Boise Cascade Holdings Reports Second Quarter 2011 Financial Results

Aug 04, 2011, 08:45 ET from Boise Cascade Holdings, L.L.C.

BOISE, Idaho, Aug. 4, 2011 /PRNewswire/ -- Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a $9.9 million net loss for the quarter ended June 30, 2011.  Second quarter 2011 earnings before interest, taxes, depreciation, and amortization (EBITDA) was $3.9 million, compared to negative EBITDA of $5.6 million in first quarter 2011, and positive EBITDA of $18.8 million in second quarter 2010.  First quarter 2011 results included $2.6 million of charges related to the curtailment of a production facility and noncash asset write-downs.  

The Company concluded the quarter with $202.8 million of cash and $219.6 million of debt.  Total available liquidity was $311.2 million at the end of the quarter, consisting of committed bank line availability of $108.4 million and our $202.8 million cash position.  Subsequent to quarter end, we replaced our $170 million credit facility with a new $250 million credit facility that, when compared with the previous facility, has both lower pricing and an extended maturity.  Had the new facility been in place at June 30, our total available liquidity would have exceeded $381 million.  In addition, our cash position improved by $20.1 million during the second quarter, with cash from operations more than offsetting the cost of acquisitions, capital spending, and a semi-annual interest payment on our senior subordinated notes.  

Our second quarter 2011 revenues and earnings were negatively impacted by depressed demand for the products we distribute and manufacture.  U.S. housing starts declined approximately 4% in the second quarter of 2011 compared to the year-ago quarter.  Single-family starts, which are a primary driver of our sales, were particularly weak, experiencing a decline of 13% for the quarter and 17% for the first six months of the year compared to the same periods in 2010.  In addition, we did not enjoy the commodity price run that boosted second quarter 2010 results.  At the midway point of the year, the Blue Chip consensus forecast for U.S. housing starts for 2011 has been revised downward to 590,000, a level consistent with the final U.S. housing starts level reported for 2010 of 587,000.

"New residential construction activity remained weak during the second quarter.  While our June sales activity was stronger than previous months this year, we remain concerned about the overall new residential construction environment and the timing of an eventual recovery in housing starts.  That being said, we remain confident in the steps we have taken to improve productivity and manage our cost structure in this lower demand environment without sacrificing our ability to fully serve our customers now and when the eventual housing recovery surfaces.  We continue to evaluate opportunities to grow our businesses and I am particularly pleased with the laminated beam and decking plant acquisition during the quarter," stated Tom Carlile, CEO.  

Building Materials Distribution (BMD) segment sales were $470.7 million in the second quarter, down 9% from the same quarter a year ago.  Prices for the segment decreased approximately 6%, with volumes down about 3%.  BMD reported positive $3.4 million of EBITDA in the second quarter, as compared to negative $2.5 million in the first quarter of 2011 and positive $9.1 million in second quarter 2010.  BMD's EBITDA decreased from the prior year quarter as lower sales activity generated fewer gross margin dollars, the negative impact of which was partially offset by lower operating expenses.  

Wood Products segment sales in the second quarter were $182.4 million, down about 9% from the same quarter a year ago.   The segment reported positive $4.5 million of EBITDA in second quarter, as compared to negative $0.5 million in the first quarter of 2011 and positive $14.9 million in the second quarter of 2010.  The decrease in sales and EBITDA compared to the prior year quarter was due primarily to lower plywood and lumber prices.  In addition, engineered wood products (EWP) sales were flat, as a 4% improvement in pricing was mostly offset by lower volumes.    

Outlook

We expect to experience below normal demand for the products we distribute and manufacture until there is a meaningful reduction in the overhang of distressed homes for sale.   Industry commodity wood product prices could be volatile in response to operating rates and inventory levels in 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 Thursday, August 4, at 11 a.m. Eastern, at which time we will review the company's recent performance.  You can join the webcast through our website by going to www.bc.com and clicking 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 our website.  A replay of the conference call will be available from Thursday, August 4, at 2 p.m. Eastern through Thursday, August 11, at 11 p.m. Eastern.  Playback numbers are 855-859-2056 for U.S. calls and 404-537-3406 for international calls, and the passcode will be 87042141.

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, a non-GAAP financial measure.  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 maker 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 the limitations of EBITDA by relying on our GAAP results.  Our measure of EBITDA is 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



June 30


March 31,
2011



2011


2010


Sales







Trade


$

585,031



$

646,320



$

478,807


Related parties


4,382



5,168



4,440




589,413



651,488



483,247


Costs and expenses







Materials, labor, and other operating expenses


514,221



557,849



422,832


Materials, labor, and other operating expenses from related parties


10,351



10,550



8,443


Depreciation and amortization


9,241



8,595



8,907


Selling and distribution expenses


51,016



52,630



46,970


General and administrative expenses


9,880



11,205



8,278


Other (income) expense, net (a)


50



60



2,589




594,759



640,889



498,019









Income (loss) from operations


(5,346)



10,599



(14,772)









Foreign exchange gain (loss)


30



(355)



310


Interest expense


(4,584)



(6,021)



(4,589)


Interest income


77



199



146




(4,477)



(6,177)



(4,133)









Income (loss) before income taxes


(9,823)



4,422



(18,905)


Income tax provision


(38)



(90)



(96)


Net income (loss)


$

(9,861)



$

4,332



$

(19,001)







Segment Information

(unaudited, in thousands)




Three Months Ended



June 30


March 31,
2011



2011


2010


Segment sales







Building Materials Distribution


$

470,691



$

515,434



$

377,796


Wood Products


182,427



199,446



154,941


Intersegment eliminations and other


(63,705)



(63,392)



(49,490)




$

589,413



$

651,488



$

483,247









Segment income (loss)







Building Materials Distribution (a)


$

1,337



$

7,265



$

(4,559)


Wood Products (a)


(2,662)



8,238



(7,265)


Corporate and Other


(3,991)



(5,259)



(2,638)




(5,316)



10,244



(14,462)









Interest expense


(4,584)



(6,021)



(4,589)


Interest income


77



199



146


Income (loss) before income taxes


$

(9,823)



$

4,422



$

(18,905)









EBITDA (c)







Building Materials Distribution (a)


$

3,387



$

9,067



$

(2,511)


Wood Products (a)


4,467



14,939



(468)


Corporate and Other


(3,929)



(5,167)



(2,576)




$

3,925



$

18,839



$

(5,555)







Boise Cascade Holdings, L.L.C.

Consolidated Statements of Income (Loss)

(unaudited, in thousands)




Six Months Ended



June 30



2011


2010

Sales





Trade


$

1,063,838



$

1,123,742


Related parties


8,822



14,999




1,072,660



1,138,741


Costs and expenses





Materials, labor, and other operating expenses


937,053



983,750


Materials, labor, and other operating expenses from related parties


18,794



16,772


Depreciation and amortization


18,148



17,185


Selling and distribution expenses


97,986



100,795


General and administrative expenses


18,158



18,663


General and administrative expenses from related party




1,576


Other (income) expense, net (a)


2,639



(20)




1,092,778



1,138,721







Income (loss) from operations


(20,118)



20







Equity in net income of affiliate (b)




1,889


Gain on sale of shares of equity affiliate (b)




25,308


Foreign exchange gain (loss)


340



(208)


Interest expense


(9,173)



(11,541)


Interest income


223



393




(8,610)



15,841







Income (loss) before income taxes


(28,728)



15,861


Income tax provision


(134)



(135)


Net income (loss)


$

(28,862)



$

15,726







Segment Information

(unaudited, in thousands)




Six Months Ended



June 30



2011


2010

Segment sales





Building Materials Distribution


$

848,487



$

904,552


Wood Products


337,368



347,446


Intersegment eliminations and other


(113,195)



(113,257)




$

1,072,660



$

1,138,741







Segment loss





Building Materials Distribution (a)


$

(3,222)



$

6,532


Wood Products (a)


(9,927)



1,639


Corporate and Other


(6,629)



(8,359)




(19,778)



(188)







Equity in net income of affiliate (b)




1,889


Gain on sale of shares of equity affiliate (b)




25,308


Interest expense


(9,173)



(11,541)


Interest income


223



393


Income (loss) before income taxes


$

(28,728)



$

15,861







EBITDA (c)





Building Materials Distribution (a)


$

876



$

10,163


Wood Products (a)


3,999



15,004


Corporate and Other


(6,505)



(8,170)


Equity in net income of affiliate (b)




1,889


Gain on sale of shares of equity affiliate (b)




25,308




$

(1,630)



$

44,194







Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets

(unaudited, in thousands)




June 30,
2011


December 31,
2010




ASSETS










Current





Cash and cash equivalents


$

202,828



$

264,606


Receivables





Trade, less allowances of $2,330 and $2,492


149,047



102,906


Related parties


242



297


Other


3,189



4,571


Inventories


275,048



261,202


Prepaid expenses and other


7,838



3,808




638,192



637,390


Property





Property and equipment, net


270,500



273,569


Timber deposits


11,474



10,588




281,974



284,157







Deferred financing costs


3,289



3,626


Goodwill


12,170



12,170


Intangible assets, net


8,900



8,906


Other assets


6,198



5,989


Total assets


$

950,723



$

952,238







Boise Cascade Holdings, L.L.C.

Consolidated Balance Sheets (continued)

(unaudited, in thousands)




June 30,
2011


December 31,
2010




LIABILITIES AND CAPITAL










Current





Accounts payable





Trade


$

144,983



$

112,414


Related parties


1,654



394


Accrued liabilities





Compensation and benefits


33,365



39,827


Interest payable


3,289



3,291


Other


20,945



22,530




204,236



178,456


Debt





Long-term debt


219,560



219,560







Other





Compensation and benefits


121,636



121,709


Other long-term liabilities


14,227



14,116




135,863



135,825


Redeemable equity units





Series B equity units – 2,650 units and 2,736 units outstanding


2,650



2,736


Series C equity units – 14,330 units and 14,425 units outstanding


6,500



6,563




9,150



9,299


Commitments and contingent liabilities










Capital





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


99,977



96,162


Series B equity units – no par value; 550,000 units authorized; 532,674 units and 532,588 units outstanding


281,937



312,936


Series C equity units – no par value; 44,000 units authorized; 12,075 units and 11,980 units outstanding





Total capital


381,914



409,098


Total liabilities and capital


$

950,723



$

952,238







Boise Cascade Holdings, L.L.C.

Consolidated Statements of Cash Flows

(unaudited, in thousands)




Six Months Ended



June 30



2011


2010

Cash provided by (used for) operations





Net income (loss)


$

(28,862)



$

15,726


Items in net income (loss) not using (providing) cash





Equity in net income of affiliate




(1,889)


Gain on sale of shares of equity affiliate




(25,308)


Depreciation and amortization of deferred financing costs and other


19,041



19,063


Pension expense


6,432



3,865


Management equity units expense




869


Other


744



196


Decrease (increase) in working capital, net of acquisitions







Receivables


(44,221)



(58,511)


Inventories


(11,969)



(21,174)


Prepaid expenses and other


(2,284)



(2,098)


Accounts payable and accrued liabilities


27,716



48,161


Pension contributions


(4,279)



(3,070)


Other


(1,617)



1,899


Net cash used for operations


(39,299)



(22,271)







Cash provided by (used for) investment





Proceeds from sale of shares of equity affiliate, net




86,123


Expenditures for property and equipment


(16,585)



(9,997)


Acquisitions of businesses and facilities


(5,782)




Other


(112)



(1,408)


Net cash provided by (used for) investment


(22,479)



74,718







Cash provided by (used for) financing





Issuances of long-term debt




45,000


Payments of long-term debt




(120,000)


Net cash used for financing




(75,000)







Net decrease in cash and cash equivalents


(61,778)



(22,553)







Balance at beginning of the period


264,606



287,101







Balance at end of the period


$

202,828



$

264,548






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 and the company's Quarterly Report on Form 10-Q for the period ended June 30, 2011. Net income (loss) for all periods presented involved estimates and accruals.


(a)

In first quarter 2011, we committed to indefinitely curtail a manufacturing plant in our Wood Products segment, and we recorded the related expense of $1.4 million in "Other (income) expense, net" for the three months ended March 31, 2011, and six months ended June 30, 2011. The manufacturing plant was permanently closed on June 30, 2011. Also, during the three months ended March 31, 2011, and six months ended June 30, 2011, we recorded $1.2 million of noncash asset write-downs in "Other (income) expense, net," of which $0.8 million was recorded in our Building Materials Distribution segment and $0.4 million was recorded in our Wood Products segment.

(b)

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 gain of $25.3 million in "Gain on sale of shares of equity affiliate" for the six months ended June 30, 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 and Boise Inc. were related parties.

(c)

EBITDA represents income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization. The following table reconciles net income (loss) to EBITDA for the three months ended June 30, 2011 and 2010, and March 31, 2011:







Three Months Ended



June 30


March 31,
2011



2011


2010











(unaudited, in thousands)








Net income (loss)


$

(9,861)



$

4,332



$

(19,001)


Interest expense


4,584



6,021



4,589


Interest income


(77)



(199)



(146)


Income tax provision


38



90



96


Depreciation and amortization


9,241



8,595



8,907


EBITDA


$

3,925



$

18,839



$

(5,555)







The following table reconciles BC Holdings net income (loss) to BC Holdings EBITDA and Boise Cascade, L.L.C. EBITDA for the six months ended June 30, 2011 and 2010:




Six Months Ended



June 30



2011


2010








(unaudited, in thousands)






BC Holdings net income (loss)


$

(28,862)



$

15,726


Interest expense


9,173



11,541


Interest income


(223)



(393)


Income tax provision


134



135


Depreciation and amortization


18,148



17,185


BC Holdings EBITDA


(1,630)



44,194


Equity in net income of affiliate




(1,889)


Gain on sale of shares of equity affiliate




(25,308)


Boise Cascade, L.L.C. EBITDA


$

(1,630)



$

16,997






SOURCE Boise Cascade Holdings, L.L.C.