Boise Cascade Holdings Reports First Quarter 2010 Financial Results
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<p><span class="xn-location">BOISE</span>, Idaho, <span class="xn-chron">May 11</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">$11.4 million</span> for the quarter ended <span class="xn-chron">March 31, 2010</span>. Included in its net income was a <span class="xn-money">$25.3 million</span> gain on the sale of the remaining 18.3 million <span class="xn-location">Boise</span> Inc. shares held by the Company, as well as <span class="xn-money">$1.9 million</span> of noncash income associated with the Company's investment in <span class="xn-location">Boise</span> Inc.</p>
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<p>In first quarter 2010, BC Holdings' building products subsidiary, <span class="xn-location">Boise</span> Cascade, L.L.C., reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of negative <span class="xn-money">$1.8 million</span>. This compared to negative EBITDA of <span class="xn-money">$31.3 million</span> in first quarter 2009. With <span class="xn-money">$86.1 million</span> of net proceeds from the first quarter sale of <span class="xn-location">Boise</span> Inc. shares, the Company concluded the quarter with <span class="xn-money">$336.1 million</span> of cash and <span class="xn-money">$303.1 million</span> of debt.</p>
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<p>New residential construction remained weak in the first quarter with annualized housing starts of approximately 0.62 million. However, first quarter 2010 housing starts were 17% higher than the levels experienced in the same quarter of 2009. The company continues to be challenged by the reduced demand for the products it distributes and manufactures, as U.S. housing starts remain well below the ten-year historical trend of about 1.5 million per year.</p>
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<p>"The first quarter of this year was stronger than the prior year, with our EWP sales volumes up just over 50% and our plywood prices up 15% compared with the first quarter of 2009. Sales in BMD rose over 16% and carried a higher gross margin primarily due to higher commodity prices during the quarter. We are encouraged by the improvement in our first quarter operating results and our strong liquidity position," stated <span class="xn-person">Tom Carlile</span>, CEO. The individual segment results are discussed in more detail below.</p>
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<p>Building Materials Distribution segment sales were <span class="xn-money">$389.1 million</span> in the first quarter, up 16% from the same quarter a year ago. BMD reported <span class="xn-money">$1.1 million</span> of quarterly EBITDA, a <span class="xn-money">$7.7 million</span> improvement from first quarter 2009. The EBITDA improvement was driven primarily by higher prices for the commodity products BMD distributes.</p>
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<p>Wood Products segment sales in the first quarter were <span class="xn-money">$148.0 million</span>, up 27% from the same quarter a year ago. The sales increase was attributable primarily to an increase in EWP sales volumes of over 50%, 37% higher lumber sales prices and 19% higher lumber sales volumes, as well as 15% higher plywood prices. The segment broke even in the first quarter on an EBITDA basis, reporting a positive <span class="xn-money">$0.1 million</span>, compared with negative <span class="xn-money">$28.6 million</span> in first quarter 2009, which included <span class="xn-money">$5.0 million</span> of costs related to the closure of one of our Wood Products facilities. Increased product pricing for plywood and lumber and lower conversion costs for all of our product lines were the main factors contributing to the improved financial performance in the Wood Products segment.</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 in the first quarter in response to seasonal demand improvements, constrained inventory levels, supply curtailments, as well as a disruption in imports. Absent a change in unemployment trends, stronger levels of consumer confidence, 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 may be volatile in response to operating rates, inventory levels in various distribution channels, and import activity. 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">Tuesday, May 11</span>, at <span class="xn-chron">10:30 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">Tuesday, May 11</span> at <span class="xn-chron">2:00 p.m.</span> Eastern through <span class="xn-chron">Tuesday, May 18</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 72077054.</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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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
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Three Months Ended
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December
March 31 31,
--------
2010 2009 2009
---- ---- ----
Sales
Trade $477,422 $407,724 $447,739
Related parties (a) 9,831 5,703 11,897
487,253 413,427 459,636
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Costs and expenses
Materials, labor, and other
operating expenses 425,901 381,071 410,412
Materials, labor, and other
operating expenses
from related parties (a) 6,222 12,290 5,199
Depreciation and amortization 8,590 11,119 8,680
Selling and distribution expenses 48,165 45,241 46,705
General and administrative expenses 7,458 6,925 6,772
General and administrative expenses
from related party (a) 1,576 2,433 2,551
Other (income) expense, net (b) (80) 2,681 487
497,832 461,760 480,806
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Loss from operations (10,579) (48,333) (21,170)
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Equity in net income of affiliate 1,889 3,005 18,193
Gain on sale of shares of equity
affiliate (a) 25,308 - 41,755
Impairment of investment in equity
affiliate (c) - (43,039) -
Foreign exchange gain (loss) 147 (332) 121
Change in fair value of contingent
value rights - 194 -
Gain on repurchase of long-term
debt (d) - 6,026 -
Interest expense (5,520) (5,616) (5,380)
Interest income 194 397 126
22,018 (39,365) 54,815
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Income (loss) before income taxes 11,439 (87,698) 33,645
Income tax provision (45) (483) (37)
Net income (loss) $11,394 $(88,181) $33,608
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Segment Information
(unaudited, in thousands)
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Three Months Ended
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March 31 December 31,
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2010 2009 2009
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Segment sales
Building Materials Distribution $389,118 $335,022 $368,911
Wood Products 148,000 116,479 136,752
Intersegment eliminations and other (49,865) (38,074) (46,027)
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$487,253 $413,427 $459,636
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Segment loss
Building Materials Distribution $(733) $(8,544) $(832)
Wood Products (b) (6,599) (37,631) (16,218)
Corporate and Other (3,100) (2,490) (3,999)
(10,432) (48,665) (21,049)
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Equity in net income of affiliate 1,889 3,005 18,193
Gain on sale of shares of equity
affiliate (a) 25,308 - 41,755
Impairment of investment of 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 (5,520) (5,616) (5,380)
Interest income 194 397 126
Income (loss) before income taxes $11,439 $(87,698) $33,645
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EBITDA (f)
Building Materials Distribution $1,096 $(6,611) $1,003
Wood Products (b) 65 (28,559) (9,350)
Corporate and Other (3,003) (2,376) (4,022)
Equity in net income of affiliate 1,889 3,005 18,193
Gain on sale of shares of equity
affiliate (a) 25,308 - 41,755
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 -
$25,355 $(71,360) $47,579
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(in thousands)
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December
March 31, 31,
2010 2009
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ASSETS
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Current
Cash and cash equivalents (e) $336,084 $287,101
Receivables
Trade, less allowances of $2,293 and
$1,584 151,537 95,398
Related parties (a) 946 2,604
Other 4,042 3,495
Inventories 268,513 232,774
Prepaid expenses and other 3,555 1,870
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764,677 623,242
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Property
Property and equipment, net 264,786 270,229
Timber deposits 10,517 9,264
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275,303 279,493
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Investment in equity affiliate - 62,967
Deferred financing costs 5,403 5,734
Goodwill 12,170 12,170
Intangible assets, net 8,916 8,919
Other assets 7,931 8,359
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Total assets $1,074,400 $1,000,884
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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(in thousands, except for equity units)
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December
March 31, 31,
2010 2009
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LIABILITIES AND CAPITAL
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<p> </p>
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Current
Accounts payable
Trade $149,376 $89,253
Related parties (a) 1,971 2,449
Accrued liabilities
Compensation and benefits 31,511 27,887
Interest payable 7,709 3,644
Other 16,704 16,695
207,271 139,928
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Debt
Long-term debt (e) 303,146 303,146
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Other
Compensation and benefits 112,305 113,290
Other long-term liabilities 13,470 14,301
125,775 127,591
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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 5,636 5,202
8,401 7,967
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<p>Commitments and contingent liabilities</p>
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Capital
Series A equity units - no par value;
66,000,000 units authorized
and outstanding 90,662 88,908
Series B equity units - no par value;
550,000,000 units authorized;
532,558,673 units outstanding 339,145 333,344
Series C equity units - no par value;
44,000,000 units authorized;
11,951,751 units outstanding - -
Total capital 429,807 422,252
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Total liabilities and capital $1,074,400 $1,000,884
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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(in thousands)
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Three Months Ended
March 31
--------
2010 2009
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Cash provided by (used for) operations
Net income (loss) $11,394 $(88,181)
Items in net income (loss) not using
(providing) cash
Equity in net income of affiliate (1,889) (3,005)
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 9,123 11,462
Pension expense 2,087 4,938
Management equity units expense 434 778
Gain on repurchase of long-term debt - (6,026)
Facility closure and curtailment costs - 2,754
Other (221) 57
Decrease (increase) in working capital
Receivables (55,027) (25,800)
Inventories (35,739) 13,174
Prepaid expenses and other (389) (1,357)
Accounts payable and accrued liabilities 65,488 7,826
Pension contributions (2,976) (25,045)
Other 155 (1,350)
Cash used for operations (32,868) (66,736)
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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 (3,245) (4,229)
Other (1,027) 238
Cash provided by (used for) investment 81,851 (3,991)
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Cash provided by (used for) financing
Payments of long-term debt - (5,627)
Tax distributions to members - (9,897)
Repurchase of management equity units - (8)
Cash used for financing - (15,532)
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Increase (decrease) in cash and cash
equivalents 48,983 (86,259)
Balance at beginning of the period 287,101 275,803
Balance at end of the period $336,084 $189,544
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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">March 31, 2010</span>. Net income (loss) for all periods presented involved estimates and accruals.</p>
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(a) In March 2010, we sold our remaining investment in Boise Inc. and
discontinued the equity method of accounting. During the three
months ended March 31, 2010, and December 31, 2009, we sold 18.3
million and 17.6 million Boise Inc. shares and recorded gains of
$25.3 million and $41.8 million in "Gain on sale of shares of equity
affiliate" in our Consolidated Statements of Income (Loss). The
2010 related-party activity with Boise Inc. includes only those
sales and costs and expenses transacted prior to March 2010, when BC
Holdings and Boise Inc. were related parties.
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(b) In first quarter 2009, we committed to indefinitely curtailing
the lumber manufacturing facility in La Grande, Oregon, and we
recorded $4.4 million of expense in "Other (income) expense, net" in
the Wood Products segment in our Consolidated Statement of Income
(Loss). In addition, we recorded $2.5 million of accelerated
depreciation in "Depreciation and amortization" and $0.6 million of
expenses in "Materials, labor, and other operating expenses" in the
Wood Products segment in our Consolidated Statement of Income
(Loss).
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(c) On March 31, 2009, we concluded that our investment in Boise Inc.
met the definition of other than temporarily impaired. Accordingly,
we recorded a $43.0 million charge in "Impairment of investment in
equity affiliate" in our Consolidated Statement of Income (Loss) for
the three months ended March 31, 2009. For more information, see
the Notes to Consolidated Financial Statements in our Form 10-Q for
the period ended March 31, 2010.
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(d) The three months ended March 31, 2009, included a $6.0 million
net gain on the repurchase of $11.9 million of senior subordinated
notes.
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(e) On April 1, 2010, we borrowed an additional $45.0 million under
our senior secured asset-based revolving credit facility (Revolving
Credit Facility), bringing the total amount outstanding to $120.0
million. On April 30, 2010, we used cash on hand to repay the entire
$120.0 million outstanding and permanently reduce the lending
commitments by $120.0 million, bringing the total commitments under
the Revolving Credit Facility to $170.0 million.
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(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 Boise Cascade,
L.L.C., EBITDA for the three months ended March 31, 2010 and 2009,
and December 31, 2009:
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Three Months Ended
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March 31 December 31,
--------
2010 2009 2009
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<p> </p>
<p> (unaudited, in thousands)</p>
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BC Holdings, L.L.C., net
income (loss) $11,394 $(88,181) $33,608
Interest expense 5,520 5,616 5,380
Interest income (194) (397) (126)
Income tax provision 45 483 37
Depreciation and
amortization 8,590 11,119 8,680
BC Holdings, L.L.C.,
EBITDA 25,355 (71,360) 47,579
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Equity in net income of
affiliate (1,889) (3,005) (18,193)
Gain on sale of shares of
equity affiliate (25,308) - (41,755)
Impairment of investment
in equity affiliate - 43,039 -
Boise Cascade, L.L.C.,
EBITDA $(1,842) $(31,326) $(12,369)
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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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