Boise Reports Fourth Quarter and Year 2011 Results

Feb. 28, 2012 - Boise Inc. today reported net income of $16.3 million, or $0.15 per diluted share, for fourth quarter 2011, compared with net income of $26.2 million, or $0.31 per diluted share, for fourth quarter 2010. Net income for the year ended 2011 was $75.2 million, an increase of $12.5 million, or 20%, from net income of $62.7 million for the year ended 2010. EBITDA excluding special items was $340.2 million for the year ended 2011, an increase of $14.6 million, or 4%, from 2010 EBITDA excluding special items of $325.6 million.

Boise Inc. declared a special cash dividend of $0.48 per common share, payable March 21, 2012, to shareholders of record on March 9, 2012.

"The past year was our most successful year since our inception four years ago," said Alexander Toeldte, president and chief executive officer of Boise Inc. "Our EBITDA excluding special items was a record $340 million, we generated $121 million in free cash flow, expanded and diversified our presence in packaging markets through two acquisitions, and returned $169 million of capital to our shareholders through share repurchases and dividends. In recognition of our 2011 performance, we are pleased to pay a special dividend of $48 million to our shareholders. This increases the per share special dividend from $0.40 per share in 2011 to $0.48 per share now."

"Our packaging business had an outstanding year, setting consecutive earnings records in the third and fourth quarters of 2011 and posting a 61% increase in operating income over 2010. Our acquisitions of Tharco and Hexacomb, excellent operational performance at our DeRidder mill and corrugated plants, and stable packaging markets were all key factors in this success.

"Our paper business performed well, and sales volumes for our premium office and packaging-driven papers, including label and release and flexible packaging, grew 4% compared with 2010. Through this growth, we maintained flat overall uncoated freesheet sales volumes despite secular declines in communication paper markets. In 2011, we extended our relationship with our largest customer and long-term partner, OfficeMax, and we were excited to be named their 2011 Supplier of the Year.

"Our financial position remains strong, and we improved financial flexibility by replacing our credit facilities in November, increasing our revolving credit capacity, extending maturities, and lowering interest rates. "In 2012, our goal is to continue to build shareholder value through disciplined capital allocation and growth."

Packaging Segment

Packaging segment sales for fourth quarter 2011 were $251.4 million, an increase of $70.9 million, or 39%, compared with fourth quarter 2010. The acquisitions of Tharco and Hexacomb were the main drivers, offset partially by lower sales volumes and net selling prices of linerboard. Packaging segment sales for fourth quarter 2011 were flat, compared with third quarter 2011, as increased sales volumes of linerboard, newsprint, and corrugated products were offset by lower net selling prices for linerboard and corrugated products. Net sales prices for linerboard and corrugated products decreased 3% for fourth quarter 2011, compared with third quarter 2011, due to softer export markets and seasonal product mix changes, respectively.

Packaging segment sales for full year 2011 were $949.7 million, an increase of $277.8 million, or 41%, compared with 2010. The primary driver of the increase was our acquisition of Tharco; other factors included a 16% increase in segment linerboard net selling prices and a 10% increase in newsprint net selling prices.

Packaging segment EBITDA, excluding special items, was $46.9 million for fourth quarter 2011, an increase of $8.4 million, or 22%, compared with fourth quarter 2010, driven by the acquisition of Tharco. Packaging segment EBITDA, excluding special items, in fourth quarter 2011 increased $1.8 million, or 4%, compared with third quarter 2011, driven primarily by lower energy costs as a result of lower electricity prices and increased sales volumes for both linerboard and newsprint.

Packaging segment EBITDA, excluding special items, for full year 2011 was $159.3 million, an increase of $55.7 million, or 54%, compared with full year 2010. This increase was due to higher prices for linerboard, newsprint, and corrugated products, and the acquisition of Tharco. These factors were offset partially by higher chemical costs.

Paper Segment

Paper segment sales for fourth quarter 2011 were $359.7 million, an increase of $7.3 million, or 2%, compared with fourth quarter 2010, driven by higher sales volumes of uncoated freesheet. Paper segment sales decreased $30.9 million, or 8%, compared with third quarter 2011, due primarily to a 6% decrease in sales volumes of uncoated freesheet and a 1% decline in prices. Lower sales volumes and prices of market pulp also contributed to the decrease in sales. Total uncoated freesheet sales volumes increased 1% versus the prior-year period and were down 6% versus third quarter 2011 as a result of expected seasonal demand decline.

Paper segment sales for full year 2011 were $1.5 billion, an increase of 3%, compared with 2010, driven by a 1% increase in overall uncoated freesheet net sales prices and higher prices and sales volumes of market pulp and medium. While sales volumes of uncoated freesheet were flat in 2011 compared with 2010, combined sales volumes of premium office, label and release, and flexible packaging papers, grew 4%, compared with 2010, and represented 33% of our total uncoated freesheet sales volumes for 2011.

Paper segment EBITDA, excluding special items, was $44.4 million for fourth quarter 2011, a decrease of $16.4 million, or 27%, compared with fourth quarter 2010. This was due primarily to higher fiber costs, increased chemical prices, and lower net selling prices for market pulp, offset partially by higher sales volumes. Paper segment EBITDA, excluding special items, for fourth quarter 2011 decreased $14.2 million from third quarter 2011 as a result of the extended annual maintenance outage at our mill in Jackson, Alabama, lower sales volumes and net selling prices for uncoated freesheet, and increased energy costs as a result of higher consumption due to colder winter weather.

Paper segment EBITDA, excluding special items, for full year 2011 was $201.5 million, a decrease of $38.1 million, or 16%, compared with $239.6 million for the year ended December 31, 2010. This decrease was driven by higher chemical costs and higher fiber costs. Increased fixed costs as a result of higher maintenance costs during our annual shutdowns at Wallula, Washington, in second quarter and Jackson, Alabama, in fourth quarter also contributed. These factors were offset partially by higher sales prices and lower energy costs due to lower natural gas prices.

Other

Selling and distribution costs were $29.0 million in fourth quarter 2011, an increase of $12.8 million, compared with $16.2 million in fourth quarter 2010. The increase was due primarily to Tharco, which serves a larger number of small customers with a more diverse range of products, compared with our other businesses, resulting in higher selling and distribution costs. Selling and distribution costs decreased slightly from $29.8 million in third quarter 2011. General and administrative expenses were $18.9 million in fourth quarter 2011, an increase of $3.2 million, compared with $15.7 million in fourth quarter 2010, and an increase of $4.5 million from $14.4 million in third quarter 2011. The increase compared with the prior-year quarter is due primarily to Tharco, while the increase compared with third quarter 2011 was primarily a result of Hexacomb and higher labor and benefit costs.

Secured Credit Agreement

In November 2011, we entered into a $700 million five-year senior secured credit agreement consisting of a five-year amortizing $200 million Tranche A term loan facility and a five-year nonamortizing $500 million revolving credit facility. These borrowings replaced the revolving credit facility and Tranche A term loan, both due in 2013.

Headquartered in Boise, Idaho, Boise Inc. (NYSE: BZ - News) manufactures a wide variety of packaging and paper products. Boise`s range of packaging products includes linerboard and corrugating medium, corrugated containers and sheets, and protective packaging products. Boise`s paper products include imaging papers for the office and home, printing and converting papers, and papers used in packaging, such as label and release and flexible packaging papers. Our employees are committed to delivering excellent value while managing our businesses to sustain environmental resources for future generations.

SOURCE: Boise Inc.