Business News
Boise Cascade Holdings Reports Third Quarter 2008 Financial Results
Friday 07. November 2008 - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a net loss of $207.6 million for the quarter ended September 30, 2008. The principal component of the loss was a $208.1 million noncash write-down in the carrying value of the Company's 49% equity investment in Boise Inc. (NYSE:BZ).
In the third quarter, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., generated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $10.0 million, which included the negative impact of $1.7 million of additional expenses related to the sale of the paper businesses. The individual segment results are discussed in more detail below.
“Business conditions were very difficult in the third quarter, particularly as we got past Labor Day. The turmoil in the financial markets in September and October dampened what life there was left in the new residential construction markets. Our typical seasonal slowdown started several weeks earlier than normal this year; and, unfortunately, it does not look like there will be a change for the better before next spring. With the sale of our Brazilian operations in July for $45.5 million, after selling expenses, we further bolstered our relatively strong balance sheet position during the quarter,” commented Tom Stephens, chairman and chief executive officer.
Third Quarter Segment Results
U.S. housing starts declined 32% in the third quarter, dropping from an annualized rate of 1.30 million in the third quarter 2007 to 0.88 million this year. In the third quarter, turmoil in financial markets, continuing foreclosures, elevated 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 third quarter were $584 million, compared to $687 million in third quarter 2007 and $610 million in second quarter 2008. Relative to third quarter 2007, the 15% decline in sales resulted from a 22% decline in product volumes sold offset in part by a 9% increase in product prices. The EBITDA generated by BMD fell from $18.0 million in the year-ago quarter to $12.1 million this third 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 third quarter were $215 million, compared to $262 million in the year-ago quarter and $226 million in second quarter 2008. Relative to third quarter 2007, sales of engineered wood products and lumber declined due to lower volumes and prices. Plywood sales declined as lower prices were only partially offset by modestly higher volumes. Particleboard sales declined as reduced volumes were only partially offset by higher prices. Third quarter EBITDA for Wood Products was $3.6 million, down $12.7 million from the $16.3 million reported in third quarter 2007. The decrease in EBITDA was driven principally by sales volume and pricing declines. We permanently closed our St. Helens, Oregon, veneer mill in the third quarter and have been taking rolling curtailments at a number of our other 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 expect business conditions to seasonally weaken in the months ahead. Single-family housing starts are unlikely to improve meaningfully until spring 2009 or later. 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 to maintain appropriate inventory levels has continued in the fourth quarter.