Boise Cascade Holdings Reports Fourth Quarter 2010 Financial Results

Mar 02, 2011, 08:45 ET from Boise Cascade Holdings, L.L.C.

BOISE, Idaho, March 2, 2011 /PRNewswire/ -- Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a $16.2 million net loss for the quarter ended December 31, 2010, and a $6.1 million full year 2010 net loss.  During 2010, BC Holdings sold its remaining equity interest in Boise Inc. for net proceeds of $86.1 million and recognized a $25.3 million gain.  The Company contributed the proceeds to its wholly owned operating subsidiary, Boise Cascade, L.L.C.  

Boise Cascade, L.L.C. reported negative fourth quarter 2010 earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.6 million, compared with negative EBITDA of $12.4 million in fourth quarter 2009.  Boise Cascade, L.L.C. reported full year 2010 sales of $2.2 billion and positive EBITDA of $22.1 million, which included $4.6 million of litigation proceeds.  This compared with 2009 sales of $2.0 billion and negative EBITDA of $35.3 million, which included a $6.0 million gain on debt repurchases and $3.7 million of asset closure costs.  At December 31, 2010, we had $264.6 million of cash and $219.6 million of debt.  

The Company's 2010 revenues and earnings continued to be negatively impacted by reduced demand for the products it distributes and manufactures. New residential construction remained weak in 2010 with housing starts of approximately 587,000.  2010 housing starts were slightly higher than the 554,000 starts experienced in 2009, but were still approximately 60% lower than the 10-year historical trend of about 1.5 million per year.

"I am proud of how both of our businesses performed last year at the second lowest level of housing starts in over 50 years.  Our Wood Products and BMD operating segments reported a combined $38.1 million of EBITDA, which was a $66.8 million year-over-year improvement.  In addition, we were able to improve our net debt position by $61 million in 2010, and we are well positioned for the year ahead," stated Tom Carlile, CEO.  

Building Materials Distribution (BMD) segment sales were $402.7 million in the fourth quarter, up 9% from the same quarter a year ago.  Prices for the segment were up approximately 8%, with volumes up about 1%.   BMD reported $2.4 million of EBITDA in fourth quarter.  This was up from the $1.0 million reported in fourth quarter 2009.  Gross margins declined 70 basis points in the quarter compared to the same quarter a year ago; however, gross margin dollars increased as a result of higher sales.  Total expenses were lower as a percent of sales, resulting in an improved operating margin.  For the full year of 2010, BMD reported positive EBITDA of $19.1 million on $1.8 billion of sales.

Wood Products segment sales in the fourth quarter were $156.6 million, up 14% from the same quarter a year ago.  The sales increase was attributable primarily to 12% higher plywood sales volumes, 7% higher I-joist sales volumes, 12% higher I-joist net selling prices, and 13% higher laminated veneer lumber net selling prices.  The segment reported negative $1.8 million of EBITDA for the quarter, an improvement of $7.6 million from the negative $9.4 million reported in fourth quarter 2009.  The main factors contributing to the improved financial performance were improved product pricing for engineered wood products and lower per-unit manufacturing costs for plywood.   For the full year of 2010, Wood Products reported positive EBITDA of $19.0 million on $687.4 million of sales.

Outlook

Absent a decline in unemployment 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 could 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.  

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.  For more information, please visit our website at www.bc.com.  

Webcast and Conference Call

BC Holdings will host a webcast and conference call on Wednesday, March 2, at 11 a.m. Eastern, at which time we will review the company's recent performance.  You can join the webcast through the Boise Cascade website.  Go to 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.  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 the News & Events section of Boise Cascade's website.  A replay of the conference call will be available from Wednesday, March 2, at 2 p.m. Eastern through Wednesday, March 9, at 11 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 39857763.

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 and net debt (cash), both non-GAAP financial measures.  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.  Net debt (cash) is defined as total debt minus cash and cash equivalents. Management views net debt (cash) as a measure of the Company's leverage.  Like EBITDA, the use of net debt (cash) has limitations as an analytical tool.  Management compensates for the limitations of these non-GAAP measures by relying on our GAAP results.  Our measures of EBITDA and net debt (cash) 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.

Boise Cascade Holdings, L.L.C.

Consolidated Statements of Income (Loss)

(unaudited, in thousands)




Three Months Ended


December 31


September 30,


2010


2009


2010

Sales






Trade

$ 502,985


$ 447,739


$         588,605

Related parties (a)

5,368


11,897


4,892


508,353


459,636


593,497

Costs and expenses






Materials, labor, and other operating expenses

449,098


410,412


514,514

Materials, labor, and other operating expenses






  from related parties (a)

6,292


5,199


10,549

Depreciation and amortization

8,955


8,680


8,759

Selling and distribution expenses

47,472


46,705


54,197

General and administrative expenses

8,389


6,772


11,412

General and administrative expenses






  from related party (a)

-


2,551


-

Other (income) expense, net (b)

(39)


487


(4,565)


520,167


480,806


594,866







Loss from operations

(11,814)


(21,170)


(1,369)







Equity in income of affiliate (a)

-


18,193


-

Gain on sale of shares of equity affiliate (a)

-


41,755


-

Foreign exchange gain

239


121


321

Gain on repurchase of long-term debt

28


-


-

Interest expense

(4,743)


(5,380)


(4,721)

Interest income

148


126


249


(4,328)


54,815


(4,151)







Income (loss) before income taxes

(16,142)


33,645


(5,520)

Income tax provision

(70)


(37)


(95)

Net income (loss)

$  (16,212)


$   33,608


$            (5,615)









Segment Information

(unaudited, in thousands)




Three Months Ended


December 31


September 30,


2010


2009


2010

Segment sales






Building Materials Distribution

$ 402,692


$ 368,911


$         470,725

Wood Products

156,569


136,752


183,424

Intersegment eliminations and other

(50,908)


(46,027)


(60,652)


$ 508,353


$ 459,636


$         593,497







Segment income (loss)






Building Materials Distribution (b)

$         455


$       (832)


$              4,645

Wood Products (b)

(8,766)


(16,218)


(972)

Corporate and Other

(3,264)


(3,999)


(4,721)


(11,575)


(21,049)


(1,048)







Equity in net income of affiliate (a)

-


18,193


-

Gain on sale of shares of equity affiliate (a)

-


41,755


-

Gain on repurchase of long-term debt

28


-


-

Interest expense

(4,743)


(5,380)


(4,721)

Interest income

148


126


249

Income (loss) before income taxes

$  (16,142)


$   33,645


$            (5,520)







EBITDA (f)






Building Materials Distribution (b)

$      2,421


$      1,003


$              6,505

Wood Products (b)

(1,845)


(9,350)


5,838

Corporate and Other

(3,196)


(4,022)


(4,632)

Equity in net income of affiliate (a)

-


18,193


-

Gain on sale of shares of equity affiliate (a)

-


41,755


-

Gain on repurchase of long-term debt

28


-


-


$    (2,592)


$   47,579


$              7,711









Boise Cascade Holdings, L.L.C.

Consolidated Statements of Income (Loss)

(in thousands)




Year Ended December 31


2010


2009

Sales




Trade

$ 2,215,332


$ 1,935,353

Related parties (a)

25,259


37,897


2,240,591


1,973,250

Costs and expenses




Materials, labor, and other operating expenses (c)

1,947,362


1,757,068

Materials, labor, and other operating expenses




  from related parties (a)

33,613


29,915

Depreciation and amortization (c)

34,899


40,874

Selling and distribution expenses

202,464


190,431

General and administrative expenses

38,464


27,401

General and administrative expenses from related party (a)

1,576


10,169

Other (income) expense, net (b) (c)

(4,624)


842


2,253,754


2,056,700





Loss from operations

(13,163)


(83,450)





Equity in net income of affiliate (a)

1,889


79,729

Gain on sale of shares of equity affiliate (a)

25,308


42,752

Impairment of investment in equity affiliate (d)

-


(43,039)

Foreign exchange gain

352


1,025

Change in fair value of contingent value rights

-


194

Gain on repurchase of long-term debt (e)

28


6,026

Interest expense

(21,005)


(22,520)

Interest income

790


886


7,362


65,053





Loss before income taxes

(5,801)


(18,397)

Income tax provision

(300)


(660)

Net loss

$      (6,101)


$    (19,057)



Segment Information

(in thousands)




Year Ended December 31


2010


2009

Segment sales




Building Materials Distribution

$ 1,777,969


$ 1,609,767

Wood Products

687,439


550,818

Intersegment eliminations and other

(224,817)


(187,335)


$ 2,240,591


$ 1,973,250





Segment income (loss)




Building Materials Distribution (b)

$       11,632


$         7,954

Wood Products (b) (c)

(8,099)


(77,258)

Corporate and Other

(16,344)


(13,121)


(12,811)


(82,425)





Equity in net income of affiliate (a)

1,889


79,729

Gain on sale of shares of equity affiliate (a)

25,308


42,752

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)

28


6,026

Interest expense

(21,005)


(22,520)

Interest income

790


886

Loss before income taxes

$       (5,801)


$     (18,397)





EBITDA (f)




Building Materials Distribution (b)

$       19,089


$       15,515

Wood Products (b) (c)

18,997


(44,262)

Corporate and Other

(15,998)


(12,804)

Equity in net income of affiliate (a)

1,889


79,729

Gain on sale of shares of equity affiliate (a)

25,308


42,752

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)

28


6,026


$       49,313


$       44,111










December 31


2010


2009

Net debt (cash)




Long-term debt

$    219,560


$    303,146

Less cash and cash equivalents

(264,606)


(287,101)

Net debt (cash)

$     (45,046)


$       16,045







Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets

(in thousands)




December 31


2010


2009

ASSETS








Current




Cash and cash equivalents

$ 264,606


$    287,101

Receivables




  Trade, less allowances of $2,492 and $1,584

102,906


95,398

  Related parties (a)

297


2,604

  Other

4,571


3,495

Inventories

261,202


232,774

Prepaid expenses and other

3,808


1,870


637,390


623,242

Property




Property and equipment, net

273,569


270,229

Timber deposits

10,588


9,264


284,157


279,493





Investment in equity affiliate (a) (d)

-


62,967

Deferred financing costs

3,626


5,734

Goodwill

12,170


12,170

Intangible assets, net

8,906


8,919

Other assets

5,989


8,359

Total assets

$ 952,238


$ 1,000,884







Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets (continued)

(in thousands, except for equity units)




December 31


2010


2009

LIABILITIES AND CAPITAL








Current




Accounts payable




  Trade

$ 112,414


$       89,253

  Related parties (a)

394


2,449

Accrued liabilities




  Compensation and benefits

39,827


27,887

  Interest payable

3,291


3,644

  Other

22,530


16,695


178,456


139,928

Debt




Long-term debt

219,560


303,146





Other




Compensation and benefits

121,709


113,290

Other long-term liabilities

14,116


14,301


135,825


127,591

Redeemable equity units




Series B equity units – 2,735,524 units and 2,764,854 units outstanding

2,736


2,765

Series C equity units – 14,424,806 units and 16,270,616 units outstanding

6,563


5,202


9,299


7,967

Commitments and contingent liabilities








Capital




Series A equity units – no par value; 66,000,000 units




  authorized and outstanding

96,162


88,908

Series B equity units – no par value; 550,000,000 units authorized;




  532,588,003 units and 532,558,673 units outstanding

312,936


333,344

Series C equity units – no par value; 44,000,000 units authorized;




  11,979,941 units and 11,951,751 units outstanding

-


-

Total capital

409,098


422,252

Total liabilities and capital

$ 952,238


$ 1,000,884







Boise Cascade Holdings, L.L.C.

Consolidated Statements of Cash Flows

(in thousands)




Year Ended December 31


2010


2009

Cash provided by (used for) operations




Net loss

$    (6,101)


$  (19,057)

Items in net loss not using (providing) cash




  Equity in net income of affiliate

(1,889)


(79,729)

  Gain on sale of shares of equity affiliate

(25,308)


(42,752)

  Impairment of investment in equity affiliate

-


43,039

  Depreciation and amortization of deferred financing costs and other

37,674


43,679

  Pension expense

7,449


12,315

  Management equity units expense

1,625


2,736

  Gain on repurchase of long-term debt

(28)


(6,026)

  Facility closure and curtailment costs

-


1,968

  Other

(343)


(1,240)

Decrease (increase) in working capital, net of acquisitions




  Receivables

(6,338)


(17,250)

  Inventories

(28,428)


47,086

  Prepaid expenses and other

(300)


(569)

  Accounts payable and accrued liabilities  

32,419


11,441

Pension contributions

(3,873)


(28,385)

Current and deferred income taxes

91


198

Other

3,636


(2,678)

  Cash provided by (used for) operations

10,286


(35,224)

Cash provided by (used for) investment




Proceeds from sale of assets

1,254


467

Proceeds from sale of shares of equity affiliate, net

86,123


83,172

Expenditures for property and equipment

(35,751)


(16,806)

Acquisitions of businesses and facilities

-


(4,598)

Other

(956)


637

  Cash provided by investment

50,670


62,872

Cash provided by (used for) financing




Issuances of long-term debt

45,000


60,000

Payments of long-term debt

(128,451)


(65,627)

Tax distributions to members

-


(10,705)

Repurchase of management equity units

-


(18)

  Cash used for financing

(83,451)


(16,350)

Increase (decrease) in cash and cash equivalents

(22,495)


11,298

Balance at beginning of the period

287,101


275,803

Balance at end of the period  

$ 264,606


$ 287,101







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 2010 Form 10-K.  Net income (loss) for all periods presented involved estimates and accruals.





(a)

In March 2010, we sold our remaining investment in Boise Inc. and discontinued the equity method of accounting.  We sold 18.3 million Boise Inc. shares and recorded a $25.3 million gain in "Gain on sale of shares of equity affiliate" in our Consolidated Statement of Income (Loss) for the year ended December 31, 2010.  






The 2010 related-party activity with Boise Inc. includes only those sales and costs and expenses transacted prior to March 2010, when BC Holdings owned equity of Boise Inc.  Subsequent to the sale of our remaining investment in Boise Inc., we were no longer related parties.






During the three months and year ended December 31, 2009, we sold 17.6 million and 18.8 million Boise Inc. shares and recorded gains of $41.8 million and $42.8 million in "Gain on sale of shares of equity affiliate" in our Consolidated Statements of Income (Loss).  





(b)

During the three months ended September 30, 2010, and year ended December 31, 2010, we recorded $4.6 million of income in "Other (income) expense, net," for cash received from a litigation settlement related to vendor product pricing. We recorded $4.1 million of income in our Building Materials Distribution segment and $0.5 million in our Wood Products segment.





(c)

In June 2009, we closed the lumber manufacturing facility in La Grande, Oregon.  For the year ended December 31, 2009, we recorded $3.1 million of expense in "Other (income) expense, net" in the Wood Products segment in our Consolidated Statement of Income (Loss).  In addition, we recorded $5.2 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) for the year ended December 31, 2009.  





(d)

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 Statements of Income (Loss) for the year ended December 31, 2009.  For more information, see the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2010.





(e)

The year ended December 31, 2009, included a $6.0 million net gain on the repurchase of $11.9 million of senior subordinated notes.





(f)

EBITDA represents income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization.  The following table reconciles BC Holdings net income (loss) to BC Holdings EBITDA and Boise Cascade, L.L.C., EBITDA for the three months ended December 31, 2010 and 2009, and September 30, 2010:




Three Months Ended


December 31


September 30,


2010


2009


2010








(unaudited, in thousands)







BC Holdings net income (loss)

$(16,212)


$ 33,608


$          (5,615)

Interest expense

4,743


5,380


4,721

Interest income

(148)


(126)


(249)

Income tax provision

70


37


95

Depreciation and amortization

8,955


8,680


8,759

BC Holdings EBITDA

(2,592)


47,579


7,711

Equity in net income of affiliate

-


(18,193)


-

Gain on sale of shares of equity affiliate

-


(41,755)


-

Boise Cascade, L.L.C., EBITDA

$  (2,592)


$(12,369)


$           7,711









The following table reconciles BC Holdings net loss to BC Holdings EBITDA and Boise Cascade, L.L.C., EBITDA for the year ended December 31, 2010 and 2009:


Year Ended December 31


2010


2009






(in thousands)





BC Holdings net loss

$ (6,101)


$(19,057)

Interest expense

21,005


22,520

Interest income

(790)


(886)

Income tax provision

300


660

Depreciation and amortization

34,899


40,874

BC Holdings EBITDA

49,313


44,111

Equity in net income of affiliate

(1,889)


(79,729)

Gain on sale of shares of equity affiliate

(25,308)


(42,752)

Impairment of investment in equity affiliate

-


43,039

Boise Cascade, L.L.C., EBITDA

$22,116


$(35,331)







SOURCE Boise Cascade Holdings, L.L.C.