Boise Cascade reports Q1 net income of US$5.6M compared with US$80.8M a year earlier on sales up 3% to US$767.2M; unusually severe weather conditions reduced demand for building materials, negatively impacted operating costs, says CEO

BOISE, Idaho , April 23, 2014 (press release) – Boise Cascade Company (Boise Cascade or Company) (NYSE: BCC) today reported financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Highlights

  • Total Company sales in first quarter 2014 were $767.2 million, 3% above the same quarter in 2013, with sales growth of 9% in Wood Products and 1% in Building Materials Distribution (BMD).
  • Net income was $5.6 million in first quarter 2014, or $0.14 per share. First quarter 2013 net income was $80.8 million, or $12.2 million, after adjusting for a $68.7 million income tax benefit associated with recording net deferred tax assets upon the Company's conversion from a limited liability company to a corporation. Earnings per share and adjusted earnings per share in first quarter 2013 were $2.15 and $0.32, respectively.
  • The Company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $26.8 million in first quarter 2014, down 19% from the $33.0 million recorded in first quarter 2013. Wood Products’ first quarter 2014 EBITDA was $23.0 million, down 15% from first quarter 2013. BMD’s first quarter 2014 EBITDA was $8.2 million, down 20% from the prior year. BMD’s first quarter 2014 EBITDA included a $1.6 million pretax gain from the disposition of two surplus properties.
In first quarter 2014, total and single-family U.S. housing starts both declined 2% from the same period last year. The April 2014 Blue Chip consensus forecast for 2014 reflects 1.08 million total U.S. housing starts, a 17% expected increase from 2013 levels, but still well below the historical average for the last 20 years of approximately 1.4 million starts per year.

“The first quarter presented unusually severe weather conditions in many parts of the country which reduced the demand for building materials, negatively impacted our operating costs, and, at times, disrupted rail and truck shipments to our customers. Lower commodity wood products prices, particularly structural panels, also made the year-over-year quarterly sales and earnings comparisons challenging. However, our sales activity is picking up as we move into the second quarter and we still believe the housing recovery will continue to progress in 2014,” commented Tom Carlile, CEO.

                               1Q 2014         1Q 2013         4Q 2013
                               (thousands)
        Consolidated Results
        Sales                  $   767,180     $   744,878     $   798,344
        EBITDA1                26,788          33,035          33,132
        Net income             5,565           80,836          9,828
        Adjusted net income1   5,565           12,170          9,828
        Segment Results
        Wood Products sales    $   293,274     $   269,216     $   301,252
        Wood Products EBITDA1  23,027          27,061          25,100
        BMD sales              585,530         581,129         615,467
        BMD EBITDA1            8,168           10,175          13,388
        Corporate EBITDA1      (4,407      )   (4,201      )   (5,356      )

1 For reconciliations of non-GAAP measures, see summary notes at the end of this press release.
        
Wood Products

Sales, including sales to our Building Materials Distribution segment, increased $24.1 million, or 9%, to $293.3 million for the three months ended March 31, 2014, from $269.2 million for the three months ended March 31, 2013. The Company’s acquisition of two plywood manufacturing facilities on September 30, 2013, was the primary factor behind 20% higher plywood sales volumes. The higher plywood sales volumes increased sales by $22.7 million. Price increases of 5% in engineered wood products and 23% in lumber resulted in sales increases of $5.3 million and $4.9 million, respectively. These increases were offset partially by a decrease of $15.2 million due to 11% lower plywood prices.

Wood Products EBITDA decreased $4.1 million to $23.0 million for the three months ended March 31, 2014, from $27.1 million for the three months ended March 31, 2013. The decline was due primarily to lower plywood sales prices and higher wood fiber costs, offset partially by higher EWP and lumber sales prices, as well as EBITDA from the two recently acquired plywood manufacturing facilities.

Building Materials Distribution

Sales increased $4.4 million, or 1%, to $585.5 million for the three months ended March 31, 2014, from $581.1 million for the three months ended March 31, 2013. Compared with the same quarter in the prior year, the overall increase in sales was driven primarily by improvements in sales volumes of 5%, offset partially by a decrease in sales prices of 4%. By product line, sales of EWP (substantially all of which is sourced through our Wood Products segment) increased 7%, or $6.5 million, and general line product sales increased 4%, or $6.4 million, offset partially by a decrease in commodity sales of 3%, or $8.5 million.

BMD EBITDA decreased $2.0 million to $8.2 million for the three months ended March 31, 2014, from $10.2 million for the three months ended March 31, 2013. The decrease in income was driven primarily by a lower gross margin of $1.9 million primarily as a result of lower sales prices. In addition, a $1.9 million increase in selling and distribution expenses was partially offset by a $1.6 million pretax gain recorded in other income from the sale of two surplus properties.

Balance Sheet

Boise Cascade ended the first quarter with $86.0 million of cash and cash equivalents and $341.3 million of undrawn committed bank line availability, for total available liquidity of $427.3 million. The company reported $301.6 million of outstanding debt at March 31, 2014.

Balance Sheet Boise Cascade ended the first quarter with $86.0 million of cash and cash equivalents and $341.3 million of undrawn committed bank line availability, for total available liquidity of $427.3 million. The company reported $301.6 million of outstanding debt at March 31, 2014.

Outlook

We expect to continue to experience demand below 20-year average historical levels for the products we manufacture and distribute. The housing industry in the U.S. improved in 2012 and 2013, and we remain optimistic that the improvement in demand for our products will continue in 2014. Future commodity product pricing could be volatile in response to industry capacity restarts and operating rates, inventory levels in various distribution channels, and seasonal demand patterns. We expect to manage our production levels to our sales demand, which will likely result in operating some of our facilities below their capacity until demand improves further.

About Boise Cascade

Boise Cascade Company is one of the largest producers of plywood and engineered wood products in North America and a leading U.S. wholesale distributor of building products. For more information, please visit our website at www.bc.com.

Webcast and Conference Call

Boise Cascade will host a webcast and conference call on Wednesday, April 23, at 11 a.m. Eastern, at which time we will review the Company's first quarter.

You can join the webcast through our website by going to www.bc.com and clicking on the Event Calendar link under the Investor Relations heading. Please go to the website at least 15 minutes before the start of the webcast to register. To join the conference call, dial 855-209-5834 (international callers should dial 315-625-6883), participant passcode 28671783, at least 10 minutes before the start of the call.

The archived webcast will be available in the Investor Relations section of our website. A replay of the conference call will be available from Wednesday, April 23, at 2 p.m. Eastern through Wednesday, April 30, at 11 p.m. Eastern. Replay numbers are 855-859-2056 for U.S. calls and 404-537-3406 for international calls, and the passcode will be 28671783.

Basis of Presentation

We refer to the terms EBITDA and adjusted net income in this earnings release. EBITDA and adjusted net income are supplemental measures of our performance and liquidity that are not required by or presented in accordance with generally accepted accounting principles in the United States ("GAAP"). We define EBITDA as income before interest (interest expense and interest income), income taxes, and depreciation and amortization. We define adjusted net income as net income before certain unusual items.

EBITDA is the primary measure used by our management to evaluate segment operating performance and to decide how to allocate resources to segments. We believe EBITDA and adjusted net income are useful to investors because they provide a means to evaluate the operating performance of our segments and our Company on an ongoing basis using criteria that are used by our management and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. We believe EBITDA and adjusted net income are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. EBITDA and adjusted net income, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as an alternative to net income, income from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of EBITDA and adjusted net income instead of net income or segment income has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense, interest income, and associated significant cash requirements; and the exclusion of depreciation and amortization, which represent unavoidable operating costs. Management compensates for these limitations by relying on our GAAP results. Our measures of EBITDA and adjusted net income are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.



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