Business News

Boise Cascade Holdings Reports First Quarter 2009 Financial Results

Friday 08. May 2009 - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced a net loss of $88.2 million for the quarter ended March 31, 2009. Approximately $40.0 million of the quarterly loss was related to noncash charges associated with the Comp

In first quarter 2009, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., reported negative earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $31.3 million, which included the negative impact of $5.0 million of expenses related to the indefinite curtailment of its La Grande, Oregon, lumber operation. The Company finished first quarter with $189.5 million of cash after making pension plan contributions totaling $25.0 million, tax distributions of $9.9 million, open market note repurchases of $5.6 million, and payments under deferred compensation agreements for employees terminated in connection with the sale of our paper businesses of $2.5 million. The individual segment results are discussed in more detail below.

“We took a number of difficult actions this quarter in response to the very weak end-product demand and the uncertainty as to the timing and strength of a recovery in new residential construction. The steps taken this quarter included completing the closure of our White City, Oregon, plywood operation; announcing the indefinite curtailment of our La Grande, Oregon, lumber operation; curtailing indefinitely our plywood production in Oakdale, Louisiana; freezing salaries; suspending the 401(k) match for our salaried employees; freezing our salaried pension plan effective at the end of this year; and reducing capital spending for 2009 to a range of $20 to $25 million. These actions are all aimed at reducing our cash usage and preserving our good liquidity position,” remarked Duane McDougall, chairman and chief executive officer.

First Quarter Segment Results

U.S. housing starts declined 50% in the first quarter, dropping from an annualized rate of 1.05 million in the first quarter 2008 to 0.52 million in the first quarter 2009. In the first quarter, turmoil in financial markets, continuing foreclosures, elevated inventories of unsold homes, falling median home prices, rising unemployment, and low 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 first quarter were $335.0 million, compared with $503.9 million in first quarter 2008 and $411.5 million in fourth quarter 2008. Compared with first quarter 2008, the 34% decline in sales resulted primarily from a 33% decline in product volumes sold. EBITDA generated by BMD declined from positive $0.7 million in first quarter 2008 to negative $6.6 million in first quarter 2009. BMD’s lower sales activity resulted in fewer gross margin dollars being generated to cover cash operating costs, such as occupancy, payroll, and delivery; however, almost half of the gross profit decline compared to first quarter 2008 was offset by cost and efficiency improvements made over the last year.

Sales in our Wood Products segment during the first quarter were $116.5 million, compared with $198.7 million in first quarter 2008 and $156.0 million in fourth quarter 2008. Compared with first quarter 2008, 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. First quarter EBITDA for Wood Products was negative $28.6 million, down $19.0 million from the $9.6 million of negative EBITDA reported in first quarter 2008. The decrease in EBITDA was driven principally by pricing declines. The first quarter 2009 negative EBITDA included $5.0 million of expenses associated with our plan to indefinitely curtail our La Grande, Oregon, lumber mill this summer. 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 weak when compared to normal historical demand levels. We believe single-family housing starts are unlikely to show any significant 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 capacity.