Business News

Boise Inc. Announces Financial Results for First Quarter 2009

Thursday 07. May 2009 - Boise Inc. (NYSE:BZ) today reported a net loss of $0.9 million or ($0.01) per diluted share for first quarter 2009, compared with fourth quarter net loss of $15.5 million or ($0.20) per diluted share. Boise Inc. first quarter 2008 net loss was $16.4 million or ($0.26) per diluted share.

EBITDA, excluding special items, was $58.6 million for first quarter 2009, compared with $76.0 million for fourth quarter 2008, and $53.1 million for the combined first quarter 2008 for the packaging and paper assets of Boise Cascade, L.L.C. (the “Predecessor”) and Boise Inc.

Net covenant debt was $949.0 million at March 31, 2009, a decline of $65.9 million from $1,014.9 million at December 31, 2008.

FINANCIAL HIGHLIGHTS
(in millions, except per-share data)

Boise Inc. Combined(a) Boise Inc. Predecessor
————– ———– ———- ———–
Jan 1 –
1Q 4Q 1Q 1Q Feb 21,
2009 2008 2008 2008 2008
—- —- —- —- ——–
Sales $500.3 $591.1 $587.9 $228.0 $359.9
Income from
operations $21.4 $11.4 $(9.3) $23.1
Net income (loss) $(0.9) $(15.5) $(16.4) $22.8
Net income (loss)
per share basic and
diluted $(0.01) $(0.20) $(0.26)
EBITDA (b) $52.7 $41.4 $26.3 $2.6 $23.7
EBITDA excluding
special items (b) $58.6 $76.0 $53.1 $28.7 $24.4

Interest expense $22.2 $26.2 $11.4
Depreciation and
amortization (c) $32.0 $33.1 $12.7 $0.5
Net covenant
debt (d) $949.0 $1,014.9 $1,005.7

(a) Includes combined results for Predecessor and Boise Inc.
(b) For reconciliation of net income (loss) to EBITDA and EBITDA to EBITDA
excluding special items, see “Summary Notes to Consolidated Financial
Statements and Segment Information.”
(c) Predecessor period excludes $16.7 million of depreciation due to
classification of property as assets held for sale in first quarter
2008.
(d) Net covenant debt is calculated in accordance with credit agreements.
For reconciliation of total debt to net covenant debt, see “Summary
Notes to Consolidated Financial Statements and Segment Information.”





“In the first quarter 2009, we generated strong cash flow and improved EBITDA over last year despite very challenging markets for all our products. We also made good progress reducing our covenant debt by nearly $66 million dollars,” said Alexander Toeldte, President and Chief Executive Officer of Boise Inc. “We reduced financial risk in our newsprint business by terminating our contract with AbitibiBowater to sell directly to customers and took significant downtime to match production to demand. We managed our working capital levels well and will continue to balance production with demand and focus on cash generation.”

Sales

Total sales for first quarter 2009 were $500.3 million, a decrease of $87.6 million, or 15%, from $587.9 million during the combined first quarter 2008 and down 15% from fourth quarter 2008 sales of $591.1 million.

Paper segment sales decreased $73.7 million, or 17%, during first quarter 2009 compared with the combined first quarter 2008, driven by 22% lower uncoated freesheet sales volumes. This was due to market downtime and the St. Helens mill downsizing, which eliminated 200,000 tons, or 13%, of our annual uncoated freesheet capacity. Reduced sales volumes were partially offset by higher net sales prices. Paper segment sales in first quarter 2009 declined by $37.6 million, or 10%, from fourth quarter 2008 due to lower sales volumes, partially offset by higher net selling prices.

Packaging segment sales decreased $16.3 million, or 9%, to $157.1 million from $173.4 million during first quarter 2009 compared with the combined first quarter 2008. The decrease was driven mainly by lower newsprint and segment linerboard sales volumes as we balanced production to match lower demand. Newsprint volumes were also reduced in first quarter 2009 by the transition from selling all of our output to AbitibiBowater to selling directly to customers, which began in March. Sequentially, from fourth quarter 2008 to first quarter 2009, Packaging segment sales decreased $56.7 million, or 27%, due to lower volumes and lower net selling prices.

Prices and Volumes

Average net selling prices of uncoated freesheet papers improved $104 per ton, or 12%, to $981 per ton during first quarter 2009 compared with the combined first quarter 2008 and improved $12 per ton, or 1%, over fourth quarter 2008. Uncoated freesheet sales volumes were 303,000 tons during first quarter 2009, a decline of 22% versus the combined prior year period and down 9% from fourth quarter 2008 due to market downtime as a result of lower demand and reduced capacity as a result of the St. Helens mill downsizing. Combined sales volumes of premium office, label and release, and flexible packaging papers, which represented 26% of our first quarter 2009 uncoated freesheet sales volumes, increased by 1% from the prior year.

Linerboard net selling prices to third parties declined $44 per ton, or 11%, to $352 per ton in first quarter 2009 from $396 per ton in the combined first quarter 2008 and declined $54 per ton, or 13%, from fourth quarter 2008, due to softening demand, particularly in export markets. Linerboard sales volumes to third parties were 38,000 tons, a decrease of 21% compared with the combined first quarter 2008 and down 30% from fourth quarter 2008 due to soft market conditions. We took downtime late in fourth quarter 2008 and first quarter 2009 to match supply to demand.

Corrugated container and sheet prices improved $5 per thousand square feet (msf), or 9%, to $60 per msf in first quarter 2009 over prices for these products during the combined first quarter 2008 and decreased $1 per msf, or 2%, compared with fourth quarter 2008 prices. Sales volumes for corrugated containers and sheets were 1.4 thousand msf in first quarter 2009, a decline of 9% versus the combined first quarter 2008 and down 7% from fourth quarter 2008, driven mainly by lower volumes from our sheet feeder plant in Texas as a result of slowing industrial markets. Sales volumes for corrugated containers and sheets from our plants in the Pacific Northwest experienced more modest declines due to more stable demand in agricultural and food sectors.

Newsprint pricing in first quarter 2009 increased by $88 per ton, or 18%, to $588 per ton over the combined first quarter 2008 and declined $55 per ton, or 9%, from fourth quarter 2008. Newsprint sales volumes were 60,000 tons, a decline of 30% compared with the combined first quarter 2008 and down 36% from fourth quarter 2008 due to weak demand and the start-up of our direct marketing efforts.

Input Costs

Total fiber, energy, and chemical costs for first quarter 2009 were $205.7 million, a decrease of $66.5 million, or 24%, over costs of $272.2 million for the combined first quarter 2008, and a decrease of $61.3 million, or 23%, from costs of $267.0 million for fourth quarter 2008.

INPUT COST SUMMARY

Boise
Boise Inc. Combined(a) Inc. Predecessor
————– ———– —– ———–
Jan 1 –
Feb 21,
1Q 2009 4Q 2008 1Q 2008 1Q 2008 2008
——- ——- ——- ——- ——–
(in millions)
Fiber $94.1 $124.0 $127.3 $51.3 $76.0
Energy $60.8 $77.5 $82.8 $34.8 $48.1
Chemicals $50.8 $65.5 $62.0 $25.5 $36.5

Total $205.7 $267.0 $272.2 $111.5 $160.7

(a) Includes combined results for Predecessor and Boise Inc.





Total fiber costs during first quarter 2009 were $94.1 million, a decrease of $33.2 million, or 26%, from $127.3 million incurred for fiber in the combined first quarter 2008 and a decrease of $29.9 million, or 24%, from $124.0 million for fourth quarter 2008. This decrease was due primarily to lower prices for purchased pulp, wood and recycled fiber, and reduced consumption of wood fiber as a result of lower production capacity due to the St. Helens mill downsizing and market downtime.

Energy costs in first quarter 2009 decreased $22.0 million, or 27%, to $60.8 million compared with $82.8 million in the same quarter a year ago. Lower overall energy consumption and lower prices for natural gas and fuel were the primary drivers, partially offset by higher electricity prices. Energy costs in first quarter 2009 decreased $16.7 million, or 22%, from $77.5 million in fourth quarter 2008, due to lower total consumption and prices for natural gas.

Chemical costs in first quarter 2009 were $50.8 million, a decrease of $11.2 million, or 18%, compared with $62.0 million in the prior year’s first quarter and down $14.7 million, or 22%, compared with $65.5 million in fourth quarter 2008, driven by reduced consumption partially offset by higher prices.

Alternative Fuel Tax Credit

The U.S. Internal Revenue Code allows an excise tax for taxpayers who use alternative fuels in the taxpayer’s trade or business. Each year, under normal operating conditions, we produce and use approximately 500 million gallons of fuel produced from biomass to provide energy to four of our five paper mills. During the first quarter, we filed to be registered as an alternative fuel mixer and, in late April, received notification from the Internal Revenue Service that our registration was approved. We became eligible to receive the tax credit at our four pulp and paper mills beginning at various dates from late January to late March 2009. Through April 30, 2009, we had filed for approximately $37 million in tax credits, before the effect of income taxes. To date, we have received $3.9 million of cash related to these credits. Our first quarter results do not include any effects of the alternative fuel credits.