BOISE CASCADE HOLDINGS, L.L.C. - FORM 8-K - EX-99.1 - EARNINGS RELEASE - November 3, 2011

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Boise Cascade
 
Exhibit 99.1
 
1111 West Jefferson Street Ste 300 PO Box 50 Boise, ID 83728
 
 
 
News Release
Investor Relations Contact
Office 208 384 6073
 
 

For Immediate Release: November 3, 2011
Boise Cascade Holdings Reports Third Quarter 2011 Financial Results
BOISE, Idaho - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a $3.7 million net loss for the quarter ended September 30, 2011. Third quarter 2011 earnings before interest, taxes, depreciation, and amortization (EBITDA) were $10.6 million, up $2.9 million, or 37%, compared to reported EBITDA of $7.7 million in third quarter 2010. Third quarter 2010 results included $4.6 million of income related to the settlement of class action litigation. The Company reported EBITDA of $3.9 million in second quarter 2011.
Sales in third quarter 2011 were 6% higher than the prior year quarter and 7% higher than second quarter 2011. U.S. housing starts in third quarter 2011 were up 6% when compared with the year-ago quarter; however, single-family housing starts, which are a primary driver of our sales, declined 1%.
The Company cash position remained essentially unchanged during the quarter. We ended September 2011 with $203.1 million of cash and $219.6 million of debt. Total available liquidity was $377.6 million, consisting of committed bank line availability of $174.5 million and our $203.1 million cash position. During the quarter, 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.
“New single-family residential construction remained weak during the third quarter; however, we believe we are continuing to gain market share. We remain cautious with regard to the overall new residential construction environment and the timing of an eventual recovery in housing starts. We have good liquidity and continue to evaluate acquisition opportunities that add value, add to our market position, or help lower our costs,” stated Tom Carlile, CEO.

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Building Materials Distribution (BMD) segment sales were $501.5 million in the third quarter, up 7% from the same quarter a year ago. Volumes sold increased approximately 5% and prices increased 2%. BMD reported $8.2 million of EBITDA in the third quarter, up $1.7 million from the $6.5 million earned in third quarter 2010 (which included a $4.1 million benefit from the class action settlement). BMD's EBITDA increased from the prior year quarter as a result of higher sales, improved gross margins, and good expense control. In second quarter 2011, BMD reported EBITDA of $3.4 million.
Wood Products segment sales in third quarter were $194.8 million, up 6% from the same quarter a year ago. The growth in sales was primarily due to increased sales volumes of engineered wood products (EWP), as well as higher byproduct sales, partially offset by decreases in plywood prices and volumes. Specific to our EWP business, laminated veneer lumber and I-joist volumes increased 23% and 13%, respectively. The segment reported positive $7.1 million of EBITDA in third quarter 2011. EBITDA was up 22% compared to $5.8 million in third quarter 2010 (which included a $0.5 million benefit from the class action settlement). EBITDA improved from the prior year quarter primarily due to lower per-unit EWP conversion costs and lower per-unit raw material costs across all of our key product lines, as well as higher EWP sales volumes and lumber prices. These improvements were partially offset by a 7% decline in plywood prices. Reported EBITDA was $4.5 million in second quarter 2011.
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, November 3, 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

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of the webcast to register. To join the conference call, dial 866-356-4281 (international callers should dial 617-597-5395), participant passcode 37610045, 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, November 3, at 2 p.m. Eastern through Thursday, November 10, at 11 p.m. Eastern. Playback numbers are 888-286-8010 for U.S. calls and 617-801-6888 for international calls, and the passcode will be 64004290.
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

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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.





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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
 
 
Three Months Ended
 
 
September 30
 
June 30,
2011
 
 
2011
 
2010
 
Sales
 
 
 
 
 
 
Trade
 
$
623,199

 
$
588,605

 
$
585,031

Related parties
 
4,787

 
4,892

 
4,382

 
 
627,986

 
593,497

 
589,413

Costs and expenses
 
 
 
 
 
 
Materials, labor, and other operating expenses
 
538,794

 
514,514

 
514,221

Materials, labor, and other operating expenses from related parties
 
12,346

 
10,549

 
10,351

Depreciation and amortization
 
9,352

 
8,759

 
9,241

Selling and distribution expenses
 
55,346

 
54,197

 
51,016

General and administrative expenses
 
10,299

 
11,412

 
9,880

Other (income) expense, net (a)
 
(298
)
 
(4,565
)
 
50

 
 
625,839

 
594,866

 
594,759

 
 
 
 
 
 
 
Income (loss) from operations
 
2,147

 
(1,369
)
 
(5,346
)
 
 
 
 
 
 
 
Foreign exchange gain (loss)
 
(936
)
 
321

 
30

Interest expense
 
(5,001
)
 
(4,721
)
 
(4,584
)
Interest income
 
91

 
249

 
77

 
 
(5,846
)
 
(4,151
)
 
(4,477
)
 
 
 
 
 
 
 
Loss before income taxes
 
(3,699
)
 
(5,520
)
 
(9,823
)
Income tax provision
 
(12
)
 
(95
)
 
(38
)
Net loss
 
$
(3,711
)
 
$
(5,615
)
 
$
(9,861
)


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Segment Information
(unaudited, in thousands)
 
 
Three Months Ended
 
 
September 30
 
June 30,
2011
 
 
2011
 
2010
 
Segment sales
 
 
 
 
 
 
Building Materials Distribution
 
$
501,458

 
$
470,725

 
$
470,691

Wood Products
 
194,843

 
183,424

 
182,427

Intersegment eliminations and other
 
(68,315
)
 
(60,652
)
 
(63,705
)
 
 
$
627,986

 
$
593,497

 
$
589,413

 
 
 
 
 
 
 
Segment income (loss)
 
 
 
 
 
 
Building Materials Distribution (a)
 
$
6,040

 
$
4,645

 
$
1,337

Wood Products (a)
 
(71
)
 
(972
)
 
(2,662
)
Corporate and Other
 
(4,758
)
 
(4,721
)
 
(3,991
)
 
 
1,211

 
(1,048
)
 
(5,316
)
 
 
 
 
 
 
 
Interest expense
 
(5,001
)
 
(4,721
)
 
(4,584
)
Interest income
 
91

 
249

 
77

Loss before income taxes
 
$
(3,699
)
 
$
(5,520
)
 
$
(9,823
)
 
 
 
 
 
 
 
EBITDA (d)
 
 
 
 
 
 
Building Materials Distribution (a)
 
$
8,164

 
$
6,505

 
$
3,387

Wood Products (a)
 
7,101

 
5,838

 
4,467

Corporate and Other
 
(4,702
)
 
(4,632
)
 
(3,929
)
 
 
$
10,563

 
$
7,711

 
$
3,925





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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Income (Loss)
(unaudited, in thousands)
 
 
Nine Months Ended
 
 
September 30
 
 
2011
 
2010
Sales
 
 
 
 
Trade
 
$
1,687,037

 
$
1,712,347

Related parties
 
13,609

 
19,891

 
 
1,700,646

 
1,732,238

Costs and expenses
 
 
 
 
Materials, labor, and other operating expenses
 
1,475,847

 
1,498,264

Materials, labor, and other operating expenses from related parties
 
31,140

 
27,321

Depreciation and amortization
 
27,500

 
25,944

Selling and distribution expenses
 
153,332

 
154,992

General and administrative expenses
 
28,457

 
30,075

General and administrative expenses from related party
 
—

 
1,576

Other (income) expense, net (a) (b)
 
2,341

 
(4,585
)
 
 
1,718,617

 
1,733,587

 
 
 
 
 
Loss from operations
 
(17,971
)
 
(1,349
)
 
 
 
 
 
Equity in net income of affiliate (c)
 
—

 
1,889

Gain on sale of shares of equity affiliate (c)
 
—

 
25,308

Foreign exchange gain (loss)
 
(596
)
 
113

Interest expense
 
(14,174
)
 
(16,262
)
Interest income
 
314

 
642

 
 
(14,456
)
 
11,690

 
 
 
 
 
Income (loss) before income taxes
 
(32,427
)
 
10,341

Income tax provision
 
(146
)
 
(230
)
Net income (loss)
 
$
(32,573
)
 
$
10,111





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Segment Information
(unaudited, in thousands)
 
 
Nine Months Ended
 
 
September 30
 
 
2011
 
2010
Segment sales
 
 
 
 
Building Materials Distribution
 
$
1,349,945

 
$
1,375,277

Wood Products
 
532,211

 
530,870

Intersegment eliminations and other
 
(181,510
)
 
(173,909
)
 
 
$
1,700,646

 
$
1,732,238

 
 
 
 
 
Segment income (loss)
 
 
 
 
Building Materials Distribution (a) (b)
 
$
2,818

 
$
11,177

Wood Products (a) (b)
 
(9,998
)
 
667

Corporate and Other
 
(11,387
)
 
(13,080
)
 
 
(18,567
)
 
(1,236
)
 
 
 
 
 
Equity in net income of affiliate (c)
 
—

 
1,889

Gain on sale of shares of equity affiliate (c)
 
—

 
25,308

Interest expense
 
(14,174
)
 
(16,262
)
Interest income
 
314

 
642

Income (loss) before income taxes
 
$
(32,427
)
 
$
10,341

 
 
 
 
 
EBITDA (d)
 
 
 
 
Building Materials Distribution (a) (b)
 
$
9,040

 
$
16,668

Wood Products (a) (b)
 
11,100

 
20,842

Corporate and Other
 
(11,207
)
 
(12,802
)
Equity in net income of affiliate (c)
 
—

 
1,889

Gain on sale of shares of equity affiliate (c)
 
—

 
25,308

 
 
$
8,933

 
$
51,905




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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(unaudited, in thousands)
 
 
September 30,
2011
 
December 31,
2010
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Current
 
 
 
 
Cash and cash equivalents
 
$
203,125

 
$
264,606

Receivables
 
 
 
 
Trade, less allowances of $2,640 and $2,492
 
150,412

 
102,906

Related parties
 
329

 
297

Other
 
3,217

 
4,571

Inventories
 
271,502

 
261,202

Prepaid expenses and other
 
6,639

 
3,808

 
 
635,224

 
637,390

Property
 
 
 
 
Property and equipment, net
 
269,545

 
273,569

Timber deposits
 
7,375

 
10,588

 
 
276,920

 
284,157

 
 
 
 
 
Deferred financing costs
 
5,371

 
3,626

Goodwill
 
12,170

 
12,170

Intangible assets, net
 
8,900

 
8,906

Other assets
 
6,435

 
5,989

Total assets
 
$
945,020

 
$
952,238



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Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(unaudited, in thousands)
 
 
September 30,
2011
 
December 31,
2010
 
 
 
LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current
 
 
 
 
Accounts payable
 
 
 
 
Trade
 
$
133,032

 
$
112,414

Related parties
 
1,814

 
394

Accrued liabilities
 
 
 
 
Compensation and benefits
 
37,074

 
39,827

Interest payable
 
7,233

 
3,291

Other
 
25,753

 
22,530

 
 
204,906

 
178,456

Debt
 
 
 
 
Long-term debt
 
219,560

 
219,560

 
 
 
 
 
Other
 
 
 
 
Compensation and benefits
 
118,366

 
121,709

Other long-term liabilities
 
14,148

 
14,116

 
 
132,514

 
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
 
101,993

 
96,162

Series B equity units – no par value; 550,000 units authorized; 532,674 units and 532,588 units outstanding
 
276,897

 
312,936

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

 
—

Total capital
 
378,890

 
409,098

Total liabilities and capital
 
$
945,020

 
$
952,238



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Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 
Nine Months Ended
 
 
September 30
 
 
2011
 
2010
Cash provided by (used for) operations
 
 
 
 
Net income (loss)
 
$
(32,573
)
 
$
10,111

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
 
29,118

 
28,277

Pension expense
 
8,933

 
5,670

Management equity units expense
 
—

 
1,303

Other
 
1,515

 
(74
)
Decrease (increase) in working capital, net of acquisitions
 
 
 
 
Receivables
 
(45,700
)
 
(40,946
)
Inventories
 
(8,423
)
 
(19,839
)
Prepaid expenses and other
 
(1,221
)
 
(1,328
)
Accounts payable and accrued liabilities
 
27,598

 
52,745

Pension contributions
 
(10,274
)
 
(3,766
)
Other
 
(90
)
 
4,229

Net cash provided by (used for) operations
 
(31,117
)
 
9,185

 
 
 
 
 
Cash provided by (used for) investment
 
 
 
 
Proceeds from sale of shares of equity affiliate, net
 
—

 
86,123

Expenditures for property and equipment
 
(25,299
)
 
(22,369
)
Acquisitions of businesses and facilities
 
(5,782
)
 
—

Proceeds from sales of assets
 
3,053

 
1,114

Other
 
211

 
(598
)
Net cash provided by (used for) investment
 
(27,817
)
 
64,270

 
 
 
 
 
Cash provided by (used for) financing
 
 
 
 
Credit facility financing costs
 
(2,547
)
 
—

Issuances of long-term debt
 
—

 
45,000

Payments of long-term debt
 
—

 
(120,000
)
Net cash used for financing
 
(2,547
)
 
(75,000
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(61,481
)
 
(1,545
)
 
 
 
 
 
Balance at beginning of the period
 
264,606

 
287,101

 
 
 
 
 
Balance at end of the period
 
$
203,125

 
$
285,556


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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 September 30, 2011. Net income (loss) for all periods presented involved estimates and accruals.
(a)
During the three and nine months ended September 30, 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.
(b)
In June 2011, we permanently closed a manufacturing plant in our Wood Products segment. During the nine months ended September 30, 2011, we recorded the related expense of $1.3 million in "Other (income) expense, net." Also, during the nine months ended September 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.
(c)
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 nine months ended September 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.
(d)
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 September 30, 2011 and 2010, and June 30, 2011:
 
 
Three Months Ended
 
 
September 30
 
June 30,
2011
 
 
2011
 
2010
 
 
 
 
 
 
 
 
 
 
(unaudited, in thousands)
 
 
 
 
 
 
 
Net loss
 
$
(3,711
)
 
$
(5,615
)
 
$
(9,861
)
Interest expense
 
5,001

 
4,721

 
4,584

Interest income
 
(91
)
 
(249
)
 
(77
)
Income tax provision
 
12

 
95

 
38

Depreciation and amortization
 
9,352

 
8,759

 
9,241

EBITDA
 
$
10,563

 
$
7,711

 
$
3,925




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The following table reconciles BC Holdings net income (loss) to BC Holdings EBITDA and Boise Cascade, L.L.C. EBITDA for the nine months ended September 30, 2011 and 2010:
 
 
Nine Months Ended
 
 
September 30
 
 
2011
 
2010
 
 
 
 
 
 
 
(unaudited, in thousands)
 
 
 
 
 
BC Holdings net income (loss)
 
$
(32,573
)
 
$
10,111

Interest expense
 
14,174

 
16,262

Interest income
 
(314
)
 
(642
)
Income tax provision
 
146

 
230

Depreciation and amortization
 
27,500

 
25,944

BC Holdings EBITDA
 
8,933

 
51,905

Equity in net income of affiliate
 
—

 
(1,889
)
Gain on sale of shares of equity affiliate
 
—

 
(25,308
)
Boise Cascade, L.L.C. EBITDA
 
$
8,933

 
$
24,708


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