Boise Inc. Announces Financial Results for First Quarter 2010

BOISE, Idaho, May 4 /PRNewswire-FirstCall/ -- Boise Inc. (NYSE: BZ) today reported a net loss of $12.7 million or ($0.16) per diluted share for first quarter 2010 compared with a first quarter 2009 net loss of $0.9 million or ($0.01) per diluted share.  Net income excluding special items in first quarter 2010 was $3.0 million or $0.04 per diluted share compared with $2.7 million or $0.03 per diluted share in first quarter 2009.

EBITDA excluding special items was $54.9 million for first quarter 2010 compared with $58.6 million for first quarter 2009.

"We operated well during the first quarter and saw improving conditions in our key markets," said Alexander Toeldte, President and Chief Executive Officer of Boise Inc.  "We grew our premium office, label and release, and flexible packaging products sales volumes 17% over the prior year, experienced strong demand in our corrugated packaging products, and continued to deliver solid results in our office papers business.  We extended debt maturities and reduced balance sheet risk through the debt refinancing we completed in March.  As expected, fiber and energy input costs increased during the quarter, and we experienced seasonal increases in working capital and increased maintenance expenditures from our planned annual outage at DeRidder.  Looking ahead, we expect to begin to benefit from recent price increases across our businesses in the second quarter."

Sales

Total sales for first quarter 2010 were $494.1 million, down $6.2 million, or 1%, from $500.3 million for first quarter 2009 and up $3.8 million from fourth quarter 2009 sales of $490.3 million.  

Paper segment sales increased $1.5 million during first quarter 2010 compared with first quarter 2009, as increased sales volumes were offset partially by lower sales prices.  In first quarter 2009, we took market downtime to balance supply with customer demand.

Packaging segment sales decreased $8.9 million during first quarter 2010 compared with first quarter 2009, driven by lower sales prices for segment linerboard, newsprint, and corrugated products and lower sales volumes of newsprint due to the idling of our DeRidder #2 newsprint machine in April 2009.   These declines were offset partially by higher sales volumes of segment linerboard and corrugated products.

Prices and Volumes

Pricing for uncoated freesheet improved in first quarter 2010 sequentially from fourth quarter 2009 but declined compared with first quarter 2009.  Average net selling prices for uncoated freesheet papers declined $40 per ton, or 4%, to $941 per ton during first quarter 2010 compared with first quarter 2009 and increased 1% from fourth quarter 2009.  In first quarter 2010, we implemented a $40-per-ton price increase across most of our uncoated freesheet grades, including cut-size office papers, offset, and midweight opaque grades.  In April 2010, we announced a $60-per-ton price increase across virtually all of our uncoated office papers and printing and converting grades effective in May 2010.  Overall, uncoated freesheet sales volumes were 312,000 tons during first quarter 2010, an increase of 3% versus the prior year period, and up 1% from fourth quarter 2009 due to improved demand trends and reduced market downtime.  Combined sales volumes of premium office, label and release, and flexible packaging papers, which represented 29% of our total first quarter 2010 uncoated freesheet sales volumes, increased by 17% compared with first quarter 2009.

Corrugated container and sheet sales volumes improved 14% during first quarter 2010 compared with first quarter 2009 and increased 4% from fourth quarter 2009, due primarily to increased sales of sheets from our sheet feeder plant in Texas.  Corrugated container and sheet prices declined 12% in first quarter 2010 from first quarter 2009, driven by lower selling prices for containerboard and product mix changes.  Corrugated container and sheet prices decreased 2% compared with fourth quarter 2009.  

More favorable market conditions led to increased linerboard sales volumes to third parties, which were up 62%, to 62,000 tons, compared with first quarter 2009.  Third-party sales volumes decreased by 26% sequentially from fourth quarter 2009 as improved sales volumes in our corrugated product and sheet operations during first quarter 2010 resulted in less linerboard available for sales to third parties.  Linerboard net selling prices to third parties declined to $296 per ton in first quarter 2010 from $352 per ton in first quarter 2009 and improved 1% compared with fourth quarter 2009.  In first quarter 2010, we implemented a $50-per-ton and $70-per-ton price increase on domestic linerboard sales in the eastern and western U.S., respectively.  In April, we announced an additional $60-per-ton increase on domestic linerboard sales.

Input Costs

Total fiber, energy, and chemical costs for first quarter 2010 were $228.0 million, an increase of $22.3 million, or 11%, compared with costs of $205.7 million for first quarter 2009.  The increase was driven primarily by higher fiber costs and higher consumption of all inputs due to increased production and sales volumes.

Total fiber costs during first quarter 2010 were $115.5 million, an increase of $21.4 million, or 23%, from $94.1 million incurred in first quarter 2009.  This was due to increased fiber consumption, higher pulp prices, and increased wood costs in our Alabama operating region as a result of wet weather during the quarter.  Fiber costs in first quarter 2010 increased $9.0 million, or 8%, compared with $106.5 million in fourth quarter 2009.  

Energy costs in first quarter 2010 were $63.4 million, an increase of $2.6 million, or 4%, compared with $60.8 million in first quarter 2009, driven by increased consumption of energy due to higher production volumes, offset partially by lower prices for natural gas and electricity.  Energy costs in first quarter 2010 increased $17.7 million, or 39%, from $45.7 million in fourth quarter 2009 due to seasonal increases in consumption as a result of colder winter weather.  

Chemical costs in first quarter 2010 were $49.1 million, a decrease of $1.7 million, or 3%, compared with $50.8 million in first quarter 2009.  Chemical costs were down $3.7 million, or 7%, compared with $52.8 million in fourth quarter 2009.  The key drivers were lower prices offset partially by higher consumption of commodity chemicals.

Refinancing

In March 2010, we refinanced our variable rate debt due in 2014 with fixed rate debt due in 2020, extending maturities, fixing interest rates, and increasing our financial flexibility.  In connection with the refinancing, we recognized a $22.2 million noncash loss on the extinguishment of debt during the three months ended March 31, 2010.

Webcast and Conference Call

Boise Inc. will host a webcast and conference call on Tuesday, May 4, 2010, at 12:00 p.m. ET, at which time we will review the company's recent performance.  To participate in the conference call, dial 866-841-1001 (international callers should dial 832-4451689).  The webcast may be accessed through Boise's Internet site and will be archived for one year following the call.  Go to www.BoiseInc.com and click on the link to the webcast under Webcasts & Presentations on the Investors drop-down menu.  

A replay of the conference call will be available in Webcasts & Presentations from May 4 at 3:00 p.m. ET through June 4 at 11:45 p.m. ET.  Playback numbers are 800-642-1687 for U.S. callers and 706-645-9291 for international callers.  The passcode is 69548759.  

About Boise Inc.

Headquartered in Boise, Idaho, Boise Inc. (NYSE: BZ) 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.  Our employees are committed to delivering excellent value while managing our businesses to sustain environmental resources for future generations.  Visit our website at www.BoiseInc.com.  

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.  Statements regarding announced price increases on our products are considered forward looking; accordingly, there can be no assurance that we will be able to implement or realize all or any part of such price increases.  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.  

Summary Notes to Consolidated Financial Statements and Segment Information

The Consolidated Statements of Income (Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and Segment Information do not include all Notes to Consolidated Financial Statements and should be read in conjunction with the Company's 2009 Annual Report on Form 10K and the Company's Quarterly Report on Form 10Q for the period ended March 31, 2010, as well as other reports the Company files with the SEC. Net income (loss) for all periods presented involved estimates and accruals.

Boise Inc. operates its business in three reportable segments: Paper, Packaging, and Corporate and Other (support services).  Boise Inc. manufactures and sells a range of papers, including communication-based papers, packaging-demand-driven papers, and market pulp.  Boise Inc. also manufactures and sells corrugated containers and sheets as well as linerboard and newsprint.

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.  The following table reconciles net income (loss) to EBITDA for the three months ended March 31, 2010 and 2009, and the three months ended December 31, 2009 (unaudited, dollars in thousands):

The following table reconciles EBITDA to EBITDA excluding special items for the three months ended March 31, 2010 and 2009, and the three months ended December 31, 2009 (unaudited, dollars in thousands):

The following table reconciles net income (loss) to net income (loss) excluding special items and presents net income (loss) excluding special items per diluted share for the three months ended March 31, 2010 and 2009, and the three months ended December 31, 2009 (unaudited, dollars in thousands, except share and per-share data):

The following table reconciles total debt to net total debt as of March 31, 2010 and 2009, and December 31, 2009 (unaudited, dollars in thousands):

SOURCE Boise Inc.

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