Boise Cascade Holdings Reports Second Quarter 2010 Financial Results
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<p><span class="xn-location">BOISE</span>, Idaho, <span class="xn-chron">Aug. 12</span> /CNW/ -- <span class="xn-location">Boise</span> Cascade Holdings, L.L.C. (BC Holdings or Company) announced net income of <span class="xn-money">$4.3 million</span> for the quarter ended <span class="xn-chron">June 30, 2010</span>. BC Holdings' building products subsidiary, <span class="xn-location">Boise</span> Cascade, L.L.C., reported second quarter 2010 earnings before interest, taxes, depreciation, and amortization (EBITDA) of <span class="xn-money">$18.8 million</span>. This compared to negative EBITDA of <span class="xn-money">$1.8 million</span> in first quarter 2010 and negative EBITDA of <span class="xn-money">$3.5 million</span> in second quarter of 2009. The Company concluded the quarter with <span class="xn-money">$264.5 million</span> of cash and <span class="xn-money">$228.1 million</span> of debt.</p>
<p/>
<p>The company continues to be challenged by reduced demand for the products it distributes and manufactures. New residential construction remained weak in the second quarter with annualized housing starts of approximately 600,000, or about 60% lower than the 10-year historical trend of about 1.5 million per year. However, second quarter 2010 housing starts were 12% higher than the levels experienced in the same quarter of 2009.</p>
<p/>
<p>"I am pleased that we were able to report stronger results compared to prior year, and that our liquidity position remains strong. We benefited from higher commodity pricing compared to prior year. In addition, we continue to see the benefits of our efforts in controlling cost and aligning production to the realities of the low demand environment that continues to persist," stated <span class="xn-person">Tom Carlile</span>, CEO.</p>
<p/>
<p>Building Materials Distribution (BMD) segment sales were <span class="xn-money">$515.4 million</span> in the second quarter, up 19% from the same quarter a year ago, primarily as a result of higher year-over-year net selling prices for the commodity products that BMD distributes. BMD reported <span class="xn-money">$9.1 million</span> of EBITDA, which was down slightly from the <span class="xn-money">$9.6 million</span> reported in the second quarter 2009. As a result of facility additions and expansions in the past year, selling and distribution expenses were 10% higher than the prior year quarter. Higher sales generated increased gross margin dollars, which offset the increase in selling and distribution costs.</p>
<p/>
<p>Wood Products segment sales in the second quarter were <span class="xn-money">$199.4 million</span>, up 48% from the same quarter a year ago. The sales increase was attributable primarily to an increase in EWP sales volumes of 40%, 38% higher plywood sales prices and 14% higher plywood sales volumes, as well as 49% higher lumber prices. On an EBITDA basis, the segment reported <span class="xn-money">$14.9 million</span> for the quarter, a substantial improvement from the negative <span class="xn-money">$9.8 million</span> reported in the second quarter of 2009. The main factor contributing to the improved financial performance was increased product pricing for plywood and lumber. In addition, we benefited from lower conversion costs in all of our major product lines.</p>
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Outlook
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<p>U.S. pricing for lumber, plywood, and a number of other commodity wood products moved up sharply early in the second quarter in response to constrained inventory levels and supply curtailments, as well as a disruption in imports. However, without strong underlying end-product demand, the pricing strength quickly abated mid-second quarter, with a number of key commodity product prices approaching levels seen at the beginning of the year. Absent a decline in unemployment, stronger household formation, and a reduction in foreclosures, we expect to continue to experience below normal demand for the products we distribute and manufacture. Industry commodity wood product prices will be volatile in response to operating rates and inventory levels in various distribution channels. We expect to manage our production levels to our sales demand, which will likely cause us to operate our facilities below their capacity.</p>
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About Boise Cascade
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<p>BC Holdings is a privately held company headquartered in <span class="xn-location">Boise</span>, Idaho. Our wholly owned subsidiary, <span class="xn-location">Boise</span> 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 <span class="xn-location">North America</span>. For more information, please visit our website at <a href="http://www.bc.com">www.bc.com</a>.</p>
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Webcast and Conference Call
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<p>BC Holdings will host a webcast and conference call on <span class="xn-chron">Thursday, August 12</span> at <span class="xn-chron">11 a.m.</span> Eastern, at which time we will review the company's recent performance. You can join the webcast through the <span class="xn-location">Boise</span> Cascade website. Go to <a href="http://www.bc.com">www.bc.com</a> 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. 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.</p>
<p/>
<p>The archived webcast will be available in the News & Events section of <span class="xn-location">Boise</span> Cascade's website. A replay of the conference call will be available from <span class="xn-chron">Thursday, August 12</span>, at <span class="xn-chron">2:00 p.m.</span> Eastern through <span class="xn-chron">Thursday, August 19</span>, at <span class="xn-chron">11:59 p.m.</span> Eastern. Playback numbers are 800-642-1687 for U.S. calls and 706-645-9291 for international calls, and the passcode will be 89838066.</p>
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Basis of Presentation
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<p>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 and interest income), income taxes, and depreciation and amortization. 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 when comparing companies in our industry that have different financing and capital structures and/or tax rates. 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. 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, and associated significant cash requirements; and the exclusion of depreciation and amortization. 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.</p>
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Forward-Looking Statements
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<p>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.</p>
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<p> </p>
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
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<p> </p>
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Three Months Ended
------------------
June 30 March 31,
-------
2010 2009 2010
---- ---- ----
Sales
Trade $646,320 $512,247 $477,422
Related parties (a) 5,168 8,933 9,831
651,488 521,180 487,253
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Costs and expenses
Materials, labor, and other
operating expenses 557,849 463,699 425,901
Materials, labor, and other
operating expenses
from related parties (a) 10,550 6,332 6,222
Depreciation and amortization (b) 8,595 11,448 8,590
Selling and distribution expenses 52,630 47,771 48,165
General and administrative expenses 11,205 6,863 7,458
General and administrative expenses
from related party (a) - 2,503 1,576
Other (income) expense, net (b) 60 (1,751) (80)
640,889 536,865 497,832
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<p> </p>
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Income (loss) from operations 10,599 (15,685) (10,579)
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<p> </p>
<p> </p>
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Equity in net income of affiliate - 30,306 1,889
Gain on sale of shares of equity
affiliate (a) - - 25,308
Foreign exchange gain (loss) (355) 715 147
Interest expense (6,021) (6,135) (5,520)
Interest income 199 178 194
(6,177) 25,064 22,018
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<p> </p>
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Income before income taxes 4,422 9,379 11,439
Income tax provision (90) (68) (45)
Net income $4,332 $9,311 $11,394
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<p> </p>
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Segment Information
(unaudited, in thousands)
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<p> </p>
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Three Months Ended
------------------
June 30 March 31,
-------
2010 2009 2010
---- ---- ----
Segment sales
Building Materials Distribution $515,434 $433,662 $389,118
Wood Products 199,446 134,404 148,000
Intersegment eliminations (63,392) (46,886) (49,865)
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$651,488 $521,180 $487,253
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<p> </p>
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Segment income (loss)
Building Materials Distribution $7,265 $7,647 $(733)
Wood Products (b) 8,238 (19,206) (6,599)
Corporate and Other (5,259) (3,411) (3,100)
10,244 (14,970) (10,432)
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<p> </p>
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Equity in net income of affiliate - 30,306 1,889
Gain on sale of shares of equity
affiliate (a) - - 25,308
Interest expense (6,021) (6,135) (5,520)
Interest income 199 178 194
Income before income taxes $4,422 $9,379 $11,439
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<p> </p>
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EBITDA (e)
Building Materials Distribution $9,067 $9,560 $1,096
Wood Products (b) 14,939 (9,785) 65
Corporate and Other (5,167) (3,297) (3,003)
Equity in net income of affiliate - 30,306 1,889
Gain on sale of shares of equity
affiliate (a) - - 25,308
$18,839 $26,784 $25,355
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<p> </p>
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
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<p> </p>
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Six Months Ended
June 30
-------
2010 2009
---- ----
Sales
Trade $1,123,742 $919,971
Related parties (a) 14,999 14,636
1,138,741 934,607
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Costs and expenses
Materials, labor, and other operating
expenses (b) 983,750 844,770
Materials, labor, and other operating
expenses
from related parties (a) 16,772 18,622
Depreciation and amortization (b) 17,185 22,567
Selling and distribution expenses 100,795 93,012
General and administrative expenses 18,663 13,788
General and administrative expenses from
related party (a) 1,576 4,936
Other (income) expense, net (b) (20) 930
1,138,721 998,625
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<p> </p>
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Income (loss) from operations 20 (64,018)
--- -------
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<p> </p>
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Equity in net income of affiliate 1,889 33,311
Gain on sale of shares of equity affiliate
(a) 25,308 -
Impairment of investment in equity affiliate
(c) - (43,039)
Foreign exchange gain (loss) (208) 383
Change in fair value of contingent value
rights - 194
Gain on repurchase of long-term debt (d) - 6,026
Interest expense (11,541) (11,751)
Interest income 393 575
15,841 (14,301)
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<p> </p>
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Income (loss) before income taxes 15,861 (78,319)
Income tax provision (135) (551)
Net income (loss) $15,726 $(78,870)
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<p> </p>
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Segment Information
(unaudited, in thousands)
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<p> </p>
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Six Months Ended
June 30
-------
2010 2009
---- ----
Segment sales
Building Materials Distribution $904,552 $768,684
Wood Products 347,446 250,883
Intersegment eliminations and other (113,257) (84,960)
$1,138,741 $934,607
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<p> </p>
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Segment income (loss)
Building Materials Distribution $6,532 $(897)
Wood Products (b) 1,639 (56,837)
Corporate and Other (8,359) (5,901)
(188) (63,635)
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<p> </p>
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Equity in net income of affiliate 1,889 33,311
Gain on sale of shares of equity
affiliate (a) 25,308 -
Impairment of investment in equity
affiliate (c) - (43,039)
Change in fair value of contingent
value rights - 194
Gain on repurchase of long-term
debt (d) - 6,026
Interest expense (11,541) (11,751)
Interest income 393 575
Income (loss) before income taxes $15,861 $(78,319)
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<p> </p>
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EBITDA (e)
Building Materials Distribution $10,163 $2,949
Wood Products (b) 15,004 (38,344)
Corporate and Other (8,170) (5,673)
Equity in net income of affiliate 1,889 33,311
Gain on sale of shares of equity
affiliate (a) 25,308 -
Impairment of investment in equity
affiliate (c) - (43,039)
Change in fair value of contingent
value rights - 194
Gain on repurchase of long-term
debt (d) - 6,026
$44,194 $(44,576)
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<p> </p>
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(unaudited, in thousands)
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<p> </p>
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December
June 30, 31,
2010 2009
---- ----
ASSETS
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<p> </p>
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Current
Cash and cash equivalents $264,548 $287,101
Receivables
Trade, less allowances of $2,103 and $1,584 156,554 95,398
Related parties (a) 936 2,604
Other 3,050 3,495
Inventories 253,948 232,774
Prepaid expenses and other 5,664 1,870
684,700 623,242
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Property
Property and equipment, net 263,191 270,229
Timber deposits 11,339 9,264
274,530 279,493
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<p> </p>
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Investment in equity affiliate - 62,967
Deferred financing costs 4,256 5,734
Goodwill 12,170 12,170
Intangible assets, net 8,912 8,919
Other assets 7,468 8,359
----- -----
Total assets $992,036 $1,000,884
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<p> </p>
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(unaudited, in thousands, except for equity units)
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<p> </p>
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December
June 30, 31,
2010 2009
---- ----
LIABILITIES AND CAPITAL
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<p> </p>
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Current
Accounts payable
Trade $128,771 $89,253
Related parties (a) 2,629 2,449
Accrued liabilities
Compensation and benefits 36,069 27,887
Interest payable 3,503 3,644
Other 20,867 16,695
191,839 139,928
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Debt
Long-term debt 228,146 303,146
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<p> </p>
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Other
Compensation and benefits 115,095 113,290
Other long-term liabilities 13,806 14,301
128,901 127,591
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Redeemable equity units
Series B equity units - 2,764,854 units outstanding 2,765 2,765
Series C equity units - 16,270,616 units outstanding 6,071 5,202
8,836 7,967
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<p> </p>
<p>Commitments and contingent liabilities</p>
<p> </p>
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Capital
Series A equity units - no par value; 66,000,000 units
authorized
and outstanding 92,435 88,908
Series B equity units - no par value; 550,000,000
units authorized;
532,558,673 units outstanding 341,879 333,344
Series C equity units - no par value; 44,000,000 units
authorized;
11,951,751 units outstanding - -
Total capital 434,314 422,252
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Total liabilities and capital $992,036 $1,000,884
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<p> </p>
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
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<p> </p>
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Six Months Ended
June 30
-------
2010 2009
---- ----
Cash provided by (used for) operations
Net income (loss) $15,726 $(78,870)
Items in net income (loss) not using
(providing) cash
Equity in net income of affiliate (1,889) (33,311)
Gain on sale of shares of equity affiliate (25,308) -
Impairment of investment in equity affiliate - 43,039
Depreciation and amortization of deferred
financing costs and other 19,063 23,836
Pension expense 3,865 7,461
Management equity units expense 869 1,496
Gain on repurchase of long-term debt - (6,026)
Facility closure and curtailment costs - 1,968
Other 196 (1,014)
Decrease (increase) in working capital, net
of acquisitions
Receivables (58,511) (52,812)
Inventories (21,174) 39,903
Prepaid expenses and other (2,098) (3,281)
Accounts payable and accrued liabilities 48,161 41,366
Pension contributions (3,070) (25,064)
Other 1,899 (2,618)
Cash used for operations (22,271) (43,927)
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<p> </p>
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Cash provided by (used for) investment
Proceeds from sale of shares of equity
affiliate, net 86,123 -
Expenditures for property and equipment (9,997) (8,102)
Acquisitions of businesses and facilities - (4,598)
Other (1,408) 1,778
Cash provided by (used for) investment 74,718 (10,922)
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<p> </p>
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Cash provided by (used for) financing
Issuances of long-term debt 45,000 60,000
Payments of long-term debt (120,000) (65,627)
Tax distributions to members - (10,719)
Repurchase of management equity units - (18)
Cash used for financing (75,000) (16,364)
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<p> </p>
<p>Decrease in cash and cash equivalents (22,553) (71,213)</p>
<p> </p>
<p>Balance at beginning of the period 287,101 275,803</p>
<p> </p>
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Balance at end of the period $264,548 $204,590
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Summary Notes to Consolidated Financial Statements and Segment Information
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<p>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 Form 10K and the company's Quarterly Report on Form 10Q for the period ended <span class="xn-chron">June 30, 2010</span>. Net income (loss) for all periods presented involved estimates and accruals.</p>
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<p>(a) In <span class="xn-chron">March 2010</span>, we sold our remaining investment in <span class="xn-location">Boise</span> Inc. and discontinued the equity method of accounting. We sold 18.3 million <span class="xn-location">Boise</span> Inc. shares and recorded gains of <span class="xn-money">$25.3 million</span> in "Gain on sale of shares of equity affiliate" in our Consolidated Statements of Income (Loss) for the three months ended <span class="xn-chron">March 31, 2010</span>, and the six months ended <span class="xn-chron">June 30, 2010</span>.</p>
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<p>The 2010 related-party activity with <span class="xn-location">Boise</span> Inc. includes only those sales and costs and expenses transacted prior to <span class="xn-chron">March 2010</span>, when BC Holdings and <span class="xn-location">Boise</span> Inc. were related parties.</p>
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<p>(b) In the first half of 2009, we closed the lumber manufacturing facility in La Grande, Oregon, and during the three and six months ended <span class="xn-chron">June 30, 2009</span>, we recorded <span class="xn-money">$0.9 million</span> of income and <span class="xn-money">$3.4 million</span> of expense in "Other (income) expense, net" in the Wood Products segment in our Consolidated Statement of Income (Loss). In addition, we recorded <span class="xn-money">$2.6 million</span> and <span class="xn-money">$5.2 million</span> of accelerated depreciation in "Depreciation and amortization" for the three and six months ended <span class="xn-chron">June 30, 2009</span>, and <span class="xn-money">$0.6 million</span> of expenses in "Materials, labor, and other operating expenses" in the Wood Products segment during the six months ended <span class="xn-chron">June 30, 2009</span>, in our Consolidated Statement of Income (Loss).</p>
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<p>(c) On <span class="xn-chron">March 31, 2009</span>, we concluded that our investment in <span class="xn-location">Boise</span> Inc. met the definition of other than temporarily impaired. Accordingly, we recorded a <span class="xn-money">$43.0 million</span> charge in "Impairment of investment in equity affiliate" in our Consolidated Statement of Income (Loss) for the six months ended <span class="xn-chron">June 30, 2009</span>. For more information, see the Notes to Consolidated Financial Statements in our Form 10-Q for the period ended <span class="xn-chron">June 30, 2010</span>.</p>
<p/>
<p>(d) The six months ended <span class="xn-chron">June 30, 2009</span>, included a <span class="xn-money">$6.0 million</span> net gain on the repurchase of <span class="xn-money">$11.9 million</span> of senior subordinated notes.</p>
<p/>
<p>(e) EBITDA represents income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization. The following table reconciles BC Holdings, L.L.C., net income to BC Holdings, L.L.C., EBITDA and <span class="xn-location">Boise</span> Cascade, L.L.C., EBITDA for the three months ended <span class="xn-chron">June 30, 2010</span> and 2009, and March 31, 2010:</p>
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<p> </p>
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Three Months Ended
------------------
June 30 March 31,
-------
2010 2009 2010
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<p> </p>
<p> (unaudited, in thousands)</p>
<p> </p>
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BC Holdings, L.L.C., net income $4,332 $9,311 $11,394
Interest expense 6,021 6,135 5,520
Interest income (199) (178) (194)
Income tax provision 90 68 45
Depreciation and amortization 8,595 11,448 8,590
BC Holdings, L.L.C., EBITDA 18,839 26,784 25,355
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Equity in net income of affiliate - (30,306) (1,889)
Gain on sale of shares of equity
affiliate - - (25,308)
Boise Cascade, L.L.C., EBITDA $18,839 $(3,522) $(1,842)
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<p>The following table reconciles BC Holdings, L.L.C., net income (loss) to BC Holdings, L.L.C., EBITDA and <span class="xn-location">Boise</span> Cascade, L.L.C., EBITDA for the six months ended <span class="xn-chron">June 30, 2010</span> and 2009:</p>
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<p> </p>
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<p> </p>
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Six Months Ended
June 30
-------
2010 2009
---- ----
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<p> </p>
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(unaudited, in
thousands)
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<p> </p>
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BC Holdings, L.L.C., net income (loss) $15,726 $(78,870)
Interest expense 11,541 11,751
Interest income (393) (575)
Income tax provision 135 551
Depreciation and amortization 17,185 22,567
BC Holdings, L.L.C., EBITDA 44,194 (44,576)
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Equity in net income of affiliate (1,889) (33,311)
Gain on sale of shares of equity
affiliate (25,308) -
Impairment of investment in equity
affiliate - 43,039
Boise Cascade, L.L.C., EBITDA $16,997 $(34,848)
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For further information: Investors, Wayne Rancourt of Boise Cascade Holdings, L.L.C., +1-208-384-6073 Web Site: http://www.bc.com
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