OfficeMax 2012 Annual Report Download - page 104

9. Investment in Boise Cascade Holdings, L.L.C.
In connection with the sale of the paper, forest products and timberland assets in 2004, we invested
$175 million in affiliates of Boise Cascade, L.L.C. Due to restructurings conducted by those affiliates, our
investment is currently in Boise Cascade Holdings, L.L.C., a building products company.
The Boise Investment is accounted for under the cost method, as Boise Cascade Holdings, L.L.C. does not
maintain separate ownership accounts for its members’ interests, and we do not have the ability to significantly
influence the operating and financial policies of Boise Cascade Holdings, L.L.C.
In exchange for its investment in Boise Cascade Holdings, L.L.C., we received voting securities and non-
voting securities. The non-voting securities of Boise Cascade Holdings, L.L.C. accrue dividends daily at the rate
of 8% per annum on the liquidation value plus accumulated dividends. These dividends accumulate semiannually
to the extent not paid in cash on the last day of June and December. It is our policy to record the income
associated with these dividends as a reduction of operating, selling and general and administrative expenses in
the Consolidated Statements of Operations. The voting securities do not accrue dividends.
We recognized dividend income from the non-voting securities of $8.5 million in 2012, $7.8 million in 2011
and $7.3 million in 2010 in the Corporate and Other segment. The dividend receivable associated with these
dividends was $45.1 million and $38.0 million at December 29, 2012 and December 31, 2011, respectively, and
was recorded in the Corporate and Other segment in other non-current assets in the Consolidated Balance Sheets.
During 2012, we received a distribution of $1.7 million from Boise Cascade Holdings, L.L.C., for the
income tax liability associated with our share of allocated earnings, the majority of which was used to reduce the
accrued dividend balance. No such distributions were received in 2011 or 2010.
A subsidiary of Boise Cascade Holdings, L.L.C., Boise Cascade, L.L.C. filed a registration statement with
the Securities and Exchange Commission in November 2012 to register stock for an initial public offering
(“Boise IPO”). Boise Cascade, L.L.C. announced the commencement of the Boise IPO on January 23, 2013, and
the Boise IPO was completed on February 11, 2013.
In February of 2013, we received approximately $129 million in cash proceeds related to the Boise
investment. We received approximately $112 million related to the redemption of all of the non-voting equity
securities at the original investment amount of $66 million plus the related accrued dividends of approximately
$46 million. As a result of the redemption of the non-voting equity securities, the income associated with the
dividends on those securities will cease in the first quarter of 2013. We also received a distribution of
approximately $17 million related to the voting equity securities.
The Boise Investment represented a continuing involvement in the operations of the business we sold in
2004. Therefore, approximately $180 million of gain realized from the sale was deferred. The redemption of the
non-voting equity securities is expected to trigger recognition of a pre-tax operating gain of approximately $68
million representing the portion of the deferred gain attributable to the non-voting equity securities. The
remaining $112 million of deferred gain attributable to the voting equity securities will be recognized when the
voting-equity securities are sold or redeemed.
Throughout the year, we review the carrying value of this investment whenever events or circumstances
indicate that its fair value may be less than its carrying amount. At year-end, based on information related to the
Boise IPO, we estimated the fair value of the Boise investment, and determined that there was no impairment of
this investment. We will continue to monitor and assess this investment.
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