Business News

Boise Cascade Holdings Reports Fourth Quarter 2008 Financial Results

Wednesday 11. March 2009 - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced net losses of $40.5 million and $288.0 million for the quarter and year ended December 31, 2008, respectively. Approximately $219.4 million of the full year loss was related to noncash charges associated with the Company's equity investment in Boise Inc.

In fourth quarter 2008, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., reported negative earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $31.5 million, which included the negative impact of $7.5 million of expenses related to the planned closure of its White City, Oregon, plywood operation. The individual segment results are discussed in more detail below.

“End product demand from new residential construction in the fourth quarter was very weak and has continued into the first part of this year. Our employees and management team have continued to find ways to reduce costs and improve efficiencies, but it will be a difficult challenge to return to profitability if new residential construction in the U.S. remains at the levels experienced over the last six months. All of our manufacturing operations are running at reduced levels, as we work to keep our inventories in line with reduced sales. We are hopeful for a modest seasonal uptick in demand as we move into the spring and summer; however, 2009 could very well end up more difficult than what we experienced in 2008. We have very good liquidity, finishing 2008 with over $330 million of cash and available undrawn bank line capacity,” commented Duane McDougall, chairman and chief executive officer.

Fourth Quarter Segment Results

U.S. housing starts declined 43% in the fourth quarter, dropping from an annualized rate of 1.151 million in the fourth quarter 2007 to 0.661 million in the fourth quarter 2008. In the fourth quarter, turmoil in financial markets, continuing foreclosures, elevated inventories of unsold homes, falling median home prices, rising unemployment, 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 fourth quarter were $411 million, compared with $545 million in fourth quarter 2007 and $584 million in third quarter 2008. Relative to fourth quarter 2007, the 24% decline in sales resulted from a 26% decline in product volumes sold offset by a 2% increase in product prices. The EBITDA generated by BMD fell from $6.6 million in fourth quarter 2007 to negative $2.9 million in fourth quarter 2008. 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 fourth quarter were $156 million, compared with $216 million in fourth quarter 2007 and $215 million in third quarter 2008. Relative to fourth quarter 2007, sales of engineered wood products, plywood, and lumber declined due to lower volumes and prices. Particleboard sales declined as reduced volumes were only modestly offset by higher prices. Fourth quarter EBITDA for Wood Products was negative $24.7 million, down $27.7 million from the $3.0 million of positive EBITDA reported in fourth quarter 2007. The decrease in EBITDA was driven principally by sales volume and pricing declines. The fourth quarter 2008 negative EBITDA included $7.5 million of expenses associated with our plan to permanently close our White City, Oregon, plywood mill in March. We have been taking rolling curtailments at all 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 end product demand to remain very weak when compared to normal historical demand levels. We believe single-family housing starts are unlikely to rebound during 2009 absent a change in the mortgage markets, improved consumer confidence, and a reduction in foreclosures and housing vacancy rates. Industry product sales volumes are likely to remain depressed and commodity wood product prices will largely depend on operating rates. We expect to manage our production levels to our sales demand, which will likely cause us to operate our facilities well below their rated capacities.