Business News

Boise Cascade Holdings Reports Second Quarter 2008 Financial Results

Thursday 07. August 2008 - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a net loss of $15.4 million for the quarter ended June 30, 2008.

While the Company’s core wood products and building materials business was profitable in the quarter, activity associated with the sale of, and 49% equity interest in, Boise Inc. (NYSE:BZ) negatively impacted reported results by $20.4 million. Specifically, the net loss included $8.8 million of loss attributable to BC Holdings’ 49% ownership in Boise Inc., an $8.3 million loss on the sale of the promissory note received from Boise Inc. in conjunction with the disposition of the Company’s paper-related businesses in February 2008, as well as $3.3 million of additional expenses related to the sale of the paper-related businesses.

In the second quarter, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., generated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $13.5 million, which included the negative impact of $3.3 million of additional expenses related to the sale of the paper businesses. The individual segment results are discussed in more detail below.

“Our building products subsidiary continued to perform well on a relative basis in a tough environment in the second quarter and was cash positive. We also realized net proceeds of $53 million from the sale of the Boise Inc. note, which allowed us to end the quarter with net debt of $74 million. We had $3.2 billion of debt following the leveraged buyout in October 2004. On July 1, 2008, we completed the sale of our Brazilian subsidiary for $47 million, further strengthening our balance sheet and liquidity position,” commented Tom Stephens, chairman and chief executive officer.

Second Quarter Segment Results

U.S. housing starts declined 30% in the second quarter, dropping from an annualized rate of 1.46 million in the second quarter 2007 to 1.02 million this year. In the second quarter, mortgage market dislocations, increases in foreclosures, higher inventories of unsold homes, falling median home prices, and a decline in consumer confidence 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 second quarter were $610 million, compared to $724 million in the second quarter 2007 and $504 million in first quarter 2008. The 16% decline in sales resulted from a 14% decline in product volumes sold and a 2% decline in product prices relative to second quarter 2007. The EBITDA generated by BMD fell from $22.2 million in the year-ago quarter to $17.3 million this second 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 second quarter were $226 million, compared to $279 million in the year-ago quarter and $199 million in first quarter 2008. Relative to second quarter 2007, sales of engineered wood products and lumber declined due to lower volumes and prices. Plywood sales increased as higher volumes more than offset modestly lower prices. Particleboard sales declined as reduced volumes were only partially offset by higher prices. Second quarter EBITDA for Wood Products was $3.3 million, down $20.0 million from the $23.3 million reported in second quarter 2007. The decrease in EBITDA was driven principally by pricing and sales volume declines.

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.

Outlook

We did experience moderate seasonal improvement in the second quarter; however, we have not seen a meaningful improvement in end-product demand from single-family housing starts, and we are not expecting that to change over the next several quarters. Industry product sales volumes are likely to remain depressed and commodity wood product prices will largely depend on operating rates. Our need to take rolling production curtailments has continued in the third quarter. Energy costs remain elevated compared to historical experience, and we expect this to make our efforts to control manufacturing and distribution costs more challenging.