BOISE CASCADE HOLDINGS, L.L.C. - FORM 8-K - EX-99.1 - EARNINGS RELEASE - August 4, 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: August 4, 2011
Boise Cascade Holdings Reports Second Quarter 2011 Financial Results
BOISE, Idaho - 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

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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.

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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

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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.





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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
)


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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
)




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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





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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




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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



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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



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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



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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 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
)



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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 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


BOISE CASCADE HOLDINGS, L.L.C. Reports