Boise Cascade Holdings Reports Third Quarter 2010 Financial Results
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<p><span class="xn-location">BOISE</span>, Idaho, <span class="xn-chron">Nov. 4, 2010</span> /CNW/ -- <span class="xn-location">Boise</span> Cascade Holdings, L.L.C. (BC Holdings or Company) announced a <span class="xn-money">$5.6 million</span> net loss for the quarter ended <span class="xn-chron">September 30, 2010</span>. BC Holdings' building products subsidiary, <span class="xn-location">Boise</span> Cascade, L.L.C., reported third quarter 2010 earnings before interest, taxes, depreciation, and amortization (EBITDA) of <span class="xn-money">$7.7 million</span>. The third quarter 2010 EBITDA included <span class="xn-money">$4.6 million</span> received in a litigation settlement. <span class="xn-location">Boise</span> Cascade, L.L.C. earned EBITDA of <span class="xn-money">$11.9 million</span> in third quarter 2009 and <span class="xn-money">$18.8 million</span> in second quarter 2010. At <span class="xn-chron">September 30, 2010</span>, the Company reported <span class="xn-money">$285.6 million</span> of cash and <span class="xn-money">$228.1 million</span> of debt.</p>
<p/>
<p>The Company's revenues and earnings continue to be negatively impacted by reduced demand for the products it distributes and manufactures. New residential construction remained weak in the third quarter with annualized housing starts of approximately 590,000, or about 60% lower than the 10-year historical trend of about 1.5 million per year. Third quarter 2010 housing starts were flat with the levels experienced in the same quarter of 2009.</p>
<p/>
<p>"There were a few bright spots in the quarter compared to the same quarter a year ago, namely higher plywood sales volumes and modestly higher prices for most of the products we manufacture. However, the third quarter this year was largely a disappointment when compared to the seasonal demand strength of the third quarter in most years," stated <span class="xn-person">Tom Carlile</span>, CEO. "We are expecting the difficult operating environment to continue at least through the coming winter months."</p>
<p/>
<p>Building Materials Distribution (BMD) segment sales were <span class="xn-money">$470.7 million</span> in the third quarter, essentially flat with the same quarter a year ago. Prices for the segment were up approximately 9%; however, sales volumes declined, offsetting the benefit to revenues. BMD reported <span class="xn-money">$6.5 million</span> of EBITDA, which included <span class="xn-money">$4.1 million</span> from the litigation settlement. This was down from the <span class="xn-money">$11.6 million</span> reported in third quarter 2009. Gross margins in the quarter were 11.7% versus 13.0% in the same quarter a year ago, as commodity prices trended lower throughout this year's third quarter. In third quarter 2009, commodity product prices were trending higher which positively impacted gross margins. Operating expenses also increased as a percent of sales compared to the year-ago quarter as a result of increased payroll costs and occupancy expense related to facility relocations and expansions.</p>
<p/>
<p>Wood Products segment sales in the third quarter were <span class="xn-money">$183.4 million</span>, up 12% from the same quarter a year ago. The sales increase was attributable primarily to 18% higher plywood sales volumes and 9% higher plywood sales prices. The segment reported <span class="xn-money">$5.8 million</span> of EBITDA for the quarter, up from the <span class="xn-money">$3.4 million</span> reported in third quarter 2009. The main factor contributing to the improved financial performance was increased product pricing, most notably plywood.</p>
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Outlook
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<p>Absent a decline in unemployment, stronger household formation, and a reduction in the housing supply overhang, 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, November 4</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>
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<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, November 4</span>, at <span class="xn-chron">2:00 p.m.</span> Eastern through <span class="xn-chron">Thursday, November 11</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 20747681.</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, which represent unavoidable operating costs. 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
------------------
September 30 June 30,
------------
2010 2009 2010
---- ---- ----
Sales
Trade $588,605 $567,643 $646,320
Related parties (a) 4,892 11,364 5,168
593,497 579,007 651,488
------- ------- -------
Costs and expenses
Materials, labor, and
other operating expenses 514,514 501,886 557,849
Materials, labor, and
other operating expenses
from related parties (a) 10,549 6,094 10,550
Depreciation and
amortization 8,759 9,627 8,595
Selling and distribution
expenses 54,197 50,714 52,630
General and
administrative expenses 11,412 6,841 11,205
General and
administrative expenses
from related party (a) - 2,682 -
Other (income) expense,
net (b) (4,565) (575) 60
------ ---- ---
594,866 577,269 640,889
------- ------- -------
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<p> </p>
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Income (loss) from
operations (1,369) 1,738 10,599
------ ----- ------
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<p> </p>
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Equity in income of
affiliate (a) - 28,225 -
Gain on sale of shares of
equity affiliate (a) - 997 -
Foreign exchange gain
(loss) 321 521 (355)
Interest expense (4,721) (5,389) (6,021)
Interest income 249 185 199
(4,151) 24,539 (6,177)
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<p> </p>
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Income (loss) before
income taxes (5,520) 26,277 4,422
Income tax provision (95) (72) (90)
Net income (loss) $(5,615) $26,205 $4,332
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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
------------------
September 30 June 30,
------------
2010 2009 2010
---- ---- ----
Segment sales
Building Materials
Distribution $470,725 $472,172 $515,434
Wood Products 183,424 163,183 199,446
Intersegment eliminations
and other (60,652) (56,348) (63,392)
------- -------
$593,497 $579,007 $651,488
======== ======== ========
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<p> </p>
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Segment income (loss)
Building Materials
Distribution (b) $4,645 $9,683 $7,265
Wood Products (b) (972) (4,203) 8,238
Corporate and Other (4,721) (3,221) (5,259)
(1,048) 2,259 10,244
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<p> </p>
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Equity in net income of
affiliate (a) - 28,225 -
Gain on sale of shares of
equity affiliate (a) - 997 -
Interest expense (4,721) (5,389) (6,021)
Interest income 249 185 199
Income (loss) before income
taxes $(5,520) $26,277 $4,422
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<p> </p>
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EBITDA (f)
Building Materials
Distribution (b) $6,505 $11,563 $9,067
Wood Products (b) 5,838 3,432 14,939
Corporate and Other (4,632) (3,109) (5,167)
Equity in net income of
affiliate (a) - 28,225 -
Gain on sale of shares of
equity affiliate (a) - 997 -
$7,711 $41,108 $18,839
====== ======= =======
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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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Nine Months Ended
September 30
------------
2010 2009
---- ----
Sales
Trade $1,712,347 $1,487,614
Related parties (a) 19,891 26,000
1,732,238 1,513,614
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Costs and expenses
Materials, labor, and other
operating expenses (c) 1,498,264 1,346,656
Materials, labor, and other
operating expenses from
related parties (a) 27,321 24,716
Depreciation and amortization
(c) 25,944 32,194
Selling and distribution
expenses 154,992 143,726
General and administrative
expenses 30,075 20,629
General and administrative
expenses from related party
(a) 1,576 7,618
Other (income) expense, net
(b) (c) (4,585) 355
1,733,587 1,575,894
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<p> </p>
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Loss from operations (1,349) (62,280)
------ -------
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<p> </p>
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Equity in net income of
affiliate (a) 1,889 61,536
Gain on sale of shares of
equity affiliate (a) 25,308 997
Impairment of investment in
equity affiliate (d) - (43,039)
Foreign exchange gain 113 904
Change in fair value of
contingent value rights - 194
Gain on repurchase of long-
term debt (e) - 6,026
Interest expense (16,262) (17,140)
Interest income 642 760
11,690 10,238
------ ------
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<p> </p>
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Income (loss) before income
taxes 10,341 (52,042)
Income tax provision (230) (623)
Net income (loss) $10,111 $(52,665)
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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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Nine Months Ended
September 30
------------
2010 2009
---- ----
Segment sales
Building Materials Distribution $1,375,277 $1,240,856
Wood Products 530,870 414,066
Intersegment eliminations and other (173,909) (141,308)
$1,732,238 $1,513,614
========== ==========
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<p> </p>
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Segment income (loss)
Building Materials Distribution (b) $11,177 $8,786
Wood Products (b) (c) 667 (61,040)
Corporate and Other (13,080) (9,122)
(1,236) (61,376)
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<p> </p>
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Equity in net income of affiliate
(a) 1,889 61,536
Gain on sale of shares of equity
affiliate (a) 25,308 997
Impairment of investment in equity
affiliate (d) - (43,039)
Change in fair value of contingent
value rights - 194
Gain on repurchase of long-term
debt (e) - 6,026
Interest expense (16,262) (17,140)
Interest income 642 760
Income (loss) before income taxes $10,341 $(52,042)
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<p> </p>
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EBITDA (f)
Building Materials Distribution (b) $16,668 $14,512
Wood Products (b) (c) 20,842 (34,912)
Corporate and Other (12,802) (8,782)
Equity in net income of affiliate
(a) 1,889 61,536
Gain on sale of shares of equity
affiliate (a) 25,308 997
Impairment of investment in equity
affiliate (d) - (43,039)
Change in fair value of contingent
value rights - 194
Gain on repurchase of long-term
debt (e) - 6,026
$51,905 $(3,468)
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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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September December
30, 31,
2010 2009
---- ----
ASSETS
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<p> </p>
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Current
Cash and cash equivalents $285,556 $287,101
Receivables
Trade, less allowances of
$2,513 and $1,584 139,833 95,398
Related parties (a) 279 2,604
Other 2,423 3,495
Inventories 252,613 232,774
Prepaid expenses and other 4,967 1,870
685,671 623,242
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Property
Property and equipment, net 266,333 270,229
Timber deposits 9,970 9,264
276,303 279,493
------- -------
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<p> </p>
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Investment in equity affiliate - 62,967
Deferred financing costs 3,990 5,734
Goodwill 12,170 12,170
Intangible assets, net 8,909 8,919
Other assets 7,691 8,359
----- -----
Total assets $994,734 $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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September December
30, 31,
2010 2009
---- ----
LIABILITIES AND CAPITAL
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<p> </p>
<pre>
Current
Accounts payable
Trade $118,754 $89,253
Related parties 1,412 2,449
Accrued liabilities
Compensation and benefits 45,508 27,887
Interest payable 7,506 3,644
Other 23,728 16,695
196,908 139,928
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Debt
Long-term debt 228,146 303,146
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<p> </p>
<pre>
Other
Compensation and benefits 116,812 113,290
Other long-term liabilities 14,723 14,301
131,535 127,591
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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 6,505 5,202
9,270 7,967
----- -----
Commitments and contingent liabilities
</pre>
<p> </p>
<pre>
Capital
Series A equity units - no par value;
66,000,000 units authorized and
outstanding 94,299 88,908
Series B equity units - no par value;
550,000,000 units authorized and
532,558,673 units outstanding 334,576 333,344
Series C equity units - no par value;
44,000,000 units authorized and
11,951,751 units outstanding - -
Total capital 428,875 422,252
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Total liabilities and capital $994,734 $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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Nine Months Ended
September 30
------------
2010 2009
---- ----
Cash provided by (used for) operations
Net income (loss) $10,111 $(52,665)
Items in net income (loss) not using
(providing) cash
Equity in net income of affiliate (1,889) (61,536)
Gain on sale of shares of equity affiliate (25,308) (997)
Impairment of investment in equity
affiliate - 43,039
Depreciation and amortization of deferred
financing costs and other 28,277 34,469
Pension expense 5,670 9,985
Management equity units expense 1,303 2,306
Gain on repurchase of long-term debt - (6,026)
Facility closure and curtailment costs - 1,968
Other (74) (1,605)
Decrease (increase) in working capital, net
of acquisitions
Receivables (40,946) (54,591)
Inventories (19,839) 46,114
Prepaid expenses and other (1,328) (2,059)
Accounts payable and accrued liabilities 52,745 39,602
Pension contributions (3,766) (28,057)
Other 4,229 (3,052)
Cash provided by (used for) operations 9,185 (33,105)
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Cash provided by (used for) investment
Proceeds from sale of shares of equity
affiliate 86,123 3,032
Expenditures for property and equipment (22,369) (12,932)
Acquisition of businesses and facilities - (4,598)
Other 516 2,279
Cash provided by (used for) investment 64,270 (12,219)
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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 - (10,705)
Repurchase of management equity units - (18)
Cash used for financing (75,000) (16,350)
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Decrease in cash and cash equivalents (1,545) (61,674)
Balance at beginning of the period 287,101 275,803
Balance at end of the period $285,556 $214,129
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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 Annual Report on Form 10-K and the company's Quarterly Report on Form 10Q for the period ended <span class="xn-chron">September 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 a <span class="xn-money">$25.3 million</span> gain in "Gain on sale of shares of equity affiliate" in our Consolidated Statement of Income (Loss) for the nine months ended <span class="xn-chron">September 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 owned equity of <span class="xn-location">Boise</span> Inc. Subsequent to the sale of our remaining investment in <span class="xn-location">Boise</span> Inc., we were no longer related parties.</p>
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<p>During the three and nine months ended <span class="xn-chron">September 30, 2009</span>, we sold 1.2 million <span class="xn-location">Boise</span> Inc. shares and recorded a <span class="xn-money">$1.0 million</span> gain in "Gain on sale of shares of equity affiliate" in our Consolidated Statements of Income (Loss).</p>
<p/>
<p>(b) During the three and nine months ended <span class="xn-chron">September 30, 2010</span>, we recorded <span class="xn-money">$4.6 million</span> of income in "Other (income) expense, net," for cash received from a litigation settlement related to vendor product pricing. We recorded <span class="xn-money">$4.1 million</span> of income in our Building Materials Distribution segment and <span class="xn-money">$0.5 million</span> in our Wood Products segment.</p>
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<p>(c) In <span class="xn-chron">June 2009</span>, we closed the lumber manufacturing facility in La Grande, Oregon. For the nine months ended <span class="xn-chron">September 30, 2009</span>, we recorded <span class="xn-money">$3.1 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">$5.2 million</span> of accelerated depreciation in "Depreciation and amortization" and <span class="xn-money">$0.6 million</span> of expenses in "Materials, labor, and other operating expenses" in the Wood Products segment in our Consolidated Statement of Income (Loss) for the nine months ended <span class="xn-chron">September 30, 2009</span>.</p>
<p/>
<p>(d) 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 Statements of Income (Loss). For more information, see the Notes to Unaudited Quarterly Consolidated Financial Statements in our Form 10-Q for the period ended <span class="xn-chron">September 30, 2010</span>.</p>
<p/>
<p>(e) The nine months ended <span class="xn-chron">September 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>(f) 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 (loss) 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">September 30, 2010</span> and 2009, and June 30, 2010:</p>
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<p> </p>
<p> </p>
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Three Months Ended
------------------
September 30 June 30,
------------
2010 2009 2010
---- ---- ----
</pre>
<p> </p>
<p> (unaudited, in thousands)</p>
<p> </p>
<pre>
BC Holdings, L.L.C., net
income (loss) $(5,615) $26,205 $4,332
Interest expense 4,721 5,389 6,021
Interest income (249) (185) (199)
Income tax provision 95 72 90
Depreciation and
amortization 8,759 9,627 8,595
BC Holdings, L.L.C.,
EBITDA 7,711 41,108 18,839
----- ------ ------
Equity in net income of
affiliate - (28,225) -
Gain on sale of shares of
equity affiliate - (997) -
Boise Cascade, L.L.C.,
EBITDA $7,711 $11,886 $18,839
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<p> </p>
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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 nine months ended September 30, 2010 and 2009:
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<p> </p>
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Nine Months Ended
September 30
------------
2010 2009
---- ----
</pre>
<p> </p>
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(unaudited, in
thousands)
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<p> </p>
<pre>
BC Holdings, L.L.C., net income (loss) $10,111 $(52,665)
Interest expense 16,262 17,140
Interest income (642) (760)
Income tax provision 230 623
Depreciation and amortization 25,944 32,194
BC Holdings, L.L.C., EBITDA 51,905 (3,468)
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Equity in net income of affiliate (1,889) (61,536)
Gain on sale of shares of equity
affiliate (25,308) (997)
Impairment of investment in equity
affiliate - 43,039
Boise Cascade, L.L.C., EBITDA $24,708 $(22,962)
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For further information: Investors, Wayne Rancourt of Boise Cascade, +1-208-384-6073 Web Site: http://www.bc.com
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