Business News

Boise Cascade Holdings Reports Second Quarter 2009 Financial Results

Wednesday 12. August 2009 - Boise Cascade Holdings, L.L.C. (BC Holdings or Company) announced net income of $9.3 million for the quarter ended June 30, 2009. Included in its net income was $30.3 million of noncash income associated with the Company's equity investment in Boise Inc.

In second quarter 2009, BC Holdings’ building products subsidiary, Boise Cascade, L.L.C., reported negative earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $3.5 million, as compared to negative EBITDA of $31.3 million in first quarter 2009. In stark contrast to the first quarter when the company used $86 million of cash, the Company’s cash and net debt position improved $15.0 million during the second quarter, with the company reporting $282.3 million of available liquidity at June 30, 2009. The individual segment results are discussed in more detail below.

“Our operations made great strides this quarter on a number of fronts. In Building Materials Distribution, sales were up 29% from the first quarter; gross margin dollars were up 52%; and working capital came down while the operations continued to maintain high order fill rates. Based on the volume of product we sold relative to the overall decline in housing starts, it also looks like we gained market share in a number of geographies. Wood Products also made good progress in reducing working capital, had a strong safety performance, and made significant productivity gains. Our dryer project in Medford, Oregon, is on schedule and under budget. We also successfully completed a couple of small acquisitions to complement our existing operations. We continue to operate in a very difficult demand environment, but our employees have responded to the challenges in a positive way and it shows,” commented Duane McDougall, Chairman and CEO of Boise Cascade.

Second Quarter Segment Results

U.S. housing starts declined 47% in the second quarter, dropping from an annualized rate of 1.02 million in the second quarter 2008 to 0.54 million in the second quarter 2009. In the second quarter, continuing foreclosures, elevated inventories of unsold homes, falling median home prices, rising unemployment, and low consumer confidence 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 $433.7 million, compared with $335.0 million in first quarter 2009 and $610.0 million in second quarter 2008. Compared with second quarter 2008, the 29% decline in sales resulted from a 23% decline in product volumes sold and an 8% decrease in product prices. EBITDA generated by BMD improved significantly to $9.6 million in second quarter 2009 from the negative $6.6 million of EBITDA in first quarter 2009. BMD’s second quarter 2008 EBITDA was $17.3 million. The segment’s lower sales activity compared to the same quarter a year ago resulted in fewer gross margin dollars being generated to cover cash operating costs, such as occupancy, payroll, and delivery. However, more than half of the decline in gross profit dollars compared to second quarter 2008 was offset by lower operating costs and cost reduction initiatives implemented over the last year.

Sales in our Wood Products segment during the second quarter were $134.4 million, compared with $116.5 million in first quarter 2009 and $226.0 million in second quarter 2008. Compared with second quarter 2008, sales of engineered wood products, plywood, particleboard, and lumber declined due to lower volumes and prices. Second quarter EBITDA for Wood Products was negative $9.8 million, a sharp improvement from the negative $28.6 million of EBITDA reported in first quarter 2009. Wood Products reported $3.3 million of positive EBITDA in second quarter 2008. The decrease in Wood Products EBITDA from the same quarter a year ago was driven primarily by pricing and volume declines for plywood, offset in part by lower input costs and productivity improvements. We have been taking rolling curtailments at all 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 are planning on end product demand remaining 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 unemployment trends, stronger levels of 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.