EXHIBIT 99.1
Boise Cascade
1111 West Jefferson Street Ste 300 PO Box 50 Boise, ID 83728
News Release | 
|
Investor Relations Contact | |
Wayne Rancourt | |
Office 208 384 6073 | |
For Immediate Release: March 10, 2009
Boise Cascade Holdings Reports Fourth Quarter 2008 Financial Results
BOISE, Idaho – Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced net losses of $40.5 million and $288.0 million for the quarter and year ended December 31, 2008, respectively. Approximately $219.4 million of the full year loss was related to noncash charges associated with the Company’s equity investment in Boise Inc.
In fourth quarter 2008, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., reported negative earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $31.5 million, which included the negative impact of $7.5 million of expenses related to the planned closure of its White City, Oregon, plywood operation. The individual segment results are discussed in more detail below.
“End product demand from new residential construction in the fourth quarter was very weak and has continued into the first part of this year. Our employees and management team have continued to find ways to reduce costs and improve efficiencies, but it will be a difficult challenge to return to profitability if new residential construction in the U.S. remains at the levels experienced over the last six months. All of our manufacturing operations are running at reduced levels, as we work to keep our inventories in line with reduced sales. We are hopeful for a modest seasonal uptick in demand as we move into the spring and summer; however, 2009 could very well end up more difficult than what we experienced in 2008. We have very good liquidity, finishing 2008 with over $330 million of cash and available undrawn bank line capacity,” commented Duane McDougall, chairman and chief executive officer.
Fourth Quarter Segment Results
U.S. housing starts declined 43% in the fourth quarter, dropping from an annualized rate of 1.151 million in the fourth quarter 2007 to 0.661 million in the fourth quarter 2008. In the fourth quarter,
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turmoil in financial markets, continuing foreclosures, elevated inventories of unsold homes, falling median home prices, rising unemployment, and a decline in consumer confidence all contributed to a weak demand environment for the building products we manufacture and distribute.
Sales in our Building Materials Distribution (“BMD”) business during the fourth quarter were $411 million, compared with $545 million in fourth quarter 2007 and $584 million in third quarter 2008. Relative to fourth quarter 2007, the 24% decline in sales resulted from a 26% decline in product volumes sold offset by a 2% increase in product prices. The EBITDA generated by BMD fell from $6.6 million in fourth quarter 2007 to negative $2.9 million in fourth quarter 2008. BMD’s lower sales activity resulted in fewer gross margin dollars being generated to cover cash operating costs, such as occupancy, payroll, and delivery.
Sales in our Wood Products segment during the fourth quarter were $156 million, compared with $216 million in fourth quarter 2007 and $215 million in third quarter 2008. Relative to fourth quarter 2007, sales of engineered wood products, plywood, and lumber declined due to lower volumes and prices. Particleboard sales declined as reduced volumes were only modestly offset by higher prices. Fourth quarter EBITDA for Wood Products was negative $24.7 million, down $27.7 million from the $3.0 million of positive EBITDA reported in fourth quarter 2007. The decrease in EBITDA was driven principally by sales volume and pricing declines. The fourth quarter 2008 negative EBITDA included $7.5 million of expenses associated with our plan to permanently close our White City, Oregon, plywood mill in March. We have been taking rolling curtailments at all of our other Wood Products operations to maintain appropriate inventory levels, while trying to minimize the negative impact these curtailments have on our employees and our operating results.
Outlook
We expect end product demand to remain very weak when compared to normal historical demand levels. We believe single-family housing starts are unlikely to rebound during 2009 absent a change in the mortgage markets, improved consumer confidence, and a reduction in foreclosures and housing vacancy rates. Industry product sales volumes are likely to remain depressed and commodity wood product prices will largely depend on operating rates. We expect to manage our production levels to our sales demand, which will likely cause us to operate our facilities well below their rated capacities.
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About Boise Cascade
BC Holdings is a privately held company headquartered in Boise, Idaho. 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. At December 31, 2008, we also owned approximately 49% of Boise Inc., a publicly traded North American paper and packaging producer listed on the New York Stock Exchange. For more information, please visit our website at www.bc.com.
Webcast and Conference Call
BC Holdings will host an audiovisual webcast and conference call on Tuesday, March 10, at 11:00 a.m. Eastern, at which time we will review the company’s recent performance. You can join the webcast through the BC Holdings website. Go to http://www.bc.com and click on the link to the webcast under the News & Events heading. Please go to the website at least 15 minutes before the start of the webcast to register and to download and install any necessary audio software. To join the conference call, dial 800-374-0165 (international callers should dial 706-902-1407) at least 10 minutes before the start of the call.
The archived webcast will be available in News & Events (link in the About Boise Cascade section) of Boise Cascade’s website. A replay of the conference call will be available from Tuesday, March 10, at 2:00 p.m. Eastern through Friday, April 10, at 11:59 p.m. Eastern. Playback numbers are 800-642-1687 for U.S. calls and 706-645-9291 for international calls, and the passcode will be 81861868.
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 (interest expense, interest income, and change in fair value of interest rate swaps), 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
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because it is frequently used by investors and other interested parties in the evaluation of companies. 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 expense, interest income, change in the fair value of interest rate swaps, and associated significant cash requirements; and the exclusion of depreciation, amortization, and depletion. 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” within the Private Securities Litigation Reform Act of 1995. These statements speak only as of the date of this press release. While they are based on the current expectations and beliefs of management, they are subject to a number of uncertainties and assumptions that could cause actual results to differ from the expectations expressed in this release.
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
| | Three Months Ended | |
| | December 31 | | September 30, | |
| | 2008 | | 2007 | | 2008 | |
Sales | | | | | | | |
Trade | | $ | 501,169 | | $ | 1,098,138 | | $ | 705,912 | |
Related parties | | 15,433 | | 143,819 | | 21,214 | |
| | 516,602 | | 1,241,957 | | 727,126 | |
Costs and expenses | | | | | | | |
Materials, labor, and other operating expenses | | 462,162 | | 1,075,585 | | 627,407 | |
Materials, labor, and other operating expenses from related parties | | 21,792 | | — | | 19,045 | |
Depreciation, amortization, and depletion | | 8,788 | | 10,554 | | 8,751 | |
Selling and distribution expenses | | 48,043 | | 71,249 | | 62,537 | |
General and administrative expenses | | 6,786 | | 21,760 | | 7,259 | |
General and administrative expenses from related party | | 2,133 | | — | | 2,506 | |
Loss on sale of Paper and Packaging & Newsprint assets (a) | | 81 | | — | | 1,739 | |
Other (income) expense, net (c) (d) | | 6,709 | | (3,538 | ) | (3,768 | ) |
| | 556,494 | | 1,175,610 | | 725,476 | |
| | | | | | | |
Income (loss) from operations | | (39,892 | ) | 66,347 | | 1,650 | |
| | | | | | | |
Equity in net income of affiliate (a) | | 3,921 | | — | | 2,148 | |
Impairment of investment in equity affiliate (e) | | — | | — | | (208,074 | ) |
Foreign exchange loss | | (1,702 | ) | (144 | ) | (406 | ) |
Change in fair value of contingent value rights (f) | | 1,296 | | — | | 2,227 | |
Change in fair value of interest rate swaps (g) | | — | | (1,662 | ) | — | |
Interest expense (h) | | (6,242 | ) | (26,751 | ) | (6,263 | ) |
Interest income | | 1,062 | | 1,566 | | 1,469 | |
| | (1,665 | ) | (26,991 | ) | (208,899 | ) |
| | | | | | | |
Income (loss) before income taxes | | (41,557 | ) | 39,356 | | (207,249 | ) |
Income tax (provision) benefit | | 1,053 | | (259 | ) | (391 | ) |
Net income (loss) | | $ | (40,504 | ) | $ | 39,097 | | $ | (207,640 | ) |
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Segment Information
(unaudited, in thousands)
| | Three Months Ended | |
| | December 31 | | September 30, | |
| | 2008 | | 2007 | | 2008 | |
Segment sales | | | | | | | |
Building Materials Distribution | | $ | 411,472 | | $ | 545,007 | | $ | 584,094 | |
Wood Products | | 156,037 | | 215,952 | | 215,057 | |
Paper | | — | | 397,949 | | — | |
Packaging & Newsprint | | — | | 203,177 | | — | |
Intersegment eliminations and other | | (50,907 | ) | (120,128 | ) | (72,025 | ) |
| | $ | 516,602 | | $ | 1,241,957 | | $ | 727,126 | |
| | | | | | | |
Segment income (loss) | | | | | | | |
Building Materials Distribution | | $ | (4,833 | ) | $ | 4,791 | | $ | 10,223 | |
Wood Products (d) | | (31,488 | ) | (5,005 | ) | (3,126 | ) |
Paper | | — | | 51,609 | | — | |
Packaging & Newsprint | | — | | 25,471 | | — | |
Corporate and Other (a) (c) | | (5,273 | ) | (10,663 | ) | (5,853 | ) |
| | (41,594 | ) | 66,203 | | 1,244 | |
| | | | | | | |
Equity in net income of affiliate (a) | | 3,921 | | — | | 2,148 | |
Impairment of investment in equity affiliate (e) | | — | | — | | (208,074 | ) |
Change in fair value of contingent value rights (f) | | 1,296 | | — | | 2,227 | |
Change in fair value of interest rate swaps (g) | | — | | (1,662 | ) | — | |
Interest expense (h) | | (6,242 | ) | (26,751 | ) | (6,263 | ) |
Interest income | | 1,062 | | 1,566 | | 1,469 | |
Income (loss) before income taxes | | $ | (41,557 | ) | $ | 39,356 | | $ | (207,249 | ) |
| | | | | | | |
EBITDA (i) | | | | | | | |
Building Materials Distribution | | $ | (2,913 | ) | $ | 6,603 | | $ | 12,129 | |
Wood Products (d) | | (24,708 | ) | 3,042 | | 3,631 | |
Paper | | — | | 51,857 | | — | |
Packaging & Newsprint | | — | | 25,556 | | — | |
Corporate and Other (a) (c) | | (5,185 | ) | (10,301 | ) | (5,765 | ) |
Equity in net income of affiliate (a) | | 3,921 | | — | | 2,148 | |
Impairment of investment in equity affiliate (e) | | — | | — | | (208,074 | ) |
Change in fair value of contingent value rights (f) | | 1,296 | | — | | 2,227 | |
| | $ | (27,589 | ) | $ | 76,757 | | $ | (193,704 | ) |
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(in thousands)
| | Year Ended December 31 | |
| | 2008 (b) | | 2007 | |
Sales | | | | | |
Trade | | $ | 2,831,283 | | $ | 4,797,795 | |
Related parties | | 146,215 | | 615,661 | |
| | 2,977,498 | | 5,413,456 | |
Costs and expenses | | | | | |
Materials, labor, and other operating expenses | | 2,620,113 | | 4,705,325 | |
Materials, labor, and other operating expenses from related parties | | 70,026 | | — | |
Depreciation, amortization, and depletion | | 36,258 | | 123,909 | |
Selling and distribution expenses | | 231,545 | | 285,633 | |
General and administrative expenses | | 36,556 | | 84,062 | |
General and administrative expenses from related party | | 8,143 | | — | |
Gain on sale of Paper and Packaging & Newsprint assets (a) | | (2,915 | ) | — | |
Other (income) expense, net (c) (d) | | 10,634 | | (5,693 | ) |
| | 3,010,360 | | 5,193,236 | |
| | | | | |
Income (loss) from operations | | (32,862 | ) | 220,220 | |
| | | | | |
Equity in net loss of affiliate (a) | | (11,328 | ) | — | |
Impairment of investment in equity affiliate (e) | | (208,074 | ) | — | |
Foreign exchange gain (loss) | | (1,831 | ) | 4,451 | |
Change in fair value of contingent value rights (f) | | (507 | ) | — | |
Change in fair value of interest rate swaps (g) | | (6,284 | ) | 3,733 | |
Interest expense (h) | | (34,313 | ) | (96,802 | ) |
Interest income | | 7,691 | | 4,083 | |
| | (254,646 | ) | (84,535 | ) |
| | | | | |
Income (loss) before income taxes | | (287,508 | ) | 135,685 | |
Income tax provision | | (470 | ) | (7,988 | ) |
Net income (loss) | | $ | (287,978 | ) | $ | 127,697 | |
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Segment Information
(in thousands)
| | Year Ended December 31 | |
| | 2008 (b) | | 2007 | |
Segment sales | | | | | |
Building Materials Distribution | | $ | 2,109,428 | | $ | 2,564,007 | |
Wood Products | | 795,854 | | 1,010,167 | |
Paper | | 253,508 | | 1,596,224 | |
Packaging & Newsprint | | 113,485 | | 783,100 | |
Intersegment eliminations and other | | (294,777 | ) | (540,042 | ) |
| | $ | 2,977,498 | | $ | 5,413,456 | |
| | | | | |
Segment income (loss) | | | | | |
Building Materials Distribution | | $ | 19,511 | | $ | 51,778 | |
Wood Products (d) | | (55,095 | ) | 23,605 | |
Paper | | 20,718 | | 132,325 | |
Packaging & Newsprint | | 5,685 | | 40,115 | |
Corporate and Other (a) (c) | | (25,512 | ) | (23,152 | ) |
| | (34,693 | ) | 224,671 | |
| | | | | |
Equity in net loss of affiliate (a) | | (11,328 | ) | — | |
Impairment of investment in equity affiliate (e) | | (208,074 | ) | — | |
Change in fair value of contingent value rights (f) | | (507 | ) | — | |
Change in fair value of interest rate swaps (g) | | (6,284 | ) | 3,733 | |
Interest expense (h) | | (34,313 | ) | (96,802 | ) |
Interest income | | 7,691 | | 4,083 | |
Income (loss) before income taxes | | $ | (287,508 | ) | $ | 135,685 | |
| | | | | |
EBITDA (i) | | | | | |
Building Materials Distribution | | $ | 27,199 | | $ | 59,151 | |
Wood Products (d) | | (27,362 | ) | 53,650 | |
Paper | | 21,066 | | 177,286 | |
Packaging & Newsprint | | 5,738 | | 77,798 | |
Corporate and Other (a) (c) | | (25,076 | ) | (19,305 | ) |
Equity in net loss of affiliate (a) | | (11,328 | ) | — | |
Impairment of investment in equity affiliate (e) | | (208,074 | ) | — | |
Change in fair value of contingent value rights (f) | | (507 | ) | — | |
| | $ | (218,344 | ) | $ | 348,580 | |
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(in thousands)
| | December 31 | |
| | 2008 | | 2007 | |
ASSETS | | | | | |
| | | | | |
Current | | | | | |
Cash and cash equivalents | | $ | 275,803 | | $ | 57,623 | |
Receivables | | | | | |
Trade, less allowances of $1,843 and $1,664 | | 78,393 | | 115,209 | |
Related parties | | 3,112 | | 9 | |
Other | | 5,907 | | 7,458 | |
Inventories | | 279,023 | | 342,015 | |
Assets held for sale | | — | | 1,853,039 | |
Prepaid expenses and other | | 1,296 | | 5,426 | |
| | 643,534 | | 2,380,779 | |
Property | | | | | |
Property and equipment, net | | 291,999 | | 313,117 | |
Fiber farms and timber deposits | | 8,632 | | 24,010 | |
| | 300,631 | | 337,127 | |
| | | | | |
Investment in equity affiliate (a) (e) | | 20,985 | | — | |
Deferred financing costs | | 7,862 | | 23,074 | |
Goodwill | | 12,170 | | 12,170 | |
Intangible assets, net | | 9,248 | | 9,668 | |
Other assets | | 6,009 | | 11,374 | |
Total assets | | $ | 1,000,439 | | $ | 2,774,192 | |
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(in thousands, except for equity units)
| | December 31 | |
| | 2008 | | 2007 | |
LIABILITIES AND CAPITAL | | | | | |
| | | | | |
Current | | | | | |
Short-term borrowings | | $ | — | | $ | 10,500 | |
Current portion of long-term debt | | — | | 47,250 | |
Accounts payable | | | | | |
Trade | | 69,478 | | 141,459 | |
Related parties | | 2,195 | | 43 | |
Accrued liabilities | | | | | |
Compensation and benefits | | 38,228 | | 36,909 | |
Interest payable | | 3,930 | | 7,140 | |
Other | | 30,893 | | 29,959 | |
Liabilities related to assets held for sale | | — | | 331,636 | |
| | 144,724 | | 604,896 | |
Debt | | | | | |
Long-term debt, less current portion | | 315,000 | | 1,113,313 | |
| | | | | |
Other | | | | | |
Compensation and benefits | | 172,275 | | 46,981 | |
Other long-term liabilities | | 12,125 | | 17,097 | |
| | 184,400 | | 64,078 | |
Redeemable equity units | | | | | |
Series B equity units — 2,920,574 and 16,622,421 units outstanding | | 2,920 | | 16,992 | |
Series C equity units — 11,016,668 and 39,069,411 units outstanding | | 3,037 | | 9,489 | |
| | 5,957 | | 26,481 | |
| | | | | |
Commitments and contingent liabilities | | | | | |
| | | | | |
Capital | | | | | |
Series A equity units — no par value; 66,000,000 units authorized and outstanding | | 81,967 | | 78,463 | |
Series B equity units — no par value; 550,000,000 units authorized; 532,414,853 units and 530,356,601 units outstanding | | 268,391 | | 876,693 | |
Series C equity units — no par value; 44,000,000 units authorized; 11,183,000 units and zero units outstanding | | — | | 10,268 | |
Total capital | | 350,358 | | 965,424 | |
Total liabilities and capital | | $ | 1,000,439 | | $ | 2,774,192 | |
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(in thousands)
| | Year Ended December 31 | |
| | 2008 | | 2007 | |
Cash provided by (used for) operations | | | | | |
Net income (loss) | | $ | (287,978 | ) | $ | 127,697 | |
Items in net income (loss) not using (providing) cash | | | | | |
Equity in net loss of affiliate | | 11,328 | | — | |
Impairment of investment in equity affiliate | | 208,074 | | — | |
Depreciation, depletion, and amortization of deferred financing costs and other | | 37,783 | | 129,289 | |
Related-party interest income | | (2,760 | ) | — | |
Deferred income taxes | | (142 | ) | 4,195 | |
Pension and other postretirement benefit expense | | 17,078 | | 25,366 | |
Gain on changes in retiree healthcare programs | | — | | (4,367 | ) |
Change in fair value of contingent value rights | | 507 | | — | |
Change in fair value of interest rate swaps | | 6,284 | | (3,733 | ) |
Management equity units expense, net of expense related to the Sale | | 1,542 | | 3,110 | |
Gain on sale of assets, net | | (10,903 | ) | (2,354 | ) |
Loss on sale of note receivable from related party | | 8,357 | | — | |
Facility closure costs | | 10,796 | | — | |
Other | | 1,797 | | (3,819 | ) |
Decrease (increase) in working capital, net of dispositions | | | | | |
Receivables | | 6,226 | | 34,156 | |
Inventories | | 62,994 | | (29,397 | ) |
Prepaid expenses and other | | 5,501 | | 679 | |
Accounts payable and accrued liabilities | | (79,312 | ) | (31,804 | ) |
Pension and other postretirement benefit payments | | (20,959 | ) | (1,117 | ) |
Current and deferred income taxes | | (1,871 | ) | 1,077 | |
Other | | 1,223 | | 1,113 | |
Cash provided by (used for) operations | | (24,435 | ) | 250,091 | |
Cash provided by (used for) investment | | | | | |
Proceeds from sale of assets, net of cash contributed | | 1,270,976 | | 27,797 | |
Proceeds from sale of note receivable from related party, net | | 52,737 | | — | |
Expenditures for property and equipment | | (51,867 | ) | (187,972 | ) |
Increase in restricted cash | | (183,290 | ) | (200,000 | ) |
Decrease in restricted cash | | 183,290 | | 200,000 | |
Additional Consideration Agreement payment | | — | | (32,542 | ) |
Other | | (402 | ) | 6,065 | |
Cash provided by (used for) investment | | 1,271,444 | | (186,652 | ) |
Cash provided by (used for) financing | | | | | |
Issuances of long-term debt | | 240,000 | | 1,085,000 | |
Payments of long-term debt | | (1,085,563 | ) | (1,138,337 | ) |
Short-term borrowings | | (10,500 | ) | 7,300 | |
Tax distributions to members | | (128,058 | ) | (2,753 | ) |
Repurchase of management equity units | | (28,634 | ) | (993 | ) |
Cash paid for termination of interest rate swaps | | (11,918 | ) | — | |
Proceeds from changes to interest rate swaps | | — | | 2,848 | |
Other | | (4,156 | ) | (4,050 | ) |
Cash used for financing | | (1,028,829 | ) | (50,985 | ) |
Increase in cash and cash equivalents | | 218,180 | | 12,454 | |
Balance at beginning of the period | | 57,623 | | 45,169 | |
Balance at end of the period | | $ | 275,803 | | $ | 57,623 | |
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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 2008 Annual Report on Form 10-K. Net income (loss) for all periods presented involved estimates and accruals.
(a) On February 22, 2008, Boise Cascade, L.L.C., our wholly owned direct subsidiary, sold the Paper and Packaging & Newsprint assets, and most of our 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. In connection with the Sale, we recognized $(0.1) million, $2.9 million and $(1.7) million in “Gain (loss) on sale of Paper and Packaging & Newsprint assets” in the Corporate and Other segment in our Consolidated Statements of Loss during the three months and year ended December 31, 2008, and three months ended September 30, 2008. After the Sale, we continue to own 100% of our Building Materials Distribution and Wood Products segments. Immediately following the Sale, Boise Cascade, L.L.C., distributed the equity securities received in the transaction to us. Subsequent to the transaction, we recorded our investment in Boise Inc. in “Investment in equity affiliate” on our Consolidated Balance Sheet and our share of Boise Inc.’s net income (loss) in “Equity in net income (loss) of affiliate” in our Consolidated Statements of Loss. For more information related to the Sale, see the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2008.
(b) The equity interest that we own in Boise Inc. represents a significant continuing involvement. As a result, the operating results of the Paper and Packaging & Newsprint businesses are included in continuing operations through February 21, 2008.
(c) In 2008, we sold a promissory note from Boise Inc. for $52.7 million, after selling expenses, and we recorded an $8.4 million loss on the sale in “Other (income) expense, net” in the Corporate and Other segment in our Consolidated Statements of Loss for the year ended December 31, 2008.
The year ended December 31, 2007, included a $4.4 million gain for changes in our retiree healthcare programs.
(d) During the three months ended September 30, 2008, we sold our wholly owned subsidiary in Brazil, Boise Cascade do Brasil LTDA., and we permanently closed our veneer operation in St. Helens, Oregon. In December 2008, we committed to closing the plywood manufacturing facility in White City, Oregon, which is scheduled to occur in March 2009. For these items, we recorded $7.3 million, $3.6 million, and $(5.0) million of (income) expense in “Other (income) expense, net” in the Wood Products segment in our Consolidated Statements of Loss for the three months and year ended December 31, 2008, and three months ended September 30, 2008.
(e) In September 2008, we concluded that our investment in Boise Inc. met the definition of other than temporarily impaired as defined in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. Accordingly, we recorded a $208.1 million charge in “Impairment of investment in equity affiliate” in our Consolidated Statements of Loss for the year ended December 31, 2008, and three months ended September 30, 2008. For more information, see the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2008.
(f) The three months and year ended December 31, 2008, included $1.3 million of income and $0.5 million of expense related to the change in the fair value of the contingent value rights (CVRs) that we and Terrapin Partners Venture Partnership granted to certain Boise Inc. investors in connection with the Sale. The three months ended September 30, 2008, included $2.2 million of income related to the fair value of the CVRs. For more information related to the CVRs, see the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2008.
(g) The three months ended December 31, 2007, included $3.0 million of income related to the change in the fair value of interest rate swaps in connection with the repayment of debt, offset by $4.6 million of expense related to changes in the fair value of our interest rate swaps that we accounted for as economic hedges.
The year ended December 31, 2007, included $8.4 million of income related to the change in the fair value of interest rate swaps in connection with the repayment of some of our variable-rate debt, partially offset by $4.6 million of expense related to changes in the fair value of our interest rate swaps that we accounted for as economic hedges. We terminated all of our interest rate swaps in February 2008.
(h) Relative to the three months and year ended December 31, 2007, the decrease in interest expense is primarily attributable to the significant reduction in our long-term debt. We used the majority of the proceeds from the Sale to pay down long-term debt.
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(i) EBITDA represents income before interest (interest expense, interest income, and change in fair value of interest rate swaps), income taxes, and depreciation, amortization, and depletion. The following table reconciles BC Holdings, L.L.C., net income (loss) to BC Holdings, L.L.C., EBITDA and Boise Cascade, L.LC., EBITDA for the three months ended December 31, 2008 and 2007, and September 30, 2008:
| | Three Months Ended | |
| | December 31 | | September 30, | |
| | 2008 | | 2007 | | 2008 | |
| | (unaudited, in thousands) | |
| | | | | | | |
BC Holdings, L.L.C., net income (loss) | | $ | (40,504 | ) | $ | 39,097 | | $ | (207,640 | ) |
Change in fair value of interest rate swaps (g) | | — | | 1,662 | | — | |
Interest expense (h) | | 6,242 | | 26,751 | | 6,263 | |
Interest income | | (1,062 | ) | (1,566 | ) | (1,469 | ) |
Income tax provision (benefit) | | (1,053 | ) | 259 | | 391 | |
Depreciation, amortization, and depletion | | 8,788 | | 10,554 | | 8,751 | |
BC Holdings, L.L.C., EBITDA | | (27,589 | ) | 76,757 | | (193,704 | ) |
Loss on sale of note receivable from related party (c) | | — | | — | | 44 | |
Equity in net income of affiliate (a) | | (3,921 | ) | — | | (2,148 | ) |
Impairment of investment in equity affiliate (e) | | — | | — | | 208,074 | |
Boise Cascade, L.L.C., EBITDA | | $ | (31,510 | ) | $ | 76,757 | | $ | 12,266 | |
The following table reconciles BC Holdings, L.L.C., net income (loss) to BC Holdings, L.L.C., EBITDA and Boise Cascade, L.L.C., EBITDA for the years ended December 31, 2008 and 2007:
| | Year Ended December 31 | |
| | 2008 | | 2007 | |
| | (in thousands) | |
| | | | | |
BC Holdings, L.L.C., net income (loss) | | $ | (287,978 | ) | $ | 127,697 | |
Change in fair value of interest rate swaps (g) | | 6,284 | | (3,733 | ) |
Interest expense (h) | | 34,313 | | 96,802 | |
Interest income | | (7,691 | ) | (4,083 | ) |
Income tax provision | | 470 | | 7,988 | |
Depreciation, amortization, and depletion | | 36,258 | | 123,909 | |
BC Holdings, L.L.C., EBITDA | | (218,344 | ) | 348,580 | |
Loss on sale of note receivable from related party (c) | | 8,357 | | — | |
Equity in net loss of affiliate (a) | | 11,328 | | — | |
Impairment of investment in equity affiliate (e) | | 208,074 | | — | |
Boise Cascade, L.L.C., EBITDA | | $ | 9,415 | | $ | 348,580 | |
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