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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended June 30, 2010

For the transition period from ___________ to ___________

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.

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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 I—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)

(a)                                  Total comprehensive income (loss) for the three and six months ended June 30, 2010, was $4.5 million and $12.1 million, compared with $9.6 million and $(4.3) million for the three and six months ended June 30, 2009.

(b)                                 Total other comprehensive income (loss) for the three and six months ended June 30, 2010, was $0.2 million and $(3.7) million, compared with $0.3 million and $74.6 million for the three and six months ended June 30, 2009.

(c)                                  Accumulated other comprehensive loss at June 30, 2010, and December 31, 2009, was $36.5 million and $32.9 million, respectively.

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

Boise Cascade Holdings, L.L.C., is a privately held building products company headquartered in Boise, Idaho. Our operations began on October 29, 2004 (inception), when we acquired the forest products and paper assets of OfficeMax (the Forest Products Acquisition). In February 2008, Boise Cascade, L.L.C., our wholly owned direct subsidiary, sold its Paper and Packaging & Newsprint assets, and we became a focused wood products manufacturing and building products distribution business. As used in this Form 10-Q, the terms “BC Holdings,” “we,” and “our” refer to Boise Cascade Holdings, L.L.C., and its consolidated subsidiaries. Our wholly owned subsidiary, Boise Cascade, L.L.C., is a leading U.S. wholesale distributor of building products and one of the largest producers of engineered wood products and plywood in North America.

We operate our business in the following three reportable segments: Building Materials Distribution, Wood Products, and Corporate and Other. See Note 15, 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 six months ended June 30, 2010 and 2009, 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 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. 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. These notes to unaudited consolidated financial statements should be read in conjunction with our 2009 Form 10-K and the other reports we file with the Securities and Exchange Commission (SEC).

Reclassifications

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

2.             Investment in Equity Affiliate

In connection with the sale of our Paper and Packaging & Newsprint assets in February 2008, we received 37.9 million shares, or 49%, of Boise Inc.’s common stock. We recorded our investment in “Investment in equity affiliate” on our Consolidated Balance Sheet. We accounted for the investment under the equity method of accounting. In 2009, we sold about half of our investment in Boise Inc., decreasing our ownership position to 18.3 million shares, or 23.5%, at December 31, 2009. In first quarter 2010, we sold all of our remaining shares of Boise Inc. and, as a result, discontinued the equity method of accounting.

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During the three months ended June 30, 2009, we recorded $30.3 million of income related to our investment in Boise Inc. in our Consolidated Statements of Income (Loss), compared with $27.2 million of income and $9.7 million of net expense during the six months ended June 30, 2010 and 2009, as follows:

(a)                             In first quarter 2010, we sold 18.3 million Boise Inc. shares for net proceeds of $86.1 million, and we recorded a $25.3 million gain on the sale of the shares in our Consolidated Statement of Income (Loss) for the six months ended June 30, 2010. We reduced our investment in Boise Inc. and our accumulated other comprehensive income related to our investment in Boise Inc. to zero.

(b)                                 On March 31, 2009, we compared the fair value of the Boise Inc. stock price ($0.61 per share) with the carrying value of our investment ($1.77 per share) and 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 March 31, 2009, Boise Inc.’s stock had traded below our carrying value since we wrote the investment down in September 2008. Accordingly, for the six months ended June 30, 2009, we recorded a $43.0 million charge in “Impairment of investment in equity affiliate” in our Consolidated Statement of Income (Loss).

3.             Transactions With Related Parties

In first quarter 2010, we sold our remaining investment in Boise Inc. (see Note 2, Investment in Equity Affiliate, for more information), and because of the disposition, Boise Inc. and BC Holdings are no longer related parties. The 2010 related-party activity with Boise Inc. included in the Consolidated Financial Statements includes only those sales and costs and expenses transacted prior to March 2010, when BC Holdings and Boise Inc. were related parties. As a result, beginning in March 2010, transactions with Louisiana Timber Procurement Company, L.L.C. (LTP) (discussed below) represent the only significant related-party activity recorded in our Consolidated Financial Statements.

Sales

The $5.2 million and $15.0 million of related-party sales recorded in our Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2010, and the $8.9 million and $14.6 million of related-party sales during the three and six months ended June 30, 2009, represent chip and pulpwood sales to Boise Inc. (for the period they were a related party) and LTP from our Wood Products segment. The sales were made at prices designed to approximate market. LTP is an unconsolidated variable-interest entity that is 50% owned by Boise Cascade, L.L.C., and 50% owned by Boise Inc. 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, L.L.C. We are not the primary beneficiary of LTP, as we do not have power to direct the activities that most significantly impact the economic performance of LTP. Accordingly, we do not consolidate LTP’s results in our financial statements.

Costs and Expenses

During the three and six months ended June 30, 2010, we recorded related-party fiber purchases of $10.6 million and $16.2 million from LTP, compared with $5.2 million and $16.4 million during the three and six months ended June 30, 2009. We also recorded $0.3 million, $0.7 million, and $1.3 million of related-party expenses for transportation services purchased from Boise Inc. during the six months ended June 30, 2010, and the three and six months ended June 30, 2009. 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).

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In connection with the sale of our Paper and Packaging & Newsprint assets in February 2008, 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 agreement, as extended, expires on February 22, 2012. The agreement automatically renews for successive one-year terms unless either party provides notice of termination to the other party at least 12 months in advance of the expiration date. The Outsourcing Services Agreement 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 and related severance. The remaining absorption fee of $1.0 million is allocated among the services provided under the contract and declines to zero on February 22, 2011. For the three and six months ended June 30, 2010, total expenses incurred under the Outsourcing Services Agreement, including both related party and nonrelated party, were $3.6 million and $7.1 million, respectively.

During the six months ended June 30, 2010, and the three and six months ended June 30, 2009, we recorded the following expenses from the Outsourcing Services Agreement as related-party expenses in our Consolidated Statements of Income (Loss). As mentioned above, after we sold our remaining investment in Boise Inc. in March 2010, expenses incurred under the Outsourcing Services Agreement were no longer related party and, therefore, are not included in the table below.

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 six months ended June 30, 2010, we made no cash tax distributions. During the six months ended June 30, 2009, we made $10.7 million of cash tax distributions, which primarily related to the net taxable gain on the sale of our Paper and Packaging & Newsprint assets. During the six months ended June 30, 2009, we paid $8.1 million to Forest Products Holdings (FPH), our majority owner. FPH in turn paid $5.2 million to Madison Dearborn Partners, our equity sponsor, and $2.9 million to management investors. For the six months ended June 30, 2009, we paid $2.6 million to OfficeMax to fund their tax obligations related to their investments in us.

4.             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 June 30, 2010, and December 31, 2009, we had $1.4 million and $1.9 million, respectively, of vendor rebates and allowances recorded in “Receivables, Other” on our 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, Trade.” At June 30, 2010, and December 31, 2009, we had $13.0 million and $9.9 million, respectively, of rebates payable to our customers recorded in “Accrued liabilities, Other” on our Consolidated Balance Sheets.

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5.             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:

(a)                                 In the first half of 2009, we closed the lumber manufacturing facility in La Grande, Oregon, and during the three and six months ended June 30, 2009, we recorded $0.9 million of income and $3.4 million of expense in “Other (income) expense, net.” In addition, we recorded $2.6 million and $5.2 million of accelerated depreciation in “Depreciation and amortization” for the three and six months ended June 30, 2009, and $0.6 million of expenses in “Materials, labor, and other operating expenses” during the six months ended June 30, 2009, in our Consolidated Statements of Income (Loss).

(b)                                 In March 2009, we amended our defined benefit pension plan for salaried employees and nonqualified salaried plans so that no future benefits would accrue in the plans after December 31, 2009. We recognized a net $0.7 million noncash curtailment gain, primarily related to our nonqualified salaried pension plans. For more information, see Note 12, Retirement and Benefit Plans, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of our 2009 Form 10-K.

6.             Leases

We lease a portion of our distribution centers as well as other property and equipment under operating leases. For purposes of determining straight-line rent expense, the lease term is calculated from the date we first take possession of the facility, including any periods of free rent and any renewal option periods we are reasonably assured of exercising. Straight-line rent expense is also adjusted to reflect any allowances or reimbursements provided by the lessor. Rental expense for operating leases was $3.6 million and $3.2 million for the three months ended June 30, 2010 and 2009, and $7.1 million and $6.5 million for the six months ended June 30, 2010 and 2009. Sublease rental income was not material in any of the periods presented.

For noncancelable operating leases with remaining terms of more than one year, the minimum lease payment requirements are $6.2 million for the remainder of 2010, $11.7 million in 2011, $10.7 million in 2012, $9.6 million in 2013, $8.4 million in 2014, and $7.5 million in 2015, with total payments thereafter of $36.0 million. These future minimum lease payment requirements have not been reduced by sublease rentals due in the future under noncancelable subleases. Minimum sublease income received in the future is not expected to be material.

Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to purchase the leased property. Additionally, some agreements contain renewal options averaging approximately three years, with fixed payment terms similar to those in the original lease agreements.

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7.             Income Taxes

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. The income taxes with respect to these operations are payable by our equity holders in accordance with their respective ownership percentages. We make cash distributions to permit the members of BC Holdings and affiliates to pay these taxes. Both our senior credit facilities and the indenture governing our notes permit these distributions. See Note 3, Transactions With Related Parties, for more information.

Income Tax (Provision) Benefit

Our income tax provision generally consists of income taxes payable to states that do not allow for the income tax liability to be passed through to our equity holders, as well as income taxes payable by our separate subsidiaries that are taxed as corporations. For both the three months ended June 30, 2010 and 2009, income tax expense was $0.1 million. Income tax expense was $0.1 million and $0.6 million for the six months ended June 30, 2010 and 2009.

Excluding tax distributions to our equity holders (see Note 3, Transactions With Related Parties), during the three months ended June 30, 2010 and 2009, we paid $0.2 million and $0.6 million of tax, net of income taxes refunded, and we paid $0.1 million and $0.6 million of income taxes, net of refunds received, during the six months ended June 30, 2010 and 2009, respectively.

Income Tax Uncertainties

BC Holdings, or one of our subsidiaries, files federal income tax returns in the U.S. and Canada and various state and foreign income tax returns in the major state jurisdictions of Alabama, California, Idaho, Oregon, Texas, and Washington. We are subject to tax examinations from 2007 to present. In 2008, the United States Internal Revenue Service (IRS) completed an audit of BC Holdings’ 2005 and 2006 tax years and issued a proposed adjustment. We appealed the adjustment. The IRS agreed with our position, and no adjustment resulted from the audit.

We recognize tax liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available or as new uncertainties occur. In third quarter 2007, the Canadian Revenue Agency began an audit of Boise AllJoist for tax years 2005 and 2006, which is now closed. At December 31, 2009, we increased the amount of our unrecognized tax benefit by $5.8 million as a result of uncertainty surrounding this audit. We charged the $5.8 million of unrecognized tax liabilities to income tax expense, with an offsetting adjustment to the valuation allowances on deferred tax assets related to Boise AllJoist’s net operating losses. As a result, the net impact of recording the unrecognized tax benefit in our 2009 Consolidated Statement of Income (Loss) was zero. The audit was closed with no additional changes, and because of sufficient net operating loss carryforwards from prior years, no cash payments were required.

8.             Inventories

Inventories include the following:

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9.             Property and Equipment, Net

Property and equipment, net, consisted of the following asset classes:

10.          Goodwill and Intangible Assets

Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and intangible assets of businesses acquired. We assess our acquired goodwill and intangible assets with indefinite lives for impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator of possible impairment. We assess goodwill and intangible assets with indefinite lives in the fourth quarter of each year using a discounted cash flow approach. We also evaluate the remaining useful lives of our finite-lived purchased intangible assets to determine whether any adjustments to the useful lives are necessary. We completed our annual assessments in fourth quarter 2009 and determined that there was no impairment.

The carrying amount of our goodwill by segment is as follows:

At June 30, 2010, and December 31, 2009, intangible assets represent the values assigned to trade names and trademarks, customer relationships, and a noncompete agreement. The trade names and trademarks have an indefinite life and are not amortized. Customer relationships were amortized over five years, and the noncompete agreement is amortized over two years.

Intangible assets consisted of the following:

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