Published:
Boise Cascade Holdings Reports First Quarter 2008 Financial Results
Boise Cascade Holdings Reports First Quarter 2008 Financial Results
BOISE, Idaho, May 8 /PRNewswire/ -- Boise Cascade Holdings, L.L.C. (BC
Holdings) today announced the successful completion of a number of milestone
events since the beginning of the year:
* Sold its Paper and Packaging & Newsprint businesses for $1.6 billion,
plus working capital adjustments. Consideration received in the
transaction included approximately $1.28 billion in cash, as well as
debt and equity securities of the buyer, Boise Inc.;
* Repaid $926 million senior secured debt and terminated its existing
senior secured credit facilities;
* Entered into a new five-year, $350 million asset-based lending
facility; and
* Repurchased $160 million of its 7 1/8% senior subordinated notes due
2014 through an asset disposition tender offer completed April 15,
2008.
BC Holdings reported a net loss of $24 million for the quarter ended March
31, 2008, which included the results of its divested paper operations for the
period from January 1 through February 21 and its partial ownership of Boise
Inc. beginning February 22, as discussed in the footnotes to the financial
statements below.
Current Operating Segments
BC Holdings' three reporting segments are now Building Materials
Distribution, Wood Products, and Corporate and Other. Since the Paper and
Packaging & Newsprint segments have been sold, the First Quarter Segment
Results discussion below will focus on the retained operating businesses.
First Quarter Segment Results
U.S. housing starts declined 29.5% in the first quarter, dropping from an
annualized rate of 1.46 million in first quarter 2007 to 1.03 million this
year. In the first quarter, mortgage market dislocations, increases in
foreclosures, higher inventories of unsold homes, falling median home prices
and, in some areas, harsh winter weather, all contributed to a weak demand
environment for the building products we manufacture and distribute.
Sales in our Building Materials Distribution ("BMD") business during the
first quarter were $504 million, compared to $609 million in first quarter
2007 and $545 million in fourth quarter 2007. The 17% decline in sales
resulted from a 12% decline in product volumes sold and a 6% decline in
product prices relative to first quarter 2007. The earnings before interest,
taxes, depreciation and amortization ("EBITDA") generated by BMD fell from
$12.3 million in the year-ago quarter to $0.7 million this first quarter.
BMD's lower sales activity resulted in fewer gross margin dollars being
generated to cover cash operating costs, such as occupancy, payroll, and
delivery.
Sales in our Wood Products segment during the first quarter were $199
million, compared to $254 million in the year-ago quarter and $216 million in
the fourth quarter of 2007. Relative to first quarter 2007, sales of
engineered wood products and lumber declined due to lower volumes and prices.
Plywood sales volume and prices were roughly flat with the year-ago quarter.
Particleboard sales volume fell, while pricing improved modestly. Our
quarterly segment EBITDA for Wood Products went negative for the first time in
this cyclical downturn in the first quarter, coming in at a negative $9.6
million, down $20.6 million from the positive $11.0 million reported in first
quarter 2007. The decrease in EBITDA was driven principally by the pricing
and sales volume declines noted above.
We have been taking rolling curtailments at a number of our Wood Products
operations to maintain appropriate inventory levels, while trying to minimize
the negative impact these curtailments have on our employees and our operating
results. We decided to permanently close ourWhite City, Oregon, lumber
operation in January and our Guaiba,Brazil, veneer operation in April. We
are pursuing a sale of our Brazilian assets.
Outlook
We expect a seasonal improvement in demand for the products we manufacture
and distribute, but we are not anticipating a meaningful recovery in new
residential construction during the year. Industry product sales volumes are
likely to remain anemic and commodity wood product prices will largely depend
on operating rates. Our need to take rolling production curtailments has
continued in the second quarter. Energy costs show no sign of abating and we
expect this to make our efforts to control manufacturing and distribution
costs more challenging.
About Boise Cascade
BC Holdings is a privately held company headquartered inBoise, 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 inNorth America. We also own 49% of
Boise Inc., a publicly traded North American paper and packaging producer
listed on the New York Stock Exchange. For more information, please visit our
website at http://www.bc.com.
Webcast and Conference Call
BC Holdings will host an audiovisual webcast and conference call on
Thursday, May 8, 2008, at 11:00 a.m. Eastern, at which time we will review the
company's recent performance. You can join the webcast through the BC
Holdings website. Go to http://www.bc.com and click on the link to the
webcast under the News & Events heading. Slides will be posted 15 minutes
before the beginning of the webcast. Please go to the website at least 15
minutes before the start of the webcast to register and to download and
install any necessary audio software. 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 News & Events (link in the About
Boise Cascade section) of Boise Cascade's website. A replay of the conference
call will be available from May 8 at 2:00 p.m. Eastern through June 8 at 11:59
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 46484838.
Basis of Presentation
We present our consolidated financial statements in accordance with
generally accepted accounting principles (GAAP). Our earnings release also
supplements the GAAP presentations by reflecting EBITDA. EBITDA represents
income (loss) before interest (interest expense, interest income, and change
in fair value of interest rate swaps and contingent value rights), income tax
provision, and depreciation, amortization, and depletion. 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 in
the evaluation of companies with substantial financial leverage. 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. For example, we believe that the inclusion of
items such as taxes, interest expense, and interest income distorts
management's ability to assess and view the core operating trends in our
segments. 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 and associated significant cash requirements; and the exclusion of
depreciation, amortization, and depletion, which represent significant and
unavoidable operating costs, given the level of our indebtedness and the
capital expenditures needed to maintain our businesses. 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.
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
March 31 December 31,
2008(a) 2007 2007
Sales
Trade $880,800 $1,163,173 $1,098,138
Related parties 95,782 157,795 143,819
976,582 1,320,968 1,241,957
Costs and expenses
Materials, labor, and other
operating expenses 886,838 1,156,899 1,075,585
Depreciation, amortization, and
depletion 10,035 (b) 40,360 10,554 (b)
Selling and distribution expenses 63,365 68,408 71,249
General and administrative
expenses 15,630 19,495 21,760
Gain on sale of Paper and
Packaging &
Newsprint assets (8,063) - -
Other (income) expense, net (942) 2,546 (3,538)
966,863 1,287,708 1,175,610
Income from operations 9,719 33,260 66,347
Equity in net loss of affiliate (8,552) - -
Foreign exchange gain (loss) (613) 242 (144)
Change in fair value of contingent
value rights (4,773) (c) - -
Change in fair value of interest
rate swaps (6,284) (c) - (1,662)(c)
Interest expense (15,381) (22,343) (26,751)(d)
Interest income 2,601 601 1,566
(33,002) (21,500) (26,991)
Income (loss) before income taxes (23,283) 11,760 39,356
Income tax provision (1,155) (1,223) (259)
Net income (loss) $(24,438) $10,537 $39,097
Segment Information
(unaudited, in thousands)
Three Months Ended
March 31 December 31,
2008(a) 2007 2007
Segment sales
Building Materials Distribution $503,884 $608,658 $545,007
Wood Products 198,733 253,923 215,952
Paper 253,508 395,034 397,949
Packaging & Newsprint 113,485 193,972 203,177
Intersegment eliminations and
other (93,028) (130,619) (120,128)
$976,582 $1,320,968 $1,241,957
Segment income (loss)
Building Materials Distribution $(1,209) $10,455 $4,791
Wood Products (17,100) 3,709 (5,005)
Paper 20,718 (b) 18,026 51,609 (b)
Packaging & Newsprint 5,685 (b) 8,083 25,471 (b)
Corporate and Other 1,012 (b) (6,771) (10,663)(b)
9,106 33,502 66,203
Equity in net loss of affiliate (8,552) - -
Change in fair value of
contingent value rights (4,773)(c) - -
Change in fair value of interest
rate swaps (6,284)(c) - (1,662)(c)
Interest expense (15,381) (22,343) (26,751)(d)
Interest income 2,601 601 1,566
Income (loss) before income
taxes $(23,283) $11,760 $39,356
EBITDA (e)
Building Materials Distribution $714 $12,331 $6,603
Wood Products (9,566) 10,993 3,042
Paper 21,066 34,599 51,857
Packaging & Newsprint 5,738 21,495 25,556
Corporate and Other 1,189 (5,556) (10,301)
Equity in net loss of affiliate (8,552) - -
$10,589 $73,862 $76,757
Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(unaudited, in thousands)
March 31, December 31,
2008 2007
ASSETS
Current
Cash and cash equivalents $151,100 $57,623
Restricted cash (f) 183,290 -
Receivables
Trade, less allowances of $1,906
and $1,664 161,764 115,209
Related parties 7,172 9
Other 9,107 7,458
Inventories 334,906 342,015
Assets held for sale - 1,853,039
Other 7,803 5,426
855,142 2,380,779
Property
Property and equipment, net 306,417 313,117
Fiber farms and timber deposits 25,890 24,010
332,307 337,127
Investment in equity affiliate 268,873 -
Note receivable from related party 58,793 -
Deferred financing costs 11,703 23,074
Goodwill 12,170 12,170
Intangible assets, net 9,563 9,668
Other assets 9,057 11,374
Total assets $1,557,608 $2,774,192
Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(unaudited, in thousands, except for equity units)
March 31, December 31,
2008 2007
LIABILITIES AND CAPITAL
Current
Short-term borrowings $ - $10,500
Current portion of long-term debt (g) 160,000 47,250
Accounts payable
Trade 154,902 141,459
Related parties 9,587 43
Accrued liabilities
Compensation and benefits 36,464 36,909
Interest payable 13,418 7,140
Other 83,977 29,959
Liabilities related to assets held
for sale - 331,636
458,348 604,896
Debt
Long-term debt, less current portion 304,224 1,113,313
Other
Compensation and benefits 43,508 46,981
Other long-term liabilities 10,587 17,097
54,095 64,078
Redeemable equity units
Series B equity units - 9,822,162 and
16,622,421 units outstanding 9,891 16,992
Series C equity units - 22,784,727
and 39,069,411 units outstanding 6,317 9,489
16,208 26,481
Commitments and contingent liabilities
Capital
Series A equity units - no par value;
66,000,000 units authorized and outstanding 76,332 78,463
Series B equity units - no par value;
550,000,000 units authorized
and 530,356,601 units outstanding 648,401 876,693
Series C equity units - no par value;
44,000,000 units and 44,000,000
units authorized - 10,268
Total capital 724,733 965,424
Total liabilities and capital $1,557,608 $2,774,192
Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months Ended
March 31
2008 2007
Cash provided by (used for) operations
Net income (loss) $(24,438) $10,537
Items in net income (loss) not using
(providing) cash
Equity in net loss of affiliate 8,552 -
Depreciation, depletion, and
amortization of deferred financing
costs and other 10,378 40,084
Related-party interest income (986) -
Deferred income taxes 54 493
Pension and other postretirement
benefit expense 5,007 6,066
Change in fair value of contingent
value rights 4,773 -
Change in fair value of interest
rate swaps 6,284 -
Management equity units expense 347 822
(Gain) loss on sale of assets, net (10,972) 999
Other 579 194
Decrease (increase) in working
capital, net of dispositions
Receivables (75,192) (56,662)
Inventories 12,765 (20,309)
Prepaid expenses (1,646) 4,234
Accounts payable and accrued liabilities 21,143 19,466
Pension and other postretirement
benefit payments (20,716) (339)
Current and deferred income taxes 1,403 771
Other (155) 4,397
Cash provided by (used for) operations (62,820) 10,753
Cash provided by (used for) investment
Proceeds from sale of assets, net of
cash contributed 1,227,327 3,384
Expenditures for property and equipment (18,219) (47,242)
Increase in restricted cash (183,290) -
Other (1,019) 166
Cash provided by (used for) investment 1,024,799 (43,692)
Cash provided by (used for) financing
Issuances of long-term debt 229,224 100,000
Payments of long-term debt (925,563) (40,000)
Short-term borrowings (10,500) (3,200)
Tax distributions to members (127,342) (2,753)
Repurchase of management equity units (18,289) (94)
Cash paid for termination of interest
rate swaps (11,918) -
Other (4,114) (7)
Cash provided by (used for) financing (868,502) 53,946
Increase in cash and cash equivalents 93,477 21,007
Balance at beginning of the period 57,623 45,169
Balance at end of the period $151,100 $66,176
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 2007 Annual Report on Form 10-K and the
company's Quarterly Report on Form 10-Q for the period ended March 31, 2008.
Net income (loss) for all periods presented involved estimates and accruals.
(a) On February 22, 2008, Boise Cascade, L.L.C., our wholly owned direct
subsidiary, sold the Paper and Packaging & Newsprint assets, and most
of our Corporate and Other assets (the Sale), to Boise Inc. (formerly
Aldabra 2 Acquisition Corp.) for cash and securities equal to $1.6
billion, plus working capital adjustments. In connection with the
Sale, we recorded an $8.1 million gain in "Gain on sale of Paper and
Packaging & Newsprint assets" in the Corporate and Other segment in
our Consolidated Statement of Loss. After the transaction, we
continue to own 100% of our Building Materials Distribution and Wood
Products segments. Immediately following the Sale, Boise Cascade,
L.L.C., distributed the equity securities received in the transaction
to us. The 49% equity interest that we own in Boise Inc. represents a
significant continuing involvement. As a result, the operating
results of the Paper and Packaging & Newsprint businesses are included
in continuing operations through the transaction date. Subsequent to
the transaction, we recorded our investment in Boise Inc. in
"Investment in equity affiliate" on our Consolidated Balance Sheet and
our share of Boise Inc.'s net loss in "Equity in net loss of
affiliate" in our Consolidated Statement of Loss. For more
information related to the Sale, see the Notes to Unaudited Quarterly
Consolidated Financial Statements in our Form 10-Q for the period
ended March 31, 2008.
(b) In September 2007, in anticipation of the Sale, we reclassified the
assets and liabilities of our Paper and Packaging & Newsprint
segments, as well as some of the assets and liabilities included in
our Corporate and Other segment, to "Assets held for sale" and
"Liabilities related to assets held for sale" on our Consolidated
Balance Sheet and stopped depreciating and amortizing those assets. As
a result, the three months ended March 31, 2008, and December 31,
2007, included approximately $16.7 million and $31.4 million of lower
depreciation and amortization expense. Of the $16.7 million and $31.4
million of lower depreciation and amortization expense, $9.4 million
and $16.3 million related to our Paper segment, $6.9 million and $14.3
million related to our Packaging & Newsprint segment, and $0.4 million
and $0.8 million related to our Corporate and Other segment,
respectively.
(c) The three months ended March 31, 2008, included $6.3 million of
expense related to changes in the fair value of our interest rate
swaps, which were terminated in February 2008, and $4.8 million of
expense related to the fair value of the contingent value rights
(CVRs) that we and Terrapin Partners Venture Partnership granted to
certain Boise Inc. investors. For more information related to the
CVRs, see the Notes to Unaudited Quarterly Consolidated Financial
Statements in our Form 10-Q for the period ended March 31, 2008.
The three months ended December 31, 2007, included $3.0 million of
income related to the change in the fair value of interest rate swaps
in connection with the repayment of the $250 million senior unsecured
floating-rate notes, offset by $4.6 million of expense related to
changes in the fair value of our interest rate swaps that we accounted
for as economic hedges.
(d) The three months ended December 31, 2007, included the write-off of
$4.5 million of deferred financing costs related to the repayment of
$250 million of senior unsecured floating-rate notes.
(e) EBITDA represents income before interest (interest expense, interest
income, and change in fair value of interest rate swaps and contingent
value rights), income taxes, and depreciation, amortization, and
depletion. The following table reconciles net income (loss) to EBITDA
for the three months ended March 31, 2008 and 2007, and December 31,
2007:
Three Months Ended
March 31 December 31,
2008 2007 2007
(unaudited, in thousands)
Net income (loss) $(24,438)(a) $10,537 $39,097
Change in fair value of contingent
value rights 4,773 (c) - -
Change in fair value of interest rate
swaps 6,284 (c) - 1,662 (c)
Interest expense 15,381 22,343 26,751 (d)
Interest income (2,601) (601) (1,566)
Income tax provision 1,155 1,223 259
Depreciation, amortization, and
depletion 10,035 (b) 40,360 10,554 (b)
EBITDA $10,589 $73,862 $76,757
The following tables reconcile segment income (loss) to EBITDA for the
three months ended March 31, 2008 and 2007, and December 31, 2007:
Three Months Ended March 31, 2008
Building Corporate
Materials Wood Packaging and
Distribution Products Paper & Newsprint Other Total
(unaudited, in thousands)
Segment income (loss) $(1,209) $(17,100) $20,718 $5,685 $1,012 $9,106
Depreciation,
amortization,
and depletion 1,923 7,534 348 53 177 10,035
Equity in net loss of
affiliate - - - - - (8,552)
EBITDA $714 $(9,566) $21,066 $5,738 $1,189 $10,589
Three Months Ended March 31, 2007
Building Corporate
Materials Wood Packaging and
Distribution Products Paper & Newsprint Other Total
(unaudited, in thousands)
Segment income (loss) $10,455 $3,709 $18,026 $8,083 $(6,771) $33,502
Depreciation,
amortization,
and depletion 1,876 7,284 16,573 13,412 1,215 40,360
EBITDA $12,331 $10,993 $34,599 $21,495 $(5,556) $73,862
Three Months Ended December 31, 2007
Building Corporate
Materials Wood Packaging and
Distribution Products Paper & Newsprint Other Total
(unaudited, in thousands)
Segment income (loss) $4,791 $(5,005) $51,609 $25,471 $(10,663) $66,203
Depreciation,
amortization,
and depletion 1,812 8,047 248 85 362 10,554
EBITDA $6,603 $3,042 $51,857 $25,556 $(10,301) $76,757
(f) At March 31, 2008, we had $183.3 million of restricted cash recorded
on our Consolidated Balance Sheet. Of the $183.3 million, $160
million related to our asset disposition tender offer for $160 million
of our $400 million 7.125% senior subordinated notes and $23.3 million
of restricted cash investments supported letters of credit
outstanding. In April 2008, the issuing bank for the letters of
credit became a participating lender in our revolving credit facility
and it released the $23.3 million of cash collateral back to us.
(g) In preparation for the repayment of the $160 million of our 7.125%
senior subordinated notes in April 2008, we reclassified the $160
million to "Current portion of long-term debt" on our Consolidated
Balance Sheet at March 31, 2008. We redeemed $160 million of the
notes on April 15, 2008.
SOURCE Boise Cascade Holdings, L.L.C.
Copyright © 2008, PRNewswire
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