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Boise Reports 3rd Quarter Profit

Nov. 3, 2009 - Boise Inc. today reported net income of $48.2 million or $0.57 per diluted share for third quarter 2009, compared with third quarter 2008 net income of $4.4 million or $0.06 per diluted share and second quarter 2009 net income of $50.9 million or $0.60 per diluted share.

EBITDA excluding special items was $66.2 million for third quarter 2009, compared with $77.9 million for third quarter 2008 and $53.0 million for second quarter 2009.

"We continued to deliver solid earnings and cash flow in the third quarter and strengthened our balance sheet through our debt restructuring in October," said Alexander Toeldte, President and Chief Executive Officer of Boise Inc. "We experienced moderating costs, good demand in our core office papers and agricultural-based packaging products, and continued to see growth in our label and release, flexible packaging, and premium office paper markets. We are now in compliance with the NYSE listing standards, have a more flexible debt structure, and have a clear focus on our continued mission to generate earnings and cash."

Sales

Total sales for third quarter 2009 were $508.3 million, a decrease of $124.8 million, or 20%, from $633.1 million for third quarter 2008 and up 6% from second quarter 2009 sales of $479.4 million.

Paper segment sales during third quarter 2009 decreased $65.0 million, or 15%, to $366.0 million from $431.0 million for third quarter 2008, driven by 11% lower sales volumes and 1% lower net sales prices for uncoated freesheet. In first quarter 2009, we completed the downsizing of our mill in St. Helens, Oregon, which eliminated 13% of our annual uncoated freesheet capacity. Paper segment sales in third quarter 2009 increased by $9.6 million, or 3%, from second quarter 2009, driven by higher sales volumes, offset partially by lower net sales prices.

Packaging segment sales during third quarter 2009 decreased $62.4 million, or 29%, to $150.5 million from $212.9 million for third quarter 2008. Lower newsprint volumes due to the indefinite idling of our DeRidder #2 newsprint machine and lower net sales prices for newsprint and linerboard contributed to the decline. This was offset partially by increased linerboard sales volumes to third parties. Packaging segment sales increased $20.2 million, or 16%, from second quarter 2009 due to higher sales volumes across all products, offset partially by lower net selling prices for newsprint, linerboard, and corrugated products.

Prices and Volumes

Average net selling prices of uncoated freesheet papers declined $14 per ton, or 1%, to $941 per ton during third quarter 2009 compared with third quarter 2008 and declined $17 per ton, or 2%, from second quarter 2009. Uncoated freesheet sales volumes were 325,000 tons during third quarter 2009, a decline of 11% versus the prior year period, due to reduced capacity and lower demand. Uncoated freesheet sales volumes increased 3% from second quarter 2009 on reduced market downtime, improved demand, and higher sales volumes of office and printing and converting papers. Combined sales volumes of premium office, label and release, and flexible packaging papers (which represented 27% of our third quarter 2009 uncoated freesheet sales volumes) increased by 2% from the prior year.

Corrugated container and sheet prices were flat at $58 per msf in third quarter 2009 over prices for these products during the third quarter 2008 and decreased $1 per msf, or 2%, compared with second quarter 2009 prices. Sales volumes for corrugated containers and sheets were 1.6 million msf in third quarter 2009, a decline of 4% from third quarter 2008, due primarily to sluggish industrial markets, which resulted in lower sales volumes from our sheet feeder plant in Texas. Corrugated products sales volumes increased 8% from second quarter 2009 on improving seasonal agricultural and food sector demand in our Pacific Northwest corrugated plants.

Linerboard net selling prices to third parties declined $108 per ton, or 28%, to $284 per ton in third quarter 2009 from $392 per ton in the third quarter 2008 and declined $18 per ton, or 6%, from second quarter 2009, due to soft demand, particularly in export markets. Linerboard sales volumes to third parties were 77,000 tons, an increase of 24% compared with the third quarter 2008 and an increase of 41% from second quarter 2009. In the third quarter 2008, we took production downtime as a result of hurricanes Gustav and Ike, which reduced sales volumes during that period. In the second quarter 2009, we took market downtime to balance production with lower demand at our mill in DeRidder, Louisiana.

Input Costs

Total fiber, energy, and chemical costs for third quarter 2009 were $205.8 million, a decrease of $97.9 million, or 32%, from costs of $303.7 million for third quarter 2008. Much of the decline was driven by reduced consumption as a result of the restructuring of our mill in St. Helens, Oregon, and the idling of our DeRidder #2 machine at our mill in DeRidder, Louisiana. Total fiber, energy, and chemical costs for third quarter 2009 increased $22.1 million, or 12%, from costs of $183.7 million for second quarter 2009.

Fiber costs during third quarter 2009 were $108.2 million, a decrease of $28.2 million, or 21%, from $136.4 million in third quarter 2008; this was due to lower fiber prices and reduced consumption due to lower demand and production capacity as a result of the St. Helens mill downsizing. Fiber costs increased $16.0 million, or 17%, from second quarter 2009 due primarily to increased consumption as a result of higher production volumes.

Energy costs in third quarter 2009 decreased $53.7 million, or 56%, to $41.9 million compared with $95.6 million in the same quarter a year ago and were flat from second quarter 2009.

Chemical costs in third quarter 2009 were $55.7 million, a decrease of $16.0 million, or 22%, compared with $71.7 million in the same quarter a year ago due to lower consumption and prices and increased $4.6 million, or 9% compared with second quarter 2009 due to increased sales volumes, offset partially by lower chemical prices.

Debt Restructuring

In October, we amended our secured debt credit agreements and issued $300.0 million of senior unsecured notes in an offering as part of a debt restructuring to increase financial flexibility, extend debt maturities, simplify our capital structure, and reduce overall debt. The notes are due in November 2017 and bear interest at a rate of 9%. The proceeds from this offering and cash on hand were used to repay $75.0 million of our Tranche A and Tranche B term loan facilities at par; repurchase all of our $260.7 million second lien term loans at 113% of face value; and exercise the option we entered into on August 4, 2009, to repurchase and retire the $74.8 million notes payable at 70% of face value.

Alternative Fuel Mixture Credit

During the three months ended September 30, 2009, we recorded $59.6 million of alternative fuel mixture credits, net of associated fees and expenses and before taxes. As of September 30, 2009, we recorded a receivable of $29.2 million for alternative fuel mixture credits. Our first quarter 2009 results do not include any effects of the alternative fuel mixture credits. These credits are scheduled to expire December 31, 2009.

About Boise Inc.

Headquartered in Boise, Idaho, Boise Inc. manufactures packaging products and papers including corrugated containers, containerboard, label and release and flexible packaging papers, imaging papers for the office and home, printing and converting papers, newsprint, and market pulp. The company employs about 4,100 people

SOURCE: Boise Inc.




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