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Boise swings to a profit in Q4

Tuesday, March 02, 2010

Press release from the issuing company

Boise, Idaho, - Boise Inc. today reported net income of $55.7 million or $0.66 per diluted share for fourth quarter 2009, compared with fourth quarter 2008 net loss of $15.5 million or ($0.20) per diluted share.  Net income for 2009 was $153.8 million or $1.85 per diluted share.  Net income excluding special items in fourth quarter 2009 was $4.2 million, or $0.05 per diluted share.

EBITDA excluding special items was $54.4 million for fourth quarter 2009 compared with $76.0 million for fourth quarter 2008.  EBITDA excluding special items for 2009 was $232.1 million compared with $247.1 million for combined 2008.  Net total debt at December 31, 2009, was $736.5 million, compared with $1,081.5 million at December 31, 2008.

"Against a very difficult backdrop, our performance was strong in 2009, and we accomplished many of our objectives," said Alexander Toeldte, President and Chief Executive Officer of Boise Inc.  "We ran well and had one of our safest years on record.  In 2009, we generated $382 million in free cash flow, extracted $92 million in cash through working capital reductions, and reduced our net total debt by $345 million, a 32% reduction from the end of 2008.  We reduced our interest costs and extended debt maturities through the refinancing we completed in October.  We continued to shift production capacity to packaging demand-driven and office paper products and lowered our structural costs through difficult but necessary asset portfolio moves at our St. Helens and DeRidder mills.  And, we grew sales volumes of our label and release, flexible packaging, and premium office grades 4% over 2008 through some of the most challenging markets we've experienced.  I am proud of what we've accomplished, and we look forward to building on these successes in 2010."

Total sales for fourth quarter 2009 were $490.3 million, a decrease of $100.8 million, or 17%, from $591.1 million for fourth quarter 2008 and down 4% from third quarter 2009 sales of $508.3 million. 

Paper segment sales decreased 11% during fourth quarter 2009 compared with fourth quarter 2008, driven by lower sales volumes and prices.  In first quarter 2009, we completed the downsizing of our mill in St. Helens, Oregon, which eliminated 13% of our annual uncoated freesheet capacity and reduced 2009 sales volumes and costs compared with 2008.

Packaging segment sales decreased 30% during fourth quarter 2009 compared with fourth quarter 2008, driven by lower sales volumes of newsprint due to the indefinite idling of our DeRidder #2 newsprint machine and lower sales prices of packaging products.  These declines were offset partially by higher sales volumes of linerboard. 

Full year 2009 sales were $2.0 billion, a 19% decrease over combined year 2008 sales of $2.4 billion.  The decrease was driven primarily by a 14% decrease in Paper segment sales due to lower sales volumes, offset partially by higher sales prices for uncoated freesheet papers, and a 28% decline in Packaging segment sales due to lower sales prices and lower newsprint sales volumes.

Prices and Volumes
Pricing for uncoated freesheet began to improve late in 2009 and in early 2010 after declining through the year.  Average net selling prices of uncoated freesheet papers declined $34 per ton, or 4%, to $935 per ton during fourth quarter 2009 compared with fourth quarter 2008 and decreased 1% from third quarter 2009.  In fourth quarter 2009, we implemented a $40-per-ton price increase on our offset and envelope grades and on some premium colored office papers.  In January 2010, we announced a $40-per-ton price increase across most of our cut-size office papers, offset, and mid-weight opaque grades effective in mid-February.  Overall, uncoated freesheet sales volumes were 309,000 tons during fourth quarter, a decline of 7% versus the prior year period, and down 5% from third quarter 2009 due primarily to seasonal demand declines.  Full year net selling prices for uncoated freesheet improved $24 per ton, or 3%, to $954 per ton in 2009 compared with 2008.  Full year sales volumes of uncoated freesheet papers were 1.3 million tons in 2009, down 13% compared with the same period in 2008.  Combined sales volumes of premium office, label and release, and flexible packaging papers, which represented 27% of our total 2009 uncoated freesheet sales volumes, increased by 4% from the prior year.

Corrugated containers and sheets sales volumes improved 2% during fourth quarter 2009 compared with fourth quarter 2008 and were flat from third quarter 2009.  Full year corrugated container and sheet volumes decreased 5% to 6.0 billion square feet in 2009 compared with 2008, driven mainly by lower volumes from our sheet feeder plant in Texas as a result of slowing industrial markets. 

Corrugated container and sheet prices declined 11% in fourth quarter 2009 from fourth quarter 2008 and decreased 7% from third quarter 2009 prices due to seasonal box mix fluctuations in our agricultural end markets and containerboard price declines earlier in the year.  Full year corrugated container and sheet prices improved 2% in 2009 compared with 2008. 

Linerboard sales volumes to third parties increased 55% compared with fourth quarter 2008 and increased 9% from third quarter 2009 due to improving market conditions.  Full year linerboard sales volumes to third parties were 253,000 tons in 2009, a 10% increase compared with 2008.  Linerboard net selling prices to third parties declined to $293 per ton in fourth quarter 2009 from $406 per ton in fourth quarter 2008 and improved 3% from third quarter 2009, as demand in export markets improved.  Full year net selling prices for linerboard sales to third parties decreased $96 per ton, or 24%, to $301 per ton in 2009 compared with 2008.  In January 2010, we announced a $50-per-ton and $70-per-ton price increase on domestic sales in the eastern and western U.S., respectively.  These price increases are currently being implemented.

Input Costs
Total fiber, energy, and chemical costs for fourth quarter 2009 were $205.0 million, a decrease of $62.0 million, or 23%, from costs of $267.0 million for fourth 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 #2 machine at our mill in DeRidder, Louisiana.  Input costs were flat compared with third quarter 2009.  Full year 2009 fiber, energy, and chemical costs totaled $800.3 million, a decrease of $332.5 million, or 29%, from costs of $1,132.8 million for full year 2008. 

Total fiber costs during fourth quarter 2009 were $106.5 million, a decrease of $17.5 million, or 14%, from $124.0 million incurred in fourth quarter 2008. 

This was due to lower fiber prices and reduced consumption of fiber as a result of lower production capacity and was offset partially by higher purchased pulp consumption. Fiber costs in fourth quarter 2009 declined $1.7 million, or 2%, from third quarter 2009.  Full year 2009 fiber costs were $401.1 million, a decrease of $128.9 million, or 24%, from costs of $530.0 million for combined 2008, due primarily to lower prices and consumption of fiber.

Energy costs in fourth quarter 2009 were $45.7 million, a decrease of $31.8 million, or 41%, compared with $77.5 million in fourth quarter 2008, driven by lower prices for natural gas and electricity and reduced consumption of energy.  Energy costs in fourth quarter 2009 increased $3.8 million, or 9%, from $41.9 million in third quarter 2009, due to higher prices for natural gas and seasonal increases in consumption as a result of colder winter weather.  Full year 2009 energy costs were $188.9 million, a decrease of $151.3 million, or 44%, from costs of $340.2 million for combined 2008, driven by reduced prices and consumption of natural gas and electricity.

Chemical costs in fourth quarter 2009 were $52.8 million, a decrease of $12.7 million, or 19%, compared with $65.5 million in fourth quarter 2008.  Chemical costs were down $2.8 million, or 5%, compared with $55.7 million in third quarter 2009.  Full year 2009 chemical costs were $210.3 million, a decrease of $52.3 million, or 20%, from $262.6 million for combined 2008.  The key drivers were lower prices and generally lower consumption of commodity chemicals.

Alternative Fuel Mixture Credit
During the three months and year ended December 31, 2009, we recorded $72.7 million and $207.6 million, respectively, of alternative fuel mixture credits, net of associated fees and expenses and before taxes.  As of December 31, 2009, we recorded a receivable of $56.6 million for alternative fuel mixture credits.  These credits expired on December 31, 2009.

In October 2009, we began filing for alternative fuel mixture credits as a refundable credit on our income tax return instead of as a refundable excise tax credit.  This filing change will not affect the total amount we expect to ultimately receive but does delay receipt of fuel mixture credit payments until after we file our federal income tax return in first quarter 2010.

Extinguishment of Debt
In connection with the debt restructuring in October 2009, we recognized a $44.1 million loss on the extinguishment of debt during the three months ended December 31, 2009.

Income Tax Benefit
During the three months ended December 31, 2009, we reversed income tax valuation allowances of $33.2 million.

Annual Meeting Date
Boise Inc. intends to hold its annual meeting of shareholders at 10:00 a.m. MDT on Thursday, April 29, 2010, in Boise, Idaho. The record date to determine shareholders eligible to vote at the meeting is March 12, 2010.

Basis of Presentation
We present our consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP).  Our earnings release also supplements the GAAP presentations by reflecting EBITDA.  EBITDA represents income (loss) before interest (change in fair value of interest rate derivatives, interest expense, and interest income), income taxes, and depreciation, amortization, and depletion.  EBITDA is the primary measure used by our chief operating decision makers 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 with substantial financial leverage.  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 GAAP and should not be considered as an alternative to net income (loss), income (loss) 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 (loss) or segment income (loss) has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest and associated significant cash requirements; and the exclusion of depreciation, amortization, and depletion, which represent significant and unavoidable operating costs, given the level of our indebtedness and 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.

Forward-Looking Statements
This news release contains statements that are "forward looking" as defined by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements.  Forward-looking statements involve risks and uncertainties, including but not limited to economic, competitive, and technological factors outside our control that may cause our business, strategy, or actual results to differ materially from the forward-looking statements.  For further information about the risks and uncertainties associated with our business, please refer to our filings with the Securities and Exchange Commission.  The company does not intend, and undertakes no obligation, to update any forward-looking statements.

 

 

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