantees and Indemnifications
We provide a wide range of guarantees, assurances, and indemnification arrangements in the normal course of our business. These include guarantees of statutory environmental obligations, tort indemnifications, tax indemnifications, indemnifications against third-party claims arising out of arrangements to provide services to us, and indemnifications in financing, merger, and acquisition agreements. At
September 30, 2012
, we are not aware of any material liabilities arising from these indemnifications, and we are unable to estimate the maximum potential liability.
Legal Proceedings
We are a party to routine proceedings that arise in the course of our business. We are not currently a party to any legal proceedings or environmental claims that we believe would have a material adverse effect on our financial position, results of operations, or liquidity, either individually or in the aggregate.
20. Consolidating Guarantor and Nonguarantor Financial Information
Our 9% and 8% senior notes (Senior Notes) were issued by Boise Paper Holdings and co-issuers (Boise Co-Issuer Company and Boise Finance Company). The Senior Notes are jointly and severally guaranteed on a senior unsecured basis by BZ Intermediate and each of its existing and, to the extent they become guarantors under the Credit Facilities, future subsidiaries (other than: (i) Boise Paper Holdings and the co-issuers; (ii) Louisiana Timber Procurement Company, L.L.C.; and (iii) our foreign subsidiaries, including those acquired as part of the Hexacomb Acquisition).
The following consolidating financial statements present the results of operations, comprehensive income, financial position, and cash flows of (i) BZ Intermediate (parent); (ii) co-issuers; (iii) guarantor subsidiaries; (iv) nonguarantor subsidiaries; and (v) eliminations to arrive at the information on a consolidated basis. Other than these consolidated financial statements and footnotes for Boise Inc. and BZ Intermediate, financial statements and other disclosures concerning the guarantors have not been presented because management believes that such information is not material to investors. Furthermore, the cancellation provisions of the guarantor subsidiaries are customary, and they do not include an arrangement that permits a guarantor subsidiary to opt out of the obligation prior to or during the term of the debt. Each guarantor subsidiary is automatically released from its obligations as a guarantor upon the sale of the subsidiary or substantially all of its assets to a third party, the designation of the subsidiary as an unrestricted subsidiary for the purposes of the covenants included in the indentures, the release of the indebtedness under the indentures, or if the issuers exercise their legal defeasance option or discharge their obligations in accordance with the indentures.
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Income
For the Three Months Ended
September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
$
|
—
|
|
|
$
|
3,679
|
|
|
$
|
614,838
|
|
|
$
|
12,537
|
|
|
$
|
—
|
|
|
$
|
631,054
|
|
Intercompany
|
—
|
|
|
—
|
|
|
2,085
|
|
|
29,555
|
|
|
(31,640
|
)
|
|
—
|
|
Related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
14,131
|
|
|
—
|
|
|
14,131
|
|
|
—
|
|
|
3,679
|
|
|
616,923
|
|
|
56,223
|
|
|
(31,640
|
)
|
|
645,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
Materials, labor, and other operating expenses
|
—
|
|
|
2,859
|
|
|
483,198
|
|
|
48,431
|
|
|
(31,640
|
)
|
|
502,848
|
|
Fiber costs from related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
5,266
|
|
|
—
|
|
|
5,266
|
|
Depreciation, amortization, and depletion
|
—
|
|
|
718
|
|
|
36,151
|
|
|
671
|
|
|
—
|
|
|
37,540
|
|
Selling and distribution expenses
|
—
|
|
|
—
|
|
|
29,640
|
|
|
375
|
|
|
—
|
|
|
30,015
|
|
General and administrative expenses
|
—
|
|
|
6,914
|
|
|
11,145
|
|
|
1,154
|
|
|
—
|
|
|
19,213
|
|
St. Helens charges
|
—
|
|
|
—
|
|
|
27,448
|
|
|
—
|
|
|
—
|
|
|
27,448
|
|
Other (income) expense, net
|
—
|
|
|
691
|
|
|
925
|
|
|
(107
|
)
|
|
—
|
|
|
1,509
|
|
|
—
|
|
|
11,182
|
|
|
588,507
|
|
|
55,790
|
|
|
(31,640
|
)
|
|
623,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
—
|
|
|
(7,503
|
)
|
|
28,416
|
|
|
433
|
|
|
—
|
|
|
21,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
—
|
|
|
339
|
|
|
(29
|
)
|
|
(14
|
)
|
|
—
|
|
|
296
|
|
Interest expense
|
—
|
|
|
(15,460
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
(15,458
|
)
|
Interest expense—intercompany
|
—
|
|
|
(49
|
)
|
|
—
|
|
|
(14
|
)
|
|
63
|
|
|
—
|
|
Interest income
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Interest income—intercompany
|
—
|
|
|
14
|
|
|
49
|
|
|
—
|
|
|
(63
|
)
|
|
—
|
|
|
—
|
|
|
(15,156
|
)
|
|
23
|
|
|
(26
|
)
|
|
—
|
|
|
(15,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net income (loss) of affiliates
|
—
|
|
|
(22,659
|
)
|
|
28,439
|
|
|
407
|
|
|
—
|
|
|
6,187
|
|
Income tax (provision) benefit
|
—
|
|
|
(2,777
|
)
|
|
10
|
|
|
183
|
|
|
—
|
|
|
(2,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net income (loss) of affiliates
|
—
|
|
|
(25,436
|
)
|
|
28,449
|
|
|
590
|
|
|
—
|
|
|
3,603
|
|
Equity in net income of affiliates
|
3,603
|
|
|
29,039
|
|
|
—
|
|
|
—
|
|
|
(32,642
|
)
|
|
—
|
|
Net income
|
$
|
3,603
|
|
|
$
|
3,603
|
|
|
$
|
28,449
|
|
|
$
|
590
|
|
|
$
|
(32,642
|
)
|
|
$
|
3,603
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Income
For the Three Months Ended
September 30, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
$
|
—
|
|
|
$
|
3,759
|
|
|
$
|
613,899
|
|
|
$
|
1,738
|
|
|
$
|
—
|
|
|
$
|
619,396
|
|
Intercompany
|
—
|
|
|
—
|
|
|
—
|
|
|
26,814
|
|
|
(26,814
|
)
|
|
—
|
|
Related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
12,346
|
|
|
—
|
|
|
12,346
|
|
|
—
|
|
|
3,759
|
|
|
613,899
|
|
|
40,898
|
|
|
(26,814
|
)
|
|
631,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
Materials, labor, and other operating expenses
|
—
|
|
|
3,570
|
|
|
471,018
|
|
|
36,111
|
|
|
(26,814
|
)
|
|
483,885
|
|
Fiber costs from related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
4,786
|
|
|
—
|
|
|
4,786
|
|
Depreciation, amortization, and depletion
|
—
|
|
|
699
|
|
|
35,675
|
|
|
—
|
|
|
—
|
|
|
36,374
|
|
Selling and distribution expenses
|
—
|
|
|
—
|
|
|
29,717
|
|
|
82
|
|
|
—
|
|
|
29,799
|
|
General and administrative expenses
|
—
|
|
|
5,964
|
|
|
8,432
|
|
|
—
|
|
|
—
|
|
|
14,396
|
|
Other (income) expense, net
|
—
|
|
|
359
|
|
|
(399
|
)
|
|
(90
|
)
|
|
—
|
|
|
(130
|
)
|
|
—
|
|
|
10,592
|
|
|
544,443
|
|
|
40,889
|
|
|
(26,814
|
)
|
|
569,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
—
|
|
|
(6,833
|
)
|
|
69,456
|
|
|
9
|
|
|
—
|
|
|
62,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
—
|
|
|
(588
|
)
|
|
106
|
|
|
—
|
|
|
—
|
|
|
(482
|
)
|
Interest expense
|
—
|
|
|
(15,725
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,725
|
)
|
Interest expense—intercompany
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
(4
|
)
|
|
52
|
|
|
—
|
|
Interest income
|
—
|
|
|
56
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
58
|
|
Interest income—intercompany
|
—
|
|
|
4
|
|
|
48
|
|
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
—
|
|
|
(16,301
|
)
|
|
156
|
|
|
(4
|
)
|
|
—
|
|
|
(16,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net income (loss) of affiliates
|
—
|
|
|
(23,134
|
)
|
|
69,612
|
|
|
5
|
|
|
—
|
|
|
46,483
|
|
Income tax (provision) benefit
|
—
|
|
|
(18,120
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(18,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net income (loss) of affiliates
|
—
|
|
|
(41,254
|
)
|
|
69,613
|
|
|
5
|
|
|
—
|
|
|
28,364
|
|
Equity in net income of affiliates
|
28,364
|
|
|
69,618
|
|
|
—
|
|
|
—
|
|
|
(97,982
|
)
|
|
—
|
|
Net income
|
$
|
28,364
|
|
|
$
|
28,364
|
|
|
$
|
69,613
|
|
|
$
|
5
|
|
|
$
|
(97,982
|
)
|
|
$
|
28,364
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Income
For the
Nine Months Ended September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
$
|
—
|
|
|
$
|
10,979
|
|
|
$
|
1,835,446
|
|
|
$
|
36,742
|
|
|
$
|
—
|
|
|
$
|
1,883,167
|
|
Intercompany
|
—
|
|
|
—
|
|
|
3,061
|
|
|
81,589
|
|
|
(84,650
|
)
|
|
—
|
|
Related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
44,704
|
|
|
—
|
|
|
44,704
|
|
|
—
|
|
|
10,979
|
|
|
1,838,507
|
|
|
163,035
|
|
|
(84,650
|
)
|
|
1,927,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
Materials, labor, and other operating expenses
|
—
|
|
|
9,916
|
|
|
1,446,917
|
|
|
140,307
|
|
|
(84,650
|
)
|
|
1,512,490
|
|
Fiber costs from related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
14,678
|
|
|
—
|
|
|
14,678
|
|
Depreciation, amortization, and depletion
|
—
|
|
|
2,040
|
|
|
108,310
|
|
|
2,049
|
|
|
—
|
|
|
112,399
|
|
Selling and distribution expenses
|
—
|
|
|
—
|
|
|
90,487
|
|
|
738
|
|
|
—
|
|
|
91,225
|
|
General and administrative expenses
|
—
|
|
|
21,155
|
|
|
33,922
|
|
|
4,179
|
|
|
—
|
|
|
59,256
|
|
St. Helens charges
|
—
|
|
|
—
|
|
|
27,448
|
|
|
—
|
|
|
—
|
|
|
27,448
|
|
Other (income) expense, net
|
—
|
|
|
843
|
|
|
1,114
|
|
|
(367
|
)
|
|
—
|
|
|
1,590
|
|
|
—
|
|
|
33,954
|
|
|
1,708,198
|
|
|
161,584
|
|
|
(84,650
|
)
|
|
1,819,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
—
|
|
|
(22,975
|
)
|
|
130,309
|
|
|
1,451
|
|
|
—
|
|
|
108,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
—
|
|
|
342
|
|
|
47
|
|
|
166
|
|
|
—
|
|
|
555
|
|
Interest expense
|
—
|
|
|
(46,258
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
(46,256
|
)
|
Interest expense—intercompany
|
—
|
|
|
(144
|
)
|
|
—
|
|
|
(42
|
)
|
|
186
|
|
|
—
|
|
Interest income
|
—
|
|
|
48
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
101
|
|
Interest income—intercompany
|
—
|
|
|
42
|
|
|
144
|
|
|
—
|
|
|
(186
|
)
|
|
—
|
|
|
—
|
|
|
(45,970
|
)
|
|
244
|
|
|
126
|
|
|
—
|
|
|
(45,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net income (loss) of affiliates
|
—
|
|
|
(68,945
|
)
|
|
130,553
|
|
|
1,577
|
|
|
—
|
|
|
63,185
|
|
Income tax provision
|
—
|
|
|
(24,406
|
)
|
|
(13
|
)
|
|
(163
|
)
|
|
—
|
|
|
(24,582
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net income (loss) of affiliates
|
—
|
|
|
(93,351
|
)
|
|
130,540
|
|
|
1,414
|
|
|
—
|
|
|
38,603
|
|
Equity in net income of affiliates
|
38,603
|
|
|
131,954
|
|
|
—
|
|
|
—
|
|
|
(170,557
|
)
|
|
—
|
|
Net income
|
$
|
38,603
|
|
|
$
|
38,603
|
|
|
$
|
130,540
|
|
|
$
|
1,414
|
|
|
$
|
(170,557
|
)
|
|
$
|
38,603
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Income
For the
Nine Months Ended September 30, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
$
|
—
|
|
|
$
|
11,028
|
|
|
$
|
1,756,962
|
|
|
$
|
4,510
|
|
|
$
|
—
|
|
|
$
|
1,772,500
|
|
Intercompany
|
—
|
|
|
—
|
|
|
—
|
|
|
72,213
|
|
|
(72,213
|
)
|
|
—
|
|
Related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
31,140
|
|
|
—
|
|
|
31,140
|
|
|
—
|
|
|
11,028
|
|
|
1,756,962
|
|
|
107,863
|
|
|
(72,213
|
)
|
|
1,803,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
Materials, labor, and other operating expenses
|
—
|
|
|
10,470
|
|
|
1,385,445
|
|
|
94,254
|
|
|
(72,213
|
)
|
|
1,417,956
|
|
Fiber costs from related parties
|
—
|
|
|
—
|
|
|
—
|
|
|
13,609
|
|
|
—
|
|
|
13,609
|
|
Depreciation, amortization, and depletion
|
—
|
|
|
2,235
|
|
|
104,203
|
|
|
—
|
|
|
—
|
|
|
106,438
|
|
Selling and distribution expenses
|
—
|
|
|
—
|
|
|
78,412
|
|
|
243
|
|
|
—
|
|
|
78,655
|
|
General and administrative expenses
|
—
|
|
|
17,307
|
|
|
24,408
|
|
|
—
|
|
|
—
|
|
|
41,715
|
|
Other (income) expense, net
|
—
|
|
|
1,772
|
|
|
(1,373
|
)
|
|
(265
|
)
|
|
—
|
|
|
134
|
|
|
—
|
|
|
31,784
|
|
|
1,591,095
|
|
|
107,841
|
|
|
(72,213
|
)
|
|
1,658,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
—
|
|
|
(20,756
|
)
|
|
165,867
|
|
|
22
|
|
|
—
|
|
|
145,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
—
|
|
|
(507
|
)
|
|
212
|
|
|
—
|
|
|
—
|
|
|
(295
|
)
|
Interest expense
|
—
|
|
|
(48,164
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,164
|
)
|
Interest expense—intercompany
|
—
|
|
|
(141
|
)
|
|
—
|
|
|
(11
|
)
|
|
152
|
|
|
—
|
|
Interest income
|
—
|
|
|
204
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
210
|
|
Interest income—intercompany
|
—
|
|
|
11
|
|
|
141
|
|
|
—
|
|
|
(152
|
)
|
|
—
|
|
|
—
|
|
|
(48,597
|
)
|
|
359
|
|
|
(11
|
)
|
|
—
|
|
|
(48,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net income (loss) of affiliates
|
—
|
|
|
(69,353
|
)
|
|
166,226
|
|
|
11
|
|
|
—
|
|
|
96,884
|
|
Income tax provision
|
—
|
|
|
(37,874
|
)
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(37,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net income (loss) of affiliates
|
—
|
|
|
(107,227
|
)
|
|
166,171
|
|
|
11
|
|
|
—
|
|
|
58,955
|
|
Equity in net income of affiliates
|
58,955
|
|
|
166,182
|
|
|
—
|
|
|
—
|
|
|
(225,137
|
)
|
|
—
|
|
Net income
|
$
|
58,955
|
|
|
$
|
58,955
|
|
|
$
|
166,171
|
|
|
$
|
11
|
|
|
$
|
(225,137
|
)
|
|
$
|
58,955
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Comprehensive Income
For the Three Months Ended
September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
3,603
|
|
|
$
|
3,603
|
|
|
$
|
28,449
|
|
|
$
|
590
|
|
|
$
|
(32,642
|
)
|
|
$
|
3,603
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
970
|
|
|
—
|
|
|
970
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
—
|
|
|
1,794
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,794
|
|
Loss included in net income
|
—
|
|
|
239
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
239
|
|
Amortization of actuarial loss and prior service cost for defined benefit pension plans
|
—
|
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
Equity in other comprehensive income of affiliates
|
4,503
|
|
|
970
|
|
|
—
|
|
|
—
|
|
|
(5,473
|
)
|
|
—
|
|
|
4,503
|
|
|
4,503
|
|
|
—
|
|
|
970
|
|
|
(5,473
|
)
|
|
4,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
8,106
|
|
|
$
|
8,106
|
|
|
$
|
28,449
|
|
|
$
|
1,560
|
|
|
$
|
(38,115
|
)
|
|
$
|
8,106
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Comprehensive Income
For the Three Months Ended
September 30, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
28,364
|
|
|
$
|
28,364
|
|
|
$
|
69,613
|
|
|
$
|
5
|
|
|
$
|
(97,982
|
)
|
|
$
|
28,364
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
—
|
|
|
(832
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(832
|
)
|
Loss included in net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss and prior service cost for defined benefit pension plans
|
—
|
|
|
867
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
867
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Equity in other comprehensive income of affiliates
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
35
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
28,399
|
|
|
$
|
28,399
|
|
|
$
|
69,613
|
|
|
$
|
5
|
|
|
$
|
(98,017
|
)
|
|
$
|
28,399
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Comprehensive Income
For the
Nine Months Ended September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
38,603
|
|
|
$
|
38,603
|
|
|
$
|
130,540
|
|
|
$
|
1,414
|
|
|
$
|
(170,557
|
)
|
|
$
|
38,603
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(482
|
)
|
|
—
|
|
|
(482
|
)
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
—
|
|
|
1,038
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,038
|
|
Loss included in net income
|
—
|
|
|
1,660
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,660
|
|
Amortization of actuarial loss and prior service cost for defined benefit pension plans
|
—
|
|
|
4,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,700
|
|
Equity in other comprehensive income (loss) of affiliates
|
6,916
|
|
|
(482
|
)
|
|
—
|
|
|
—
|
|
|
(6,434
|
)
|
|
—
|
|
|
6,916
|
|
|
6,916
|
|
|
—
|
|
|
(482
|
)
|
|
(6,434
|
)
|
|
6,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
45,519
|
|
|
$
|
45,519
|
|
|
$
|
130,540
|
|
|
$
|
932
|
|
|
$
|
(176,991
|
)
|
|
$
|
45,519
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Comprehensive Income
For the
Nine Months Ended September 30, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
58,955
|
|
|
$
|
58,955
|
|
|
$
|
166,171
|
|
|
$
|
11
|
|
|
$
|
(225,137
|
)
|
|
$
|
58,955
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
—
|
|
|
(832
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(832
|
)
|
Loss included in net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss and prior service cost for defined benefit pension plans
|
—
|
|
|
2,583
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,583
|
|
Other
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Equity in other comprehensive income of affiliates
|
1,750
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,750
|
)
|
|
—
|
|
|
1,750
|
|
|
1,750
|
|
|
—
|
|
|
—
|
|
|
(1,750
|
)
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
60,705
|
|
|
$
|
60,705
|
|
|
$
|
166,171
|
|
|
$
|
11
|
|
|
$
|
(226,887
|
)
|
|
$
|
60,705
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Balance Sheets at
September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
93,873
|
|
|
$
|
1,460
|
|
|
$
|
7,043
|
|
|
$
|
—
|
|
|
$
|
102,376
|
|
Receivables
|
|
|
|
|
|
|
|
|
|
|
|
Trade, less allowances
|
—
|
|
|
1,356
|
|
|
248,691
|
|
|
9,731
|
|
|
—
|
|
|
259,778
|
|
Intercompany
|
—
|
|
|
1,130
|
|
|
2,340
|
|
|
2,770
|
|
|
(6,240
|
)
|
|
—
|
|
Other
|
—
|
|
|
3,196
|
|
|
3,903
|
|
|
798
|
|
|
—
|
|
|
7,897
|
|
Inventories
|
—
|
|
|
3
|
|
|
317,740
|
|
|
3,227
|
|
|
—
|
|
|
320,970
|
|
Deferred income taxes
|
—
|
|
|
5,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,579
|
|
Prepaid and other
|
—
|
|
|
7,113
|
|
|
5,051
|
|
|
612
|
|
|
—
|
|
|
12,776
|
|
|
—
|
|
|
112,250
|
|
|
579,185
|
|
|
24,181
|
|
|
(6,240
|
)
|
|
709,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
—
|
|
|
6,626
|
|
|
1,190,725
|
|
|
11,406
|
|
|
—
|
|
|
1,208,757
|
|
Fiber farms
|
—
|
|
|
—
|
|
|
23,719
|
|
|
—
|
|
|
—
|
|
|
23,719
|
|
|
—
|
|
|
6,626
|
|
|
1,214,444
|
|
|
11,406
|
|
|
—
|
|
|
1,232,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
—
|
|
|
27,820
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,820
|
|
Goodwill
|
—
|
|
|
—
|
|
|
153,345
|
|
|
6,949
|
|
|
—
|
|
|
160,294
|
|
Intangible assets, net
|
—
|
|
|
—
|
|
|
135,768
|
|
|
14,223
|
|
|
—
|
|
|
149,991
|
|
Investments in affiliates
|
800,713
|
|
|
1,781,417
|
|
|
—
|
|
|
—
|
|
|
(2,582,130
|
)
|
|
—
|
|
Intercompany notes receivable
|
—
|
|
|
3,400
|
|
|
—
|
|
|
—
|
|
|
(3,400
|
)
|
|
—
|
|
Other assets
|
—
|
|
|
6,368
|
|
|
1,319
|
|
|
140
|
|
|
—
|
|
|
7,827
|
|
Total assets
|
$
|
800,713
|
|
|
$
|
1,937,881
|
|
|
$
|
2,084,061
|
|
|
$
|
56,899
|
|
|
$
|
(2,591,770
|
)
|
|
$
|
2,287,784
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Balance Sheets at
September 30, 2012
(continued)
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
LIABILITIES AND CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
—
|
|
|
14,631
|
|
|
188,777
|
|
|
6,241
|
|
|
—
|
|
|
209,649
|
|
Intercompany
|
—
|
|
|
555
|
|
|
2,212
|
|
|
3,553
|
|
|
(6,320
|
)
|
|
—
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
—
|
|
|
23,252
|
|
|
46,288
|
|
|
1,226
|
|
|
—
|
|
|
70,766
|
|
Interest payable
|
—
|
|
|
23,287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,287
|
|
Other
|
—
|
|
|
3,266
|
|
|
21,728
|
|
|
2,603
|
|
|
80
|
|
|
27,677
|
|
|
—
|
|
|
64,991
|
|
|
259,005
|
|
|
13,623
|
|
|
(6,240
|
)
|
|
331,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
—
|
|
|
775,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
775,000
|
|
Intercompany notes payable
|
—
|
|
|
—
|
|
|
—
|
|
|
3,400
|
|
|
(3,400
|
)
|
|
—
|
|
|
—
|
|
|
775,000
|
|
|
—
|
|
|
3,400
|
|
|
(3,400
|
)
|
|
775,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
—
|
|
|
104,341
|
|
|
53,268
|
|
|
3,384
|
|
|
—
|
|
|
160,993
|
|
Compensation and benefits
|
—
|
|
|
147,191
|
|
|
1,149
|
|
|
—
|
|
|
—
|
|
|
148,340
|
|
Other long-term liabilities
|
—
|
|
|
45,645
|
|
|
25,369
|
|
|
345
|
|
|
—
|
|
|
71,359
|
|
|
—
|
|
|
297,177
|
|
|
79,786
|
|
|
3,729
|
|
|
—
|
|
|
380,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
Business unit equity
|
915,759
|
|
|
915,759
|
|
|
1,745,270
|
|
|
36,981
|
|
|
(2,698,010
|
)
|
|
915,759
|
|
Accumulated other comprehensive loss
|
(115,046
|
)
|
|
(115,046
|
)
|
|
—
|
|
|
(834
|
)
|
|
115,880
|
|
|
(115,046
|
)
|
|
800,713
|
|
|
800,713
|
|
|
1,745,270
|
|
|
36,147
|
|
|
(2,582,130
|
)
|
|
800,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and capital
|
$
|
800,713
|
|
|
$
|
1,937,881
|
|
|
$
|
2,084,061
|
|
|
$
|
56,899
|
|
|
$
|
(2,591,770
|
)
|
|
$
|
2,287,784
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Balance Sheets at
December 31, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
82,532
|
|
|
$
|
9,737
|
|
|
$
|
4,727
|
|
|
$
|
—
|
|
|
$
|
96,996
|
|
Receivables
|
|
|
|
|
|
|
|
|
|
|
|
Trade, less allowances
|
—
|
|
|
1,183
|
|
|
220,621
|
|
|
7,034
|
|
|
—
|
|
|
228,838
|
|
Intercompany
|
—
|
|
|
40
|
|
|
21
|
|
|
2,099
|
|
|
(2,160
|
)
|
|
—
|
|
Other
|
—
|
|
|
2,477
|
|
|
5,064
|
|
|
81
|
|
|
—
|
|
|
7,622
|
|
Inventories
|
—
|
|
|
3
|
|
|
304,490
|
|
|
2,812
|
|
|
—
|
|
|
307,305
|
|
Deferred income taxes
|
—
|
|
|
20,379
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,379
|
|
Prepaid and other
|
—
|
|
|
4,467
|
|
|
2,588
|
|
|
(111
|
)
|
|
—
|
|
|
6,944
|
|
|
—
|
|
|
111,081
|
|
|
542,521
|
|
|
16,642
|
|
|
(2,160
|
)
|
|
668,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
—
|
|
|
5,652
|
|
|
1,217,520
|
|
|
12,097
|
|
|
—
|
|
|
1,235,269
|
|
Fiber farms
|
—
|
|
|
—
|
|
|
21,193
|
|
|
—
|
|
|
—
|
|
|
21,193
|
|
|
—
|
|
|
5,652
|
|
|
1,238,713
|
|
|
12,097
|
|
|
—
|
|
|
1,256,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
—
|
|
|
30,956
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,956
|
|
Goodwill
|
—
|
|
|
—
|
|
|
156,305
|
|
|
5,386
|
|
|
—
|
|
|
161,691
|
|
Intangible assets, net
|
—
|
|
|
—
|
|
|
143,986
|
|
|
15,134
|
|
|
—
|
|
|
159,120
|
|
Investments in affiliates
|
803,344
|
|
|
1,817,537
|
|
|
—
|
|
|
—
|
|
|
(2,620,881
|
)
|
|
—
|
|
Intercompany notes receivable
|
—
|
|
|
3,400
|
|
|
—
|
|
|
—
|
|
|
(3,400
|
)
|
|
—
|
|
Other assets
|
—
|
|
|
5,805
|
|
|
3,948
|
|
|
4
|
|
|
—
|
|
|
9,757
|
|
Total assets
|
$
|
803,344
|
|
|
$
|
1,974,431
|
|
|
$
|
2,085,473
|
|
|
$
|
49,263
|
|
|
$
|
(2,626,441
|
)
|
|
$
|
2,286,070
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Balance Sheets at
December 31, 2011
(continued)
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
LIABILITIES AND CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
—
|
|
|
19,566
|
|
|
176,575
|
|
|
6,443
|
|
|
—
|
|
|
202,584
|
|
Intercompany
|
—
|
|
|
—
|
|
|
2,119
|
|
|
1
|
|
|
(2,120
|
)
|
|
—
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
—
|
|
|
24,581
|
|
|
39,457
|
|
|
869
|
|
|
—
|
|
|
64,907
|
|
Interest payable
|
—
|
|
|
10,528
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,528
|
|
Other
|
—
|
|
|
8,626
|
|
|
13,769
|
|
|
185
|
|
|
(40
|
)
|
|
22,540
|
|
|
—
|
|
|
73,301
|
|
|
231,920
|
|
|
7,498
|
|
|
(2,160
|
)
|
|
310,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
—
|
|
|
790,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
790,000
|
|
Intercompany notes payable
|
—
|
|
|
—
|
|
|
—
|
|
|
3,400
|
|
|
(3,400
|
)
|
|
—
|
|
|
—
|
|
|
790,000
|
|
|
—
|
|
|
3,400
|
|
|
(3,400
|
)
|
|
790,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
—
|
|
|
94,822
|
|
|
53,365
|
|
|
4,525
|
|
|
—
|
|
|
152,712
|
|
Compensation and benefits
|
—
|
|
|
172,305
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
172,394
|
|
Other long-term liabilities
|
—
|
|
|
40,659
|
|
|
16,261
|
|
|
141
|
|
|
—
|
|
|
57,061
|
|
|
—
|
|
|
307,786
|
|
|
69,715
|
|
|
4,666
|
|
|
—
|
|
|
382,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
Business unit equity
|
925,306
|
|
|
925,306
|
|
|
1,783,838
|
|
|
34,051
|
|
|
(2,743,195
|
)
|
|
925,306
|
|
Accumulated other comprehensive loss
|
(121,962
|
)
|
|
(121,962
|
)
|
|
—
|
|
|
(352
|
)
|
|
122,314
|
|
|
(121,962
|
)
|
|
803,344
|
|
|
803,344
|
|
|
1,783,838
|
|
|
33,699
|
|
|
(2,620,881
|
)
|
|
803,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and capital
|
$
|
803,344
|
|
|
$
|
1,974,431
|
|
|
$
|
2,085,473
|
|
|
$
|
49,263
|
|
|
$
|
(2,626,441
|
)
|
|
$
|
2,286,070
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Cash Flows
For the
Nine Months Ended September 30, 2012
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash provided by (used for) operations
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
38,603
|
|
|
$
|
38,603
|
|
|
$
|
130,540
|
|
|
$
|
1,414
|
|
|
$
|
(170,557
|
)
|
|
$
|
38,603
|
|
Items in net income not using
(providing) cash
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income of affiliates
|
(38,603
|
)
|
|
(131,954
|
)
|
|
—
|
|
|
—
|
|
|
170,557
|
|
|
—
|
|
Depreciation, depletion, and amortization of deferred financing costs and other
|
—
|
|
|
5,560
|
|
|
108,310
|
|
|
2,049
|
|
|
—
|
|
|
115,919
|
|
Share-based compensation expense
|
—
|
|
|
4,356
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,356
|
|
Pension expense
|
—
|
|
|
7,847
|
|
|
1,059
|
|
|
—
|
|
|
—
|
|
|
8,906
|
|
Deferred income taxes
|
—
|
|
|
20,982
|
|
|
—
|
|
|
(225
|
)
|
|
—
|
|
|
20,757
|
|
St. Helens charges
|
—
|
|
|
—
|
|
|
28,371
|
|
|
—
|
|
|
—
|
|
|
28,371
|
|
Other
|
—
|
|
|
(121
|
)
|
|
1,112
|
|
|
(166
|
)
|
|
—
|
|
|
825
|
|
Decrease (increase) in working capital
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
—
|
|
|
(1,978
|
)
|
|
(28,323
|
)
|
|
(3,961
|
)
|
|
4,080
|
|
|
(30,182
|
)
|
Inventories
|
—
|
|
|
—
|
|
|
(15,309
|
)
|
|
(530
|
)
|
|
—
|
|
|
(15,839
|
)
|
Prepaid expenses
|
—
|
|
|
(626
|
)
|
|
(2,463
|
)
|
|
(507
|
)
|
|
—
|
|
|
(3,596
|
)
|
Accounts payable and accrued liabilities
|
—
|
|
|
4,632
|
|
|
16,767
|
|
|
3,609
|
|
|
(4,080
|
)
|
|
20,928
|
|
Current and deferred income taxes
|
—
|
|
|
1,640
|
|
|
(1
|
)
|
|
(48
|
)
|
|
—
|
|
|
1,591
|
|
Pension payments
|
—
|
|
|
(27,240
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,240
|
)
|
Other
|
—
|
|
|
2,585
|
|
|
(905
|
)
|
|
195
|
|
|
—
|
|
|
1,875
|
|
Cash provided by (used for) operations
|
—
|
|
|
(75,714
|
)
|
|
239,158
|
|
|
1,830
|
|
|
—
|
|
|
165,274
|
|
Cash provided by (used for) investment
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment
|
—
|
|
|
(3,048
|
)
|
|
(78,656
|
)
|
|
(589
|
)
|
|
—
|
|
|
(82,293
|
)
|
Other
|
—
|
|
|
342
|
|
|
329
|
|
|
477
|
|
|
—
|
|
|
1,148
|
|
Cash provided by (used for) investment
|
—
|
|
|
(2,706
|
)
|
|
(78,327
|
)
|
|
(112
|
)
|
|
—
|
|
|
(81,145
|
)
|
Cash provided by (used for) financing
|
|
|
|
|
|
|
|
|
|
|
|
Payments of long-term debt
|
—
|
|
|
(25,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,000
|
)
|
Payments (to) from Boise Inc., net
|
(52,585
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52,585
|
)
|
Due to (from) affiliates
|
52,585
|
|
|
115,007
|
|
|
(169,108
|
)
|
|
1,516
|
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
(246
|
)
|
|
—
|
|
|
(918
|
)
|
|
—
|
|
|
(1,164
|
)
|
Cash provided by (used for) financing
|
—
|
|
|
89,761
|
|
|
(169,108
|
)
|
|
598
|
|
|
—
|
|
|
(78,749
|
)
|
Increase (decrease) in cash and cash equivalents
|
—
|
|
|
11,341
|
|
|
(8,277
|
)
|
|
2,316
|
|
|
—
|
|
|
5,380
|
|
Balance at beginning of the period
|
—
|
|
|
82,532
|
|
|
9,737
|
|
|
4,727
|
|
|
—
|
|
|
96,996
|
|
Balance at end of the period
|
$
|
—
|
|
|
$
|
93,873
|
|
|
$
|
1,460
|
|
|
$
|
7,043
|
|
|
$
|
—
|
|
|
$
|
102,376
|
|
BZ Intermediate Holdings LLC and Subsidiaries
Consolidating Statements of Cash Flows
For the
Nine Months Ended September 30, 2011
(unaudited, dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BZ
Intermediate
Holdings
LLC
(Parent)
|
|
Co-issuers
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash provided by (used for) operations
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
58,955
|
|
|
$
|
58,955
|
|
|
$
|
166,171
|
|
|
$
|
11
|
|
|
$
|
(225,137
|
)
|
|
$
|
58,955
|
|
Items in net income not using
(providing) cash
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income of affiliates
|
(58,955
|
)
|
|
(166,182
|
)
|
|
—
|
|
|
—
|
|
|
225,137
|
|
|
—
|
|
Depreciation, depletion, and amortization of deferred financing costs and other
|
—
|
|
|
6,920
|
|
|
104,203
|
|
|
—
|
|
|
—
|
|
|
111,123
|
|
Share-based compensation expense
|
—
|
|
|
2,676
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,676
|
|
Pension expense
|
—
|
|
|
8,245
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,245
|
|
Deferred income taxes
|
—
|
|
|
33,950
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,950
|
|
Other
|
—
|
|
|
525
|
|
|
548
|
|
|
—
|
|
|
—
|
|
|
1,073
|
|
Decrease (increase) in working capital, net of acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
—
|
|
|
(1,089
|
)
|
|
(15,274
|
)
|
|
(1,572
|
)
|
|
224
|
|
|
(17,711
|
)
|
Inventories
|
—
|
|
|
11
|
|
|
(10,009
|
)
|
|
—
|
|
|
—
|
|
|
(9,998
|
)
|
Prepaid expenses
|
—
|
|
|
856
|
|
|
(2,155
|
)
|
|
(2
|
)
|
|
—
|
|
|
(1,301
|
)
|
Accounts payable and accrued liabilities
|
—
|
|
|
6,233
|
|
|
3,110
|
|
|
1,500
|
|
|
(224
|
)
|
|
10,619
|
|
Current and deferred income taxes
|
—
|
|
|
1,782
|
|
|
(13
|
)
|
|
(1
|
)
|
|
—
|
|
|
1,768
|
|
Pension payments
|
—
|
|
|
(25,335
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,335
|
)
|
Other
|
—
|
|
|
(1,423
|
)
|
|
2,904
|
|
|
—
|
|
|
—
|
|
|
1,481
|
|
Cash provided by (used for) operations
|
—
|
|
|
(73,876
|
)
|
|
249,485
|
|
|
(64
|
)
|
|
—
|
|
|
175,545
|
|
Cash provided by (used for) investment
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of businesses and facilities, net of cash acquired
|
—
|
|
|
—
|
|
|
(201,289
|
)
|
|
—
|
|
|
—
|
|
|
(201,289
|
)
|
Expenditures for property and equipment
|
—
|
|
|
(2,458
|
)
|
|
(81,411
|
)
|
|
—
|
|
|
—
|
|
|
(83,869
|
)
|
Purchases of short-term investments
|
—
|
|
|
(3,494
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,494
|
)
|
Maturities of short-term investments
|
—
|
|
|
14,114
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,114
|
|
Other
|
—
|
|
|
(507
|
)
|
|
2,013
|
|
|
—
|
|
|
—
|
|
|
1,506
|
|
Cash provided by (used for) investment
|
—
|
|
|
7,655
|
|
|
(280,687
|
)
|
|
—
|
|
|
—
|
|
|
(273,032
|
)
|
Cash provided by (used for) financing
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of long-term debt
|
—
|
|
|
75,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,000
|
|
Payments of long-term debt
|
—
|
|
|
(106,250
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(106,250
|
)
|
Payments (to) from Boise Inc., net
|
135,541
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135,541
|
|
Due to (from) affiliates
|
(135,541
|
)
|
|
101,278
|
|
|
34,271
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
(4,009
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,009
|
)
|
Cash provided by (used for) financing
|
—
|
|
|
66,019
|
|
|
34,271
|
|
|
(8
|
)
|
|
—
|
|
|
100,282
|
|
Increase in cash and cash equivalents
|
—
|
|
|
(202
|
)
|
|
3,069
|
|
|
(72
|
)
|
|
—
|
|
|
2,795
|
|
Balance at beginning of the period
|
—
|
|
|
166,410
|
|
|
6
|
|
|
417
|
|
|
—
|
|
|
166,833
|
|
Balance at end of the period
|
$
|
—
|
|
|
$
|
166,208
|
|
|
$
|
3,075
|
|
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
169,628
|
|