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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Commission File Number:  333-122770

Boise Cascade Holdings, L.L.C.

(Exact name of registrant as specified in its charter)

1111 West Jefferson Street

Suite 300
Boise, Idaho 83702-5389

(Address of principal executive offices) (Zip Code)

(208) 384-6161

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes o     No x

We are a voluntary filer of reports required of companies with public securities under Sections 13 or 15(d) of the Securities Exchange Act of 1934, and we have filed all reports which would have been required of us during the past 12 months had we been subject to such provisions.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o    Accelerated filer o    Non-accelerated filer x    Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes o      No x

The registrant, a limited liability company, has no voting or nonvoting equity held by nonaffiliates and no common stock outstanding.

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All reports we file with the Securities and Exchange Commission (SEC) are available free of charge via Electronic Data Gathering Analysis and Retrieval (EDGAR) through the SEC website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available through our website at www.bc.com as soon as reasonably practicable after filing such material with the SEC.

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PART 1—FINANCIAL INFORMATION

ITEM 1.              FINANCIAL STATEMENTS

Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets (continued)

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Holdings, L.L.C.

Consolidated Statements of Cash Flows

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Holdings, L.L.C.

Consolidated Statements of Capital

(unaudited)

See accompanying notes to unaudited quarterly consolidated financial statements.

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Notes to Unaudited Quarterly Consolidated Financial Statements

1.                                      Nature of Operations and Basis of Presentation

Nature of Operations

We are a building products company headquartered in Boise, Idaho. We manufacture engineered wood products, plywood, lumber, and particleboard and distribute a broad line of building materials, including wood products we manufacture. Our operations began on October 29, 2004 (inception), when we acquired the forest products and paper assets of OfficeMax (the Forest Products Acquisition). Before the Forest Products Acquisition, OfficeMax was known as Boise Cascade Corporation. We acquired the name “Boise Cascade” as part of the Forest Products Acquisition. As used in these consolidated financial statements, the terms “BC Holdings” and “we” refer to Boise Cascade Holdings, L.L.C., and its consolidated subsidiaries.

On February 22, 2008, Boise Cascade, L.L.C., our wholly owned direct subsidiary, sold its Paper and Packaging & Newsprint assets and most of its Corporate and Other assets (the Sale) to Boise Inc. (formerly Aldabra 2 Acquisition Corp.) for cash and securities equal to $1.6 billion, plus working capital adjustments. Immediately following the Sale, Boise Cascade, L.L.C., distributed the securities received in the transaction to us. As a result, we have a significant indirect financial interest in the results of the sold businesses. At September 30, 2009, we had a 46.0% ownership interest in Boise Inc. Assuming the vesting of all of Boise Inc.’s restricted stock, our ownership percentage on September 30, 2009, was 42.5% on a fully diluted basis. The equity interest we own in Boise Inc. represents a significant continuing involvement. As a result, the Paper and Packaging & Newsprint segment results through February 21, 2008, are included in our Consolidated Statement of Loss for the nine months ended September 30, 2008, and the sold assets are not classified as discontinued operations.

After the Sale, we operate our business in the following three reportable segments: Building Materials Distribution, Wood Products, and Corporate and Other. See Note 17, Segment Information, for additional information about our reportable segments.

Basis of Presentation

The quarterly consolidated financial statements have not been audited by an independent registered public accounting firm but, in the opinion of management, include all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly the results for the periods presented. The net income (loss) for the three and nine months ended September 30, 2009 and 2008, involved estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the evaluation of our investment in Boise Inc. for other-than-temporary impairment; the valuation of accounts receivable, inventories, goodwill, intangible assets, and other long-lived assets; legal contingencies; guarantee obligations; indemnifications; assumptions used in retirement and other postemployment benefits; and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets; volatile equity, foreign currency, and energy markets; and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. Quarterly results are not necessarily indicative of results that may be expected for the full year.

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Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation.

2.                                      Sale of Our Paper and Packaging & Newsprint Assets

On February 22, 2008, Boise Cascade, L.L.C., our wholly owned direct subsidiary, sold its Paper and Packaging & Newsprint assets and most of its Corporate and Other assets to Boise Inc. for $1,277.2 million of cash consideration, $285.2 million of net stock consideration, and a $41.0 million paid-in-kind promissory note receivable. We recorded a $5.9 million gain, of which we recognized $3.0 million in our Consolidated Statement of Loss for the nine months ended September 30, 2008. In the first nine months of 2008, we deferred $2.9 million of the gain as a reduction of our investment in Boise Inc. In subsequent periods, the gain decreased to $5.7 million primarily due to transaction-related expenses and adjustments. For more information related to the Sale, see Note 3, Sale of Our Paper and Packaging & Newsprint Assets, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” in our 2008 Form 10-K.

3.                                      Investment in Equity Affiliate

In connection with the Sale, we received 37.9 million, or 49%, of Boise Inc.’s shares. We recorded our investment in “Investment in equity affiliate” on our Consolidated Balance Sheet. Our ownership interest provides us with the ability to exercise significant influence. Accordingly, we account for our investment in Boise Inc. under the equity method of accounting. We adjust the amount of our investment monthly for our proportionate share of Boise Inc.’s net income or loss and our share of other comprehensive income or loss based on the most recently available financial statements. As a result, our aggregate investment in Boise Inc. is recorded in a combination of the “Investment in equity affiliate” and other comprehensive income accounts within “Series B equity units” on our Consolidated Balance Sheets. Our ownership interest, and consequently our proportionate share of Boise Inc.’s net income or loss, changes when we or Boise Inc. engage in transactions of Boise Inc. common stock with third parties. At September 30, 2009, we owned 35.9 million shares, or 46.0%, of Boise Inc. Assuming the vesting of all of Boise Inc.’s restricted stock, our ownership percentage on September 30, 2009, was 42.5% on a fully diluted basis. Changes in ownership interest may also result in our recording an ownership interest dilution gain or loss.

During the three and nine months ended September 30, 2009, we recorded income of $29.2 million and $19.5 million, respectively, related to our investment in Boise Inc. in our Consolidated Statements of Income (Loss), compared with net expense of $205.9 million and $223.3 million during the three and nine months ended September 30, 2008, as follows:

(a)                                  At September 30, 2009, the carrying value of our investment in Boise Inc. was approximately $210.2 million less than our share of Boise Inc.’s underlying equity in net assets. The difference is due to the write-down of our investment in Boise Inc. We are amortizing the difference to income on a straight-line basis over 9.1 years, which represents the remaining weighted-average useful life of Boise Inc.’s assets. The amortization of the basis differential resulted in our recognizing $5.9 million and $16.9 million of income in “Equity in net income (loss) of affiliate” in our Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2009, and will result in our recognizing approximately $23.1 million of income per year for the next 9.1 years, which will be increased or decreased by our proportionate share of Boise Inc.’s net income or loss.

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(b)                                 During the nine months ended September 30, 2009, we settled our obligation related to the contingent value rights (CVRs) we issued to holders of Boise Inc. common stock. In connection with the settlement, in first quarter 2009, we transferred ownership of 0.8 million Boise Inc. shares and recorded a $1.0 million loss in “Equity in net income (loss) of affiliate” in our Consolidated Statement of Loss for the difference between the market price on the date we settled our obligation with the shares and the carrying amount of the shares recorded on our Balance Sheet. For more information, see Note 13, Financial Instrument Risk.

(c)                                  During the three and nine months ended September 30, 2009, we sold 1.2 million Boise Inc. shares and recorded a $1.0 million gain on the sale of the Boise Inc. shares in our Consolidated Statements of Income (Loss). We contributed substantially all of the cash proceeds from the sale of the shares to our pension plans.

(d)                                 Quarterly, we compare the fair value of the Boise Inc. stock price with the carrying value of our investment to assess for other than temporary impairment. The fair value of our investment in Boise Inc. is calculated based on the number of Boise Inc. shares we own and Boise Inc.’s stock price on the respective balance sheet date. The carrying value of our investment is calculated as the sum of (1) the amount recorded in “Investment in equity affiliate” on our Consolidated Balance Sheet and (2) the amount of accumulated other comprehensive income related to our investment in Boise Inc. recorded within “Series B equity units” on our Consolidated Balance Sheet.

On March 31, 2009, and September 30, 2008, we concluded that our investment in Boise Inc. met the definition of other than temporarily impaired. We made the other than temporary impairment determination based primarily on the length of time and extent to which the fair value of our investment had been trading below its carrying value. As of September 30, 2008, Boise Inc.’s stock had traded below our carrying value for over six months, and as of March 31, 2009, Boise Inc.’s stock had traded below our carrying value since we wrote the investment down in September 2008. Accordingly, we recorded a $43.0 million impairment charge for the nine months ended September 30, 2009, and a $208.1 million impairment charge for the three and nine months ended September 30, 2008, in “Impairment of investment in equity affiliate” in our Consolidated Statements of Loss. For the nine months ended September 30, 2009, we reduced by $40.8 million our accumulated other comprehensive loss related to our investment in Boise Inc. (which was accumulated monthly from recording our proportionate share of Boise Inc.’s other comprehensive income or loss). In addition, we decreased “Investment in equity affiliate” $2.2 million to reduce the aggregate carrying value of our investment recorded on our Consolidated Balance Sheet to its fair value on March 31, 2009, of $0.61 per share.

On September 30, 2009, we evaluated whether our investment in Boise Inc. was other than temporarily impaired and concluded that it was not. The fair value of our investment of $5.28 per share exceeded the carrying value of $2.20 per share on that date. We will continue to monitor the value of Boise Inc.’s stock and our carrying value. Should market conditions and/or Boise Inc.’s financial performance deteriorate, it is possible that we will be required to record a noncash impairment charge that could have a material impact on our Consolidated Statements of Income (Loss). As additional information becomes known, we may change our estimates.

The following table presents summarized income statement information for Boise Inc. for the three and nine months ended September 30, 2009 and 2008. Income statement information for the period of January 1 through February 21, 2008, is included in our Consolidated Statement of Loss for the nine months ended September 30, 2008, and therefore is not included in the amounts below:

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4.                                      Transactions With Related Parties

Sales

During the three and nine months ended September 30, 2009, we sold $6.5 million and $13.8 million of fiber to Boise Inc., compared with $18.0 million and $32.7 million during the three and nine months ended September 30, 2008. We also sell fiber to Louisiana Timber Procurement Company, L.L.C. (LTP), an unconsolidated variable-interest entity that is 50% owned by Boise Cascade, L.L.C., and 50% owned by Boise Inc., at prices designed to approximate market. LTP procures saw timber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of Boise Inc. and Boise Cascade. Boise Inc. is the primary beneficiary of LTP, as it absorbs more of its indirect operating expenses. Accordingly, Boise Inc. consolidates LTP’s results in its financial statements. During the three and nine months ended September 30, 2009, we sold $4.9 million and $12.2 million of fiber to LTP, compared with $3.2 million and $8.0 million during the three and nine months ended September 30, 2008. The sales to Boise Inc. and LTP are chip and pulpwood sales from our Wood Products segment and are included in “Sales, Related parties” in the Consolidated Statements of Income (Loss).

Prior to the Sale, we sold paper and paper products to OfficeMax at sales prices that were designed to approximate market prices. For the nine months ended September 30, 2008, sales to OfficeMax were $90.1 million. These sales are included in “Sales, Related parties” in the Consolidated Statement of Loss.

Costs and Expenses

During the three and nine months ended September 30, 2009, we purchased $5.0 million and $21.4 million of fiber from LTP, compared with $17.4 million and $44.1 million during the three and nine months ended September 30, 2008. During the three and nine months ended September 30, 2009, we purchased $0.6 million and $1.8 million of transportation services from Boise Inc., compared with $1.1 million and $2.8 million during the three and nine months ended September 30, 2008. We purchased the fiber and transportation services at prices that approximated market prices. These costs are recorded in “Materials, labor, and other operating expenses from related parties” in our Consolidated Statements of Income (Loss).

In connection with the Sale, we entered into an Outsourcing Services Agreement under which Boise Inc. provides a number of corporate staff services to us at cost. These services include information technology, accounting, and human resource services. The initial term of the agreement is for three years. It will automatically renew for one-year terms unless either party provides notice of termination to the other party at least 12 months in advance of the applicable term. The Outsourcing Services Agreement also gives us (but not Boise Inc.) the right to terminate all or any portion of the services provided to us on 30 days’ notice, subject to payment of an absorption fee. The absorption fee of $3.0 million is allocated among the services provided under the contract and declines to zero in total and on an allocable basis over the remaining term of the agreement. During the three and nine months ended September 30, 2009 and 2008, we recognized expenses related to the Outsourcing Services Agreement in our Consolidated Statements of Income (Loss) as follows:

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Tax Distributions

We are a limited liability company, and the majority of our businesses and assets are held and operated by limited liability companies, which are not subject to entity-level federal or state income taxation. We make cash distributions to permit the members of BC Holdings and affiliates to pay income taxes. During the nine months ended September 30, 2009 and 2008, we made $10.7 million and $128.0 million of net cash tax distributions, which in both years primarily related to the net taxable gain on the Sale. During the nine months ended September 30, 2009 and 2008, we paid $8.1 million and $105.0 million to Forest Products Holdings (FPH), our majority owner. FPH in turn paid $5.2 million and $94.2 million to Madison Dearborn Partners, our equity sponsor, $2.9 million and $10.4 million to management investors, and in 2008, $0.4 million to nonmanagement affiliates. For the nine months ended September 30, 2009 and 2008, we paid $2.6 million and $23.0 million to OfficeMax to fund their tax obligations related to their investments in us.

5.                                      Vendor and Customer Rebates and Allowances

We receive rebates and allowances from our vendors under a number of different programs, including vendor marketing programs. At September 30, 2009, and December 31, 2008, we had $1.2 million and $3.0 million, respectively, of vendor rebates and allowances recorded in “Receivables, Other” on the Consolidated Balance Sheets. Rebates and allowances received from our vendors are recognized as a reduction of “Materials, labor, and other operating expenses” when the product is sold, unless the rebates and allowances are linked to a specific incremental cost to sell a vendor’s product. Amounts received from vendors that are linked to specific selling and distribution expenses are recognized as a reduction of “Selling and distribution expenses” in the period the expense is incurred.

We also provide rebates to our customers based on the volume of their purchases. We provide the rebates to increase the sell-through of our products. The rebates are recorded as a decrease in sales. At September 30, 2009, and December 31, 2008, we had $9.7 million and $11.4 million, respectively, of rebates payable to our customers recorded in “Accrued liabilities, Other” on our Consolidated Balance Sheets.

6.                                      Other (Income) Expense, Net

“Other (income) expense, net” includes miscellaneous income and expense items. The components of “Other (income) expense, net” in the Consolidated Statements of Income (Loss) are as follows: