UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2012 |
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number: 333-122770
Boise Cascade Holdings, L.L.C.
(Exact name of registrant as specified in its charter)
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Delaware | 20-1478587 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1111 West Jefferson Street
Suite 300
Boise, Idaho 83702-5389
(Address of principal executive offices) (Zip Code)
(208) 384-6161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x
We are a voluntary filer of reports required of companies with public securities under Sections 13 or 15(d) of the Securities Exchange Act of 1934, and we have filed all reports which would have been required of us during the past 12 months had we been subject to such provisions.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The registrant does not have a class of registered equity securities. All of its equity securities are held by affiliates or former employees of the company.
Table of Contents
PART I—FINANCIAL INFORMATION
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ITEM 1. | FINANCIAL STATEMENTS |
Boise Cascade Holdings, L.L.C. Consolidated Statements of Income (Loss) (unaudited) |
| | | | | | | | |
| | | | |
| | Three Months Ended March 31 |
| | 2012 | | 2011 |
| | (thousands) |
Sales | | |
| | |
|
Trade | | $ | 582,040 |
| | $ | 478,807 |
|
Related parties | | 4,946 |
| | 4,440 |
|
| | 586,986 |
| | 483,247 |
|
| | | | |
Costs and expenses | | |
| | |
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Materials, labor, and other operating expenses | | 498,806 |
| | 422,832 |
|
Materials, labor, and other operating expenses from related party | | 11,318 |
| | 8,443 |
|
Depreciation and amortization | | 8,119 |
| | 8,907 |
|
Selling and distribution expenses | | 53,814 |
| | 46,970 |
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General and administrative expenses | | 9,048 |
| | 8,278 |
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Other (income) expense, net | | (368 | ) | | 2,589 |
|
| | 580,737 |
| | 498,019 |
|
| | | | |
Income (loss) from operations | | 6,249 |
| | (14,772 | ) |
| | | | |
Foreign exchange gain | | 186 |
| | 310 |
|
Interest expense | | (4,813 | ) | | (4,589 | ) |
Interest income | | 107 |
| | 146 |
|
| | (4,520 | ) | | (4,133 | ) |
| | | | |
Income (loss) before income taxes | | 1,729 |
| | (18,905 | ) |
Income tax provision | | (61 | ) | | (96 | ) |
Net income (loss) | | $ | 1,668 |
| | $ | (19,001 | ) |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Boise Cascade Holdings, L.L.C. Consolidated Statements of Comprehensive Income (Loss) (unaudited) |
| | | | | | | |
| Three Months Ended March 31 |
| 2012 | | 2011 |
| (thousands) |
Net income (loss) | $ | 1,668 |
| | $ | (19,001 | ) |
Other comprehensive income (loss) | | | |
Defined benefit pension plans | | | |
Amortization of actuarial loss | 2,026 |
| | 726 |
|
Amortization of prior service costs and other | 41 |
| | 114 |
|
Other comprehensive income | 2,067 |
| | 840 |
|
Comprehensive income (loss) | $ | 3,735 |
| | $ | (18,161 | ) |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Boise Cascade Holdings, L.L.C. Consolidated Balance Sheets (unaudited) |
| | | | | | | | |
| | March 31, 2012 | | December 31, 2011 |
| | (thousands) |
ASSETS | | |
| | |
|
Current | | |
| | |
|
Cash and cash equivalents | | $ | 164,445 |
| | $ | 182,459 |
|
Receivables | | | | |
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Trade, less allowances of $2,423 and $2,142 | | 163,294 |
| | 118,901 |
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Related parties | | 358 |
| | 1,236 |
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Other | | 3,182 |
| | 3,796 |
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Inventories | | 318,595 |
| | 283,978 |
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Prepaid expenses and other | | 6,923 |
| | 4,864 |
|
| | 656,797 |
| | 595,234 |
|
| | | | |
Property | | |
| | |
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Property and equipment, net | | 265,375 |
| | 266,456 |
|
Timber deposits | | 9,385 |
| | 8,327 |
|
| | 274,760 |
| | 274,783 |
|
| | | | |
Deferred financing costs | | 4,513 |
| | 4,962 |
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Goodwill | | 12,170 |
| | 12,170 |
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Intangible assets, net | | 8,900 |
| | 8,900 |
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Other assets | | 6,984 |
| | 6,786 |
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Total assets | | $ | 964,124 |
| | $ | 902,835 |
|
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Boise Cascade Holdings, L.L.C. Consolidated Balance Sheets (continued) (unaudited) |
| | | | | | | | |
| | March 31, 2012 | | December 31, 2011 |
| | (thousands) |
LIABILITIES AND CAPITAL | | |
Current | | | | |
Accounts payable | | | | |
Trade | | $ | 170,210 |
| | $ | 116,758 |
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Related parties | | 2,042 |
| | 1,142 |
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Accrued liabilities | | | | |
Compensation and benefits | | 38,547 |
| | 32,267 |
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Interest payable | | 7,237 |
| | 3,326 |
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Other | | 21,678 |
| | 24,486 |
|
| | 239,714 |
| | 177,979 |
|
| | | | |
Debt | | | | |
Long-term debt | | 219,560 |
| | 219,560 |
|
| | | | |
Other | | | | |
Compensation and benefits | | 195,815 |
| | 200,248 |
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Other long-term liabilities | | 13,928 |
| | 13,676 |
|
| | 209,743 |
| | 213,924 |
|
| | | | |
Redeemable equity units | | | | |
Series B equity units — 2,491 units and 2,522 units outstanding | | 2,491 |
| | 2,522 |
|
Series C equity units — 13,642 units and 13,715 units outstanding | | 6,185 |
| | 6,227 |
|
| | 8,676 |
| | 8,749 |
|
| | | | |
Commitments and contingent liabilities | |
|
| |
|
|
| | | | |
Capital | | | | |
Series A equity units — no par value; 66,000 units authorized and outstanding | | 106,083 |
| | 104,008 |
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Series B equity units — no par value; 550,000 units authorized; 532,833 units and 532,802 units outstanding, respectively | | 299,127 |
| | 299,461 |
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Series C equity units — no par value; 44,000 units authorized; 12,763 units and 12,690 units outstanding, respectively | | — |
| | — |
|
Accumulated other comprehensive loss | | (118,779 | ) | | (120,846 | ) |
Total capital | | 286,431 |
| | 282,623 |
|
Total liabilities and capital | | $ | 964,124 |
| | $ | 902,835 |
|
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Boise Cascade Holdings, L.L.C. Consolidated Statements of Cash Flows (unaudited) |
| | | | | | | | |
| | Three Months Ended March 31 |
| | 2012 | | 2011 |
| | (thousands) |
Cash provided by (used for) operations | | | | |
Net income (loss) | | $ | 1,668 |
| | $ | (19,001 | ) |
Items in net income (loss) not using (providing) cash | | | | |
|
Depreciation and amortization of deferred financing costs and other | | 8,720 |
| | 9,328 |
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Pension expense | | 3,235 |
| | 3,804 |
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Other | | (428 | ) | | 754 |
|
Decrease (increase) in working capital, net of acquisitions | | | | |
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Receivables | | (42,486 | ) | | (37,418 | ) |
Inventories | | (34,617 | ) | | (40,093 | ) |
Prepaid expenses and other | | (196 | ) | | (793 | ) |
Accounts payable and accrued liabilities | | 58,784 |
| | 13,965 |
|
Pension contributions | | (3,941 | ) | | (882 | ) |
Other | | (700 | ) | | (1,792 | ) |
Net cash used for operations | | (9,961 | ) | | (72,128 | ) |
| | | | |
Cash provided by (used for) investment | | |
| | |
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Expenditures for property and equipment | | (4,727 | ) | | (9,608 | ) |
Acquisitions of businesses and facilities | | (2,355 | ) | | — |
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Other | | (971 | ) | | (115 | ) |
Net cash used for investment | | (8,053 | ) | | (9,723 | ) |
| | | | |
Cash provided by (used for) financing | | — |
| | — |
|
| | | | |
Net decrease in cash and cash equivalents | | (18,014 | ) | | (81,851 | ) |
| | | | |
Balance at beginning of the period | | 182,459 |
| | 264,606 |
|
| | | | |
Balance at end of the period | | $ | 164,445 |
| | $ | 182,755 |
|
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Condensed Notes to Unaudited Quarterly Consolidated Financial Statements
1. Nature of Operations and Consolidation
Nature of Operations
Boise Cascade Holdings, L.L.C., is a privately held building products company headquartered in Boise, Idaho. As used in this Form 10-Q, the terms "BC Holdings," "we," and "our" refer to Boise Cascade Holdings, L.L.C., and its consolidated subsidiaries. Boise Cascade, L.L.C., our wholly owned direct subsidiary, is a leading U.S. wholesale distributor of building products and one of the largest producers of engineered wood products (EWP) and plywood in North America.
We operate our business using three reportable segments: (1) Building Materials Distribution, which is a wholesale distributor of building materials, (2) Wood Products, which manufactures and sells EWP, plywood, particleboard, dimension lumber, and ponderosa pine lumber, and (3) Corporate and Other, which includes corporate support staff services, related assets and liabilities, and foreign exchange gains and losses. For more information, see Note 8, Segment Information.
Consolidation
The accompanying quarterly consolidated financial statements have not been audited by an independent registered public accounting firm but, in the opinion of management, include all adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed within these condensed notes to unaudited quarterly consolidated financial statements, the adjustments made were of a normal, recurring nature. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The quarterly consolidated financial statements include the accounts of BC Holdings and its subsidiaries after elimination of intercompany balances and transactions. Quarterly results are not necessarily indicative of results that may be expected for the full year. These condensed notes to unaudited quarterly consolidated financial statements should be read in conjunction with our 2011 Form 10-K and the other reports we file with the Securities and Exchange Commission (SEC).
2. Summary of Significant Accounting Policies
Accounting Policies
The complete summary of significant accounting policies is included in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets, and other long-lived assets; legal contingencies; guarantee obligations; indemnifications; assumptions used in retirement benefits; and vendor and customer rebates, among others. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.
Vendor and Customer Rebates and Allowances
We receive rebates and allowances from our vendors under a number of different programs, including vendor marketing programs. At March 31, 2012, and December 31, 2011, we had $1.6 million and $2.8 million, respectively, of vendor rebates and allowances recorded in "Receivables, Other" on the Consolidated Balance Sheets. Rebates and allowances received from our vendors are recognized as a reduction of "Materials, labor, and other operating expenses" when the product is sold, unless the rebates and allowances are linked to a specific incremental cost to sell a vendor's product. Amounts received from vendors that are linked to specific selling and distribution expenses are recognized as a reduction of "Selling and distribution
expenses" in the period the expense is incurred.
We also provide rebates to our customers and our customers' customers based on the volume of their purchases. We provide the rebates to increase the sell-through of our products. The rebates are recorded as a decrease in "Sales, Trade." At March 31, 2012, and December 31, 2011, we had $11.3 million and $15.6 million, respectively, of rebates payable to our customers recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.
Leases
We lease a portion of our distribution centers as well as other property and equipment under operating leases. For purposes of determining straight-line rent expense, the lease term is calculated from the date we first take possession of the facility, including any periods of free rent and any renewal option periods we are reasonably assured of exercising. Rental expense for operating leases was $3.6 million and $3.4 million for the three months ended March 31, 2012 and 2011, respectively. Sublease rental income was not material in any of the periods presented.
Income Taxes
We are a limited liability company, and the majority of our businesses and assets are held and operated by limited liability companies, which are not subject to entity-level federal or state income taxation. Our income tax provision generally consists of income taxes payable to states that do not allow for the income tax liability to be passed through to our equity holders, as well as income taxes payable by our separate subsidiaries that are taxed as corporations.
Inventories
Inventories included the following:
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| | | | | | | | |
| | March 31, 2012 | | December 31, 2011 |
| | (thousands) |
Finished goods and work in process | | $ | 266,422 |
| | $ | 223,605 |
|
Logs | | 32,315 |
| | 41,243 |
|
Other raw materials and supplies | | 19,858 |
| | 19,130 |
|
| | $ | 318,595 |
| | $ | 283,978 |
|
Property and Equipment
Property and equipment consisted of the following asset classes:
|
| | | | | | | | |
| | March 31, 2012 | | December 31, 2011 |
| | (thousands) |
Land | | $ | 35,662 |
| | $ | 35,469 |
|
Buildings and improvements | | 118,867 |
| | 117,155 |
|
Machinery and equipment | | 331,929 |
| | 328,282 |
|
Construction in progress | | 6,701 |
| | 5,812 |
|
| | 493,159 |
| | 486,718 |
|
Less accumulated depreciation | | (227,784 | ) | | (220,262 | ) |
| | $ | 265,375 |
| | $ | 266,456 |
|
Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy under U.S. generally accepted accounting principles (GAAP) gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value (Level 1). If quoted prices in active markets for identical assets or liabilities are not available
to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly (Level 2). If quoted prices for identical or similar assets are not available or are unobservable, we may use internally developed valuation models, whose inputs include bid prices and third-party valuations utilizing underlying asset assumptions (Level 3).
As of March 31, 2012, and December 31, 2011, we held $147.5 million and $164.6 million, respectively, in money market funds that are measured at fair value on a recurring basis using Level 1 inputs.
Financial Instruments
Our financial instruments are cash, accounts receivable, accounts payable, and long-term debt. Our cash is recorded at cost, which approximates fair value. The recorded values of accounts receivable and accounts payable approximate fair values based on their short-term nature. Our debt is predominately fixed-rate. At March 31, 2012, the book value of our fixed-rate debt was $219.6 million, and the fair value was estimated to be $220.8 million. The difference between the book value and the fair value is derived from the difference between the period-end market interest rate and the stated rate of our fixed-rate, long-term debt. We estimated the fair value based on quoted market prices for our debt (Level 1 inputs).
Concentration of Credit Risk
We are exposed to credit risk related to customer accounts receivable. In order to manage credit risk, we consider customer concentrations and current economic trends and monitor the creditworthiness of customers based on ongoing credit evaluations. At March 31, 2012, and December 31, 2011, the receivables from a single customer accounted for approximately 13% and 14% of total receivables, respectively. No other customer accounted for 10% or more of total receivables.
New and Recently Adopted Accounting Standards
In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. We adopted the provisions of this guidance January 1, 2012, and it had no effect on our financial position and results of operations.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of equity, among other amendments. Instead, the company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. On December 23, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers certain provisions of ASU 2011-05. One of ASU 2011-05's provisions required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). Accordingly, this requirement is indefinitely deferred by ASU 2011-12 and will be further deliberated by the FASB at a future date. The effective date of ASU 2011-12 is the same as that for the unaffected provisions of ASU 2011-05. We adopted this guidance retrospectively for the interim period ended March 31, 2012 by adding the Consolidated Statements of Comprehensive Income (Loss) to our consolidated financial statements. In addition, accumulated other comprehensive loss was reclassified from Series B equity units to a separate line in the Consolidated Balance Sheets.
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). This ASU was issued to provide largely identical guidance about fair value measurement and disclosure requirements for entities that disclose the fair value of an asset, a liability, or an instrument classified in shareholders' equity in their consolidated financial statements as that provided in the International Accounting Standards Board's new IFRS 13, Fair Value Measurement. This ASU does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required or permitted under GAAP. ASU 2011-04 was effective for us as of January 1, 2012, but the adoption of this guidance did not have a material impact on our consolidated financial statements and associated disclosures.
There were no other accounting standards recently issued that had or are expected to have a material impact on our consolidated financial statements and associated disclosures.
3. Other (Income) Expense
Other (income) expense includes miscellaneous income and expense items. The components of "Other (income) expense, net" in the Consolidated Statements of Income (Loss) are as follows:
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| | | | | | | | |
| | Three Months Ended March 31 |
| | 2012 | | 2011 |
| | (thousands) |
Facility curtailment (a) | | $ | — |
| | $ | 1,410 |
|
Other, net (b) | | (368 | ) | | 1,179 |
|
| | $ | (368 | ) | | $ | 2,589 |
|
_______________________________________
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(a) | In first quarter 2011, we committed to indefinitely curtail a manufacturing plant in our Wood Products segment. The manufacturing plant was permanently closed on June 30, 2011. |
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(b) | In first quarter 2011, we recorded noncash asset write-downs of $1.2 million. |
Long-term debt consisted of the following:
|
| | | | | | | | |
| | March 31, 2012 | | December 31, 2011 |
| | (thousands) |
Asset-based revolving credit facility | | $ | — |
| | $ | — |
|
7.125% senior subordinated notes | | 219,560 |
| | 219,560 |
|
Total long-term debt | | $ | 219,560 |
| | $ | 219,560 |
|
Asset-Based Revolving Credit Facilities
On July 13, 2011, Boise Cascade, L.L.C., and its principal operating subsidiaries, Boise Cascade Wood Products, L.L.C., and Boise Cascade Building Materials Distribution, L.L.C., as borrowers, and Boise Cascade Wood Products Holdings Corp., as guarantor, entered into a new $250 million senior secured asset-based revolving credit facility (New Revolving Credit Facility) with Wells Fargo Capital Finance, L.L.C., as agent and the banks named therein as lenders. The New Revolving Credit Facility replaced our previous senior secured asset-based revolving credit facility with Bank of America (Prior Revolving Credit Facility) discussed below. Borrowings under the New Revolving Credit Facility are constrained by a borrowing base formula dependent upon levels of eligible inventory and receivables reduced by outstanding borrowings and letters of credit (Availability).
The New Revolving Credit Facility has a maturity date of July 13, 2016, provided that our senior subordinated notes have been repaid or refinanced prior to July 15, 2014; otherwise, the New Revolving Credit Facility will mature July 15, 2014. The New Revolving Credit Facility is secured by a first-priority security interest in substantially all of our assets, except for property and equipment. The proceeds of borrowings under the agreement are available for working capital and other general corporate purposes.
Interest rates under the New Revolving Credit Facility are based, at the company's election, on either the London Interbank Offered Rate (LIBOR) or a base rate, as defined in the agreement, plus a spread over the index elected that ranges from 1.75% to 2.25% for loans based on LIBOR and from 0.75% to 1.25% for loans based on the base rate. The spread is determined on the basis of a pricing grid that results in a higher spread as average quarterly Availability declines. Letters of credit are subject to a 0.15% fronting fee payable to the issuing bank and a fee payable to the lenders equal to the LIBOR margin rate. In addition, the company is required to pay an unused commitment fee of 0.50% per annum of the average unused portion of the lending commitments. If we have utilized more than 40% of the commitments, the unused commitment fee
percentage reduces to 0.375%.
The New Revolving Credit Facility contains customary nonfinancial covenants, including a negative pledge covenant and restrictions on new indebtedness, investments, distributions to equity holders, asset sales, and affiliate transactions, the scope of which are dependent on the Availability existing from time to time. The New Revolving Credit Facility also contains a requirement that we meet a 1:1 fixed-charge coverage ratio (FCCR) if Availability falls below the greater of $31.25 million or 12.5% of the aggregate lending commitments. Availability exceeded the minimum threshold amounts required for testing of the FCCR at all times since entering into the New Revolving Credit Facility, and Availability at March 31, 2012, was $238.7 million. At March 31, 2012, our aggregate liquidity from cash and cash equivalents and unused borrowing capacity (net of the Availability threshold amount for testing of the FCCR) under the New Revolving Credit Facility totaled $371.9 million.
The Prior Revolving Credit Facility provided up to $170 million in borrowing capacity. Interest rates under the Prior Revolving Credit Facility were based on either the prime rate plus 1.00% to 1.50% or LIBOR plus 2.50% to 3.00%, subject to quarterly adjustment based on the average availability under the Prior Revolving Credit Facility during the prior quarter. Letters of credit were subject to a 0.15% fronting fee payable to the issuing bank and a fee payable to the lenders. The Prior Revolving Credit Facility also contained borrowing base limitations and customary financial and nonfinancial covenants and imposed unused commitment fees on the amount of the total facility that was not drawn down on a quarterly basis.
At March 31, 2012, and December 31, 2011, we had no borrowings outstanding under the New Revolving Credit Facility and approximately $11.3 million of letters of credit outstanding. These letters of credit reduced our borrowing capacity under the credit facility by an equivalent amount. The minimum and maximum borrowings under the credit facility were both zero during the three months ended March 31, 2012.
Senior Subordinated Notes
In October 2004, Boise Cascade, L.L.C., issued $400 million of 7.125% senior subordinated notes due in 2014. In July 2005, we completed an exchange offer whereby all of our senior subordinated notes were exchanged for registered securities with identical terms (other than terms relating to registration rights) to the notes issued in October 2004. We may redeem all or part of the notes at any time at redemption prices set forth in the indenture governing the notes (Indenture). If we sell specific assets or experience specific kinds of changes in control, we may be required to purchase the notes. With the proceeds from the sale of our Paper and Packaging & Newsprint assets, we repurchased $160 million of the notes at par in April 2008. During 2010 and 2009, we repurchased an additional $8.6 million and $11.9 million of senior subordinated notes, respectively.
Cash Paid for Interest
For each of the three months ended March 31, 2012 and 2011, cash payments for interest, net of interest capitalized, were $0.3 million.
5. Retirement and Benefit Plans
The following table presents the pension benefit costs:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2012 | | 2011 |
| (thousands) |
Service cost | $ | 1,169 |
| | $ | 1,501 |
|
Interest cost | 4,843 |
| | 5,270 |
|
Expected return on plan assets | (4,844 | ) | | (4,483 | ) |
Recognized actuarial loss | 2,026 |
| | 726 |
|
Amortization of prior service costs | 41 |
| | 45 |
|
Curtailment loss and other | — |
| | 745 |
|
Net periodic benefit cost | $ | 3,235 |
| | $ | 3,804 |
|
In the first three months of 2012, we made $3.9 million in cash contributions to the pension plans. For the remainder of 2012, we expect to make approximately $17 million in additional contributions to the pension plans.
6. Outsourcing Services Agreement
Under an Outsourcing Services Agreement, Boise Inc. provides a number of corporate staff services to us at cost. These services include information technology, accounting, and human resource transactional services. The agreement, as extended, expires on February 22, 2014. The agreement automatically renews for successive one-year terms unless either party provides notice of termination to the other party at least 12 months in advance of the expiration date. The Outsourcing Services Agreement gives us (but not Boise Inc.) the right to terminate all or any portion of the services provided to us on 30 days' notice. Total expenses incurred under the Outsourcing Services Agreement were $3.7 million and $3.6 million for the three months ended March 31, 2012 and 2011, respectively. The majority of these expenses are recorded in "General and administrative expenses" in our Consolidated Statements of Income (Loss).
7. Transactions With Related Parties
Transactions with Louisiana Timber Procurement Company, L.L.C. (LTP) represent the only significant related-party activity recorded in our consolidated financial statements. LTP is an unconsolidated variable-interest entity that is 50% owned by Boise Cascade, L.L.C., and 50% owned by Boise Inc. LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of Boise Inc. and Boise Cascade, L.L.C., in Louisiana. See the Consolidated Statements of Income (Loss) for sales to LTP and fiber purchases from LTP. We are not the primary beneficiary of LTP, as we do not have power to direct the activities that most significantly affect the economic performance of LTP. Accordingly, we do not consolidate LTP's results in our financial statements.
8. Segment Information
We operate our business using three reportable segments: Building Materials Distribution, Wood Products, and Corporate and Other. There are no differences in our basis of measurement of segment profit or loss from those disclosed in Note 15, Segment Information, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K.
An analysis of our operations by segment is as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Income | | | | |
| | | | | | | | | | (Loss) | | | | |
| | Sales | | Before | | Depreciation | | |
| | | | Related | | Inter- | | | | Income | | and | | EBITDA |
| | Trade | | Parties | | segment | | Total | | Taxes | | Amortization | | (b) |
| | (millions) |
Three Months Ended March 31, 2012 | | |
| | |
| | |
| | |
| | |
| | |
|
Building Materials Distribution | | $ | 451.4 |
| | $ | — |
| | $ | — |
| | $ | 451.4 |
| | $ | (0.8 | ) | | $ | 2.2 |
| | $ | 1.4 |
|
Wood Products | | 130.6 |
| | 4.9 |
| | 75.6 |
| | 211.1 |
| | 10.8 |
| | 5.9 |
| | 16.7 |
|
Corporate and Other | | — |
| | — |
| | — |
| | — |
| | (3.6 | ) | | — |
| | (3.5 | ) |
Intersegment eliminations | | — |
| | — |
| | (75.6 | ) | | (75.6 | ) | | — |
| | — |
| | — |
|
| | $ | 582.0 |
| | $ | 4.9 |
| | $ | — |
| | $ | 587.0 |
| | 6.4 |
| | $ | 8.1 |
| | $ | 14.6 |
|
Interest expense | | | | | | | | | | (4.8 | ) | | | |
|
|
Interest income | | | | | | | | | | 0.1 |
| | | |
|
|
| |
| |
|
| |
|
| |
|
| | $ | 1.7 |
| |
|
| | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Income | | | | |
| | | | | | | | | | (Loss) | | | | |
| | Sales | | Before | | Depreciation | | |
| | | | Related | | Inter- | | | | Income | | and | | EBITDA |
| | Trade | | Parties | | segment | | Total | | Taxes | | Amortization | | (b) |
| | (millions) |
Three Months Ended March 31, 2011 | | |
| | |
| | |
| | |
| | |
| | |
|
Building Materials Distribution (a) | | $ | 377.6 |
| | $ | — |
| | $ | 0.2 |
| | $ | 377.8 |
| | $ | (4.6 | ) | | $ | 2.0 |
| | $ | (2.5 | ) |
Wood Products (a) | | 101.2 |
| | 4.4 |
| | 49.3 |
| | 154.9 |
| | (7.3 | ) | | 6.8 |
| | (0.5 | ) |
Corporate and Other | | — |
| | — |
| | — |
| | — |
| | (2.6 | ) | | 0.1 |
| | (2.6 | ) |
Intersegment eliminations | | — |
| | — |
| | (49.5 | ) | | (49.5 | ) | | — |
| | — |
| | — |
|
| | $ | 478.8 |
| | $ | 4.4 |
| | $ | — |
| | $ | 483.2 |
| | (14.5 | ) | | $ | 8.9 |
| | $ | (5.6 | ) |
Interest expense | | | | | | | | | | (4.6 | ) | | | | |
Interest income | | | | | | | | | | 0.1 |
| | | | |
| |
|
| |
|
| |
|
| |
|
| | $ | (18.9 | ) | |
|
| |
|
|
___________________________________
| |
(a) | In March 2011, we committed to indefinitely curtail a manufacturing plant in our Wood Products segment, and we recorded the related expense of $1.4 million in "Other (income) expense, net" and $0.1 million of accelerated depreciation in "Depreciation and Amortization" in our Consolidated Statement of Income (Loss) for the three months ended March 31, 2011. The manufacturing plant was permanently closed on June 30, 2011. Also, during the three months ended March 31, 2011, we recorded $1.2 million of noncash asset write-downs in "Other (income) expense, net," of which $0.8 million was recorded in our Building Materials Distribution segment and $0.4 million was recorded in our Wood Products segment. |
| |
(b) | EBITDA represents income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization. EBITDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance and to decide how to allocate resources to segments. We believe EBITDA is useful to investors because it provides a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that are used by our internal decision makers and because it is 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 is a meaningful measure because it presents a transparent view of our recurring operating performance and allows management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. EBITDA, however, is not a measure of our liquidity or financial performance under generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), income (loss) 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 instead of net income (loss) or segment income (loss) 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 the limitations of EBITDA by relying on our GAAP results. Our measure of EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. |
The following is a reconciliation of net income (loss) to EBITDA:
|
| | | | | | | | |
| | Three Months Ended March 31 |
| | 2012 | | 2011 |
| (millions) |
Net income (loss) | | $ | 1.7 |
| | $ | (19.0 | ) |
Interest expense | | 4.8 |
| | 4.6 |
|
Interest income | | (0.1 | ) | | (0.1 | ) |
Income tax provision | | 0.1 |
| | 0.1 |
|
Depreciation and amortization | | 8.1 |
| | 8.9 |
|
EBITDA | | $ | 14.6 |
| | $ | (5.6 | ) |
9. Commitments, Legal Proceedings and Contingencies, and Guarantees
Commitments
We have commitments for leases and long-term debt that are discussed further under "Leases" in Note 2, Summary of Significant Accounting Policies, and Note 4, Debt. We are a party to a number of long-term log and fiber supply agreements that are discussed in Note 16, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K. In addition, we have purchase obligations for goods and services, capital expenditures, and raw materials entered into in the normal course of business. At March 31, 2012, there have been no material changes to the commitments disclosed in the 2011 Form 10-K.
Legal Proceedings and Contingencies
We are a party to routine legal proceedings that arise in the ordinary course of our business. We are not currently a party to any legal proceedings or environmental claims that we believe would, individually or in the aggregate, have a material adverse effect on our financial position, results of operations, or cash flows.
Guarantees
We provide guarantees, indemnifications, and assurances to others. Note 16, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K describes the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make. As of March 31, 2012, there have been no material changes to the guarantees disclosed in the 2011 Form 10-K.
10. Consolidating Guarantor and Nonguarantor Financial Information
The following consolidating financial information presents the Statements of Comprehensive Income (Loss), Balance Sheets, and Cash Flows related to our business. The senior subordinated notes are guaranteed on a senior subordinated basis jointly and severally by BC Holdings and each of its existing and future subsidiaries (other than: (i) the co-issuers, Boise Cascade, L.L.C., and Boise Cascade Finance Corporation and (ii) our foreign subsidiaries). Other than the consolidated financial statements and footnotes for BC Holdings and the consolidating financial information, financial statements, and other disclosures concerning the guarantors have not been presented because management believes that such information is not material to investors.
Furthermore, the cancellation provisions in the Indenture related to the guarantor subsidiaries are customary, and they do not include an arrangement that permits a guarantor subsidiary to opt out of the obligation prior to or during the term of the debt. Each guarantor subsidiary is automatically released from its obligations as a guarantor upon the sale of the subsidiary or substantially all of its assets to a third party, the designation of the subsidiary as an unrestricted subsidiary for purposes of the covenants included in the Indenture, the release of the indebtedness under the Indenture, or if the issuers exercise their legal defeasance option or the discharge of their obligations in accordance with the Indenture.
Boise Cascade Holdings, L.L.C., and Subsidiaries
Consolidating Statements of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2012
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
Sales | | |
| | |
| | |
| | |
| | |
| | |
|
Trade | | $ | — |
| | $ | — |
| | $ | 579,302 |
| | $ | 2,738 |
| | $ | — |
| | $ | 582,040 |
|
Intercompany | | — |
| | — |
| | — |
| | 3,251 |
| | (3,251 | ) | | — |
|
Related parties | | — |
| | — |
| | 4,946 |
| | — |
| | — |
| | 4,946 |
|
| | — |
| | — |
| | 584,248 |
| | 5,989 |
| | (3,251 | ) | | 586,986 |
|
| | | | | | | | | | | | |
Costs and expenses | | |
| | |
| | |
| | |
| | |
| | |
|
Materials, labor, and other operating expenses | | — |
| | — |
| | 496,022 |
| | 6,179 |
| | (3,395 | ) | | 498,806 |
|
Materials, labor, and other operating expenses from related party | | — |
| | — |
| | 11,318 |
| | — |
| | — |
| | 11,318 |
|
Depreciation and amortization | | — |
| | 32 |
| | 7,640 |
| | 447 |
| | — |
| | 8,119 |
|
Selling and distribution expenses | | — |
| | — |
| | 53,059 |
| | 755 |
| | — |
| | 53,814 |
|
General and administrative expenses | | — |
| | 3,663 |
| | 5,241 |
| | — |
| | 144 |
| | 9,048 |
|
Other (income) expense, net | | — |
| | 47 |
| | 243 |
| | (658 | ) | | — |
| | (368 | ) |
| | — |
| | 3,742 |
| | 573,523 |
| | 6,723 |
| | (3,251 | ) | | 580,737 |
|
| | | | | | | | | | | | |
Income (loss) from operations | | — |
| | (3,742 | ) | | 10,725 |
| | (734 | ) | | — |
| | 6,249 |
|
| | | | | | | | | | | | |
Foreign exchange gain | | — |
| | 51 |
| | 75 |
| | 60 |
| | — |
| | 186 |
|
Interest expense | | — |
| | (4,813 | ) | | — |
| | — |
| | — |
| | (4,813 | ) |
Interest income | | — |
| | 51 |
| | 56 |
| | — |
| | — |
| | 107 |
|
| | — |
| | (4,711 | ) | | 131 |
| | 60 |
| | — |
| | (4,520 | ) |
| | | | | | | | | | | | |
Income (loss) before income taxes and equity in net income (loss) of affiliates | | — |
| | (8,453 | ) | | 10,856 |
| | (674 | ) | | — |
| | 1,729 |
|
Income tax provision | | — |
| | (52 | ) | | (9 | ) | | — |
| | — |
| | (61 | ) |
| | | | | | | | | | | | |
Income (loss) before equity in net income (loss) of affiliates | | — |
| | (8,505 | ) | | 10,847 |
| | (674 | ) | | — |
| | 1,668 |
|
Equity in net income (loss) of affiliates | | 1,668 |
| | 10,173 |
| | — |
| | — |
| | (11,841 | ) | | — |
|
Net income (loss) | | 1,668 |
| | 1,668 |
| | 10,847 |
| | (674 | ) | | (11,841 | ) | | 1,668 |
|
Other comprehensive income (loss) | | | | | | | | | | | | |
Defined benefit pension plans | | | | | | | | | | | | |
Amortization of actuarial loss | | — |
| | 2,026 |
| | — |
| | — |
| | — |
| | 2,026 |
|
Amortization of prior service costs | | — |
| | 41 |
| | — |
| | — |
| | — |
| | 41 |
|
Other comprehensive income | | — |
| | 2,067 |
| | — |
| | — |
| | — |
| | 2,067 |
|
Comprehensive income (loss) | | $ | 1,668 |
| | $ | 3,735 |
| | $ | 10,847 |
| | $ | (674 | ) | | $ | (11,841 | ) | | $ | 3,735 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries
Consolidating Statements of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2011
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
Sales | | |
| | |
| | |
| | |
| | |
| | |
|
Trade | | $ | — |
| | $ | — |
| | $ | 475,782 |
| | $ | 3,025 |
| | $ | — |
| | $ | 478,807 |
|
Intercompany | | — |
| | — |
| | — |
| | 1,577 |
| | (1,577 | ) | | — |
|
Related parties | | — |
| | — |
| | 4,440 |
| | — |
| | — |
| | 4,440 |
|
| | — |
| | — |
| | 480,222 |
| | 4,602 |
| | (1,577 | ) | | 483,247 |
|
| | | | | | | | | | | | |
Costs and expenses | | |
| | |
| | |
| | |
| | |
| | |
|
Materials, labor, and other operating expenses | | — |
| | — |
| | 419,788 |
| | 4,730 |
| | (1,686 | ) | | 422,832 |
|
Materials, labor, and other operating expenses from related party | | — |
| | — |
| | 8,443 |
| | — |
| | — |
| | 8,443 |
|
Depreciation and amortization | | — |
| | 61 |
| | 8,380 |
| | 466 |
| | — |
| | 8,907 |
|
Selling and distribution expenses | | — |
| | — |
| | 46,347 |
| | 623 |
| | — |
| | 46,970 |
|
General and administrative expenses | | — |
| | 2,886 |
| | 5,283 |
| | — |
| | 109 |
| | 8,278 |
|
Other (income) expense, net | | — |
| | — |
| | 2,484 |
| | 105 |
| | — |
| | 2,589 |
|
| | — |
| | 2,947 |
| | 490,725 |
| | 5,924 |
| | (1,577 | ) | | 498,019 |
|
| | | | | | | | | | | | |
Loss from operations | | — |
| | (2,947 | ) | | (10,503 | ) | | (1,322 | ) | | — |
| | (14,772 | ) |
| | | | | | | | | | | | |
Foreign exchange gain | | — |
| | 103 |
| | 38 |
| | 169 |
| | — |
| | 310 |
|
Interest expense | | — |
| | (4,589 | ) | | — |
| | — |
| | — |
| | (4,589 | ) |
Interest income | | — |
| | 70 |
| | 76 |
| | — |
| | — |
| | 146 |
|
| | — |
| | (4,416 | ) | | 114 |
| | 169 |
| | — |
| | (4,133 | ) |
| | | | | | | | | | | | |
Loss before income taxes and equity in net income (loss) of affiliates | | — |
| | (7,363 | ) | | (10,389 | ) | | (1,153 | ) | | — |
| | (18,905 | ) |
Income tax provision | | — |
| | (43 | ) | | (53 | ) | | — |
| | — |
| | (96 | ) |
| | | | | | | | | | | | |
Loss before equity in net income (loss) of affiliates | | — |
| | (7,406 | ) | | (10,442 | ) | | (1,153 | ) | | — |
| | (19,001 | ) |
Equity in net income (loss) of affiliates | | (19,001 | ) | | (11,595 | ) | | — |
| | — |
| | 30,596 |
| | — |
|
Net income (loss) | | (19,001 | ) | | (19,001 | ) | | (10,442 | ) | | (1,153 | ) | | 30,596 |
| | (19,001 | ) |
Other comprehensive income (loss) | | | | | | | | | | | | |
Defined benefit pension plans | | | | | | | | | | | | |
Amortization of actuarial loss | | — |
| | 726 |
| | — |
| | — |
| | — |
| | 726 |
|
Amortization of prior service costs and other | | — |
| | 114 |
| | — |
| | — |
| | — |
| | 114 |
|
Other comprehensive income | | — |
| | 840 |
| | — |
| | — |
| | — |
| | 840 |
|
Comprehensive income (loss) | | $ | (19,001 | ) | | $ | (18,161 | ) | | $ | (10,442 | ) | | $ | (1,153 | ) | | $ | 30,596 |
| | $ | (18,161 | ) |
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Balance Sheets at March 31, 2012 (unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
ASSETS | | |
| | |
| | |
| | |
| | |
| | |
|
Current | | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | | $ | 4 |
| | $ | 164,341 |
| | $ | 20 |
| | $ | 80 |
| | $ | — |
| | $ | 164,445 |
|
Receivables | | | | | | | | | | | | |
|
Trade, less allowances | | — |
| | — |
| | 161,602 |
| | 1,692 |
| | — |
| | 163,294 |
|
Related parties | | — |
| | 16 |
| | 342 |
| | — |
| | — |
| | 358 |
|
Other | | — |
| | (138 | ) | | 3,042 |
| | 278 |
| | — |
| | 3,182 |
|
Inventories | | — |
| | — |
| | 313,572 |
| | 5,023 |
| | — |
| | 318,595 |
|
Prepaid expenses and other | | — |
| | 4,080 |
| | 2,749 |
| | 94 |
| | — |
| | 6,923 |
|
| | 4 |
| | 168,299 |
| | 481,327 |
| | 7,167 |
| | — |
| | 656,797 |
|
| | | | | | | | | | | | |
Property | | |
| | |
| | |
| | |
| | |
| | |
|
Property and equipment, net | | — |
| | 1,263 |
| | 254,504 |
| | 9,608 |
| | — |
| | 265,375 |
|
Timber deposits | | — |
| | — |
| | 9,385 |
| | — |
| | — |
| | 9,385 |
|
| | — |
| | 1,263 |
| | 263,889 |
| | 9,608 |
| | — |
| | 274,760 |
|
| | | | | | | | | | | | |
Deferred financing costs | | — |
| | 4,513 |
| | — |
| | — |
| | — |
| | 4,513 |
|
Goodwill | | — |
| | — |
| | 12,170 |
| | — |
| | — |
| | 12,170 |
|
Intangible assets, net | | — |
| | — |
| | 8,900 |
| | — |
| | — |
| | 8,900 |
|
Other assets | | — |
| | 20 |
| | 6,963 |
| | 1 |
| | — |
| | 6,984 |
|
Investments in affiliates | | 295,103 |
| | 580,378 |
| | — |
| | — |
| | (875,481 | ) | | — |
|
Total assets | | $ | 295,107 |
| | $ | 754,473 |
| | $ | 773,249 |
| | $ | 16,776 |
| | $ | (875,481 | ) | | $ | 964,124 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Balance Sheets at March 31, 2012 (continued) (unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
LIABILITIES AND CAPITAL | | |
| | |
| | |
| | |
| | |
| | |
|
Current | | |
| | |
| | |
| | |
| | |
| | |
|
Accounts payable | | |
| | |
| | |
| | |
| | |
| | |
|
Trade | | $ | — |
| | $ | 7,581 |
| | $ | 162,085 |
| | $ | 544 |
| | $ | — |
| | $ | 170,210 |
|
Related parties | | — |
| | 395 |
| | 1,647 |
| | — |
| | — |
| | 2,042 |
|
Accrued liabilities | | — |
| | — |
| | — |
| | — |
| | — |
| | |
|
Compensation and benefits | | — |
| | 15,939 |
| | 22,205 |
| | 403 |
| | — |
| | 38,547 |
|
Interest payable | | — |
| | 7,237 |
| | — |
| | — |
| | — |
| | 7,237 |
|
Other | | — |
| | 2,578 |
| | 18,725 |
| | 375 |
| | — |
| | 21,678 |
|
| | — |
| | 33,730 |
| | 204,662 |
| | 1,322 |
| | — |
| | 239,714 |
|
| | | | | | | | | | | | |
Debt | | |
| | |
| | |
| | |
| | |
| | |
|
Long-term debt | | — |
| | 219,560 |
| | — |
| | — |
| | — |
| | 219,560 |
|
| | | | | | | | | | | | |
Other | | |
| | |
| | |
| | |
| | |
| | |
|
Compensation and benefits | | — |
| | 195,815 |
| | — |
| | — |
| | — |
| | 195,815 |
|
Other long-term liabilities | | — |
| | 10,265 |
| | 3,663 |
| | — |
| | — |
| | 13,928 |
|
| | — |
| | 206,080 |
| | 3,663 |
| | — |
| | — |
| | 209,743 |
|
| | | | | | | | | | | | |
Redeemable equity units | | |
| | |
| | |
| | |
| | |
| | |
|
Series B equity units | | 2,491 |
| | — |
| | — |
| | — |
| | — |
| | 2,491 |
|
Series C equity units | | 6,185 |
| | — |
| | — |
| | — |
| | — |
| | 6,185 |
|
Redeemable equity units | | — |
| | 8,676 |
| | — |
| | — |
| | (8,676 | ) | | — |
|
| | 8,676 |
| | 8,676 |
| | — |
| | — |
| | (8,676 | ) | | 8,676 |
|
| | | | | | | | | | | | |
Commitments and contingent liabilities | | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | |
Capital | | |
| | |
| | |
| | |
| | |
| | |
|
Series A equity units | | 106,083 |
| | — |
| | — |
| | — |
| | — |
| | 106,083 |
|
Series B equity units | | 180,348 |
| | — |
| | — |
| | — |
| | 118,779 |
| | 299,127 |
|
Series C equity units | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Accumulated other comprehensive loss | | — |
| | (118,779 | ) | | — |
| | — |
| | — |
| | (118,779 | ) |
Subsidiary equity | | — |
| | 405,206 |
| | 564,924 |
| | 15,454 |
| | (985,584 | ) | | — |
|
Total capital | | 286,431 |
| | 286,427 |
| | 564,924 |
| | 15,454 |
| | (866,805 | ) | | 286,431 |
|
Total liabilities and capital | | $ | 295,107 |
| | $ | 754,473 |
| | $ | 773,249 |
| | $ | 16,776 |
| | $ | (875,481 | ) | | $ | 964,124 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Balance Sheets at December 31, 2011
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
ASSETS | | |
| | |
| | |
| | |
| | |
| | |
|
Current | | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | | $ | 4 |
| | $ | 182,326 |
| | $ | 20 |
| | $ | 109 |
| | $ | — |
| | $ | 182,459 |
|
Receivables | | | | | | | | | | | | |
|
Trade, less allowances | | — |
| | — |
| | 118,267 |
| | 634 |
| | — |
| | 118,901 |
|
Related parties | | — |
| | 935 |
| | 301 |
| | — |
| | — |
| | 1,236 |
|
Intercompany | | — |
| | — |
| | 56 |
| | — |
| | (56 | ) | | — |
|
Other | | — |
| | (90 | ) | | 3,661 |
| | 225 |
| | — |
| | 3,796 |
|
Inventories | | — |
| | — |
| | 278,580 |
| | 5,398 |
| | — |
| | 283,978 |
|
Prepaid expenses and other | | — |
| | 843 |
| | 3,972 |
| | 49 |
| | — |
| | 4,864 |
|
| | 4 |
| | 184,014 |
| | 404,857 |
| | 6,415 |
| | (56 | ) | | 595,234 |
|
| | | | | | | | | | | | |
Property | | |
| | |
| | |
| | |
| | |
| | |
|
Property and equipment, net | | — |
| | 1,259 |
| | 255,117 |
| | 10,080 |
| | — |
| | 266,456 |
|
Timber deposits | | — |
| | — |
| | 8,327 |
| | — |
| | — |
| | 8,327 |
|
| | — |
| | 1,259 |
| | 263,444 |
| | 10,080 |
| | — |
| | 274,783 |
|
| | | | | | | | | | | | |
Deferred financing costs | | — |
| | 4,962 |
| | — |
| | — |
| | — |
| | 4,962 |
|
Goodwill | | — |
| | — |
| | 12,170 |
| | — |
| | — |
| | 12,170 |
|
Intangible assets, net | | — |
| | — |
| | 8,900 |
| | — |
| | — |
| | 8,900 |
|
Other assets | | — |
| | 20 |
| | 6,765 |
| | 1 |
| | — |
| | 6,786 |
|
Investments in affiliates | | 291,368 |
| | 557,925 |
| | — |
| | — |
| | (849,293 | ) | | — |
|
Total assets | | $ | 291,372 |
| | $ | 748,180 |
| | $ | 696,136 |
| | $ | 16,496 |
| | $ | (849,349 | ) | | $ | 902,835 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Balance Sheets at December 31, 2011 (continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
LIABILITIES AND CAPITAL | | |
| | |
| | |
| | |
| | |
| | |
|
Current | | |
| | |
| | |
| | |
| | |
| | |
|
Accounts payable | | |
| | |
| | |
| | |
| | |
| | |
|
Trade | | $ | — |
| | $ | 8,633 |
| | $ | 107,336 |
| | $ | 789 |
| | $ | — |
| | $ | 116,758 |
|
Related parties | | — |
| | 395 |
| | 747 |
| | — |
| | — |
| | 1,142 |
|
Intercompany | | — |
| | — |
| | — |
| | 56 |
| | (56 | ) | | — |
|
Accrued liabilities | | | | | | | | | | | | |
|
Compensation and benefits | | — |
| | 12,104 |
| | 19,816 |
| | 347 |
| | — |
| | 32,267 |
|
Interest payable | | — |
| | 3,326 |
| | — |
| | — |
| | — |
| | 3,326 |
|
Other | | — |
| | 2,470 |
| | 21,045 |
| | 971 |
| | — |
| | 24,486 |
|
| | — |
| | 26,928 |
| | 148,944 |
| | 2,163 |
| | (56 | ) | | 177,979 |
|
| | | | | | | | | | | | |
Debt | | |
| | |
| | |
| | |
| | |
| | |
|
Long-term debt | | — |
| | 219,560 |
| | — |
| | — |
| | — |
| | 219,560 |
|
| | | | | | | | | | | | |
Other | | |
| | |
| | |
| | |
| | |
| | |
|
Compensation and benefits | | — |
| | 200,248 |
| | — |
| | — |
| | — |
| | 200,248 |
|
Other long-term liabilities | | — |
| | 10,076 |
| | 3,600 |
| | — |
| | — |
| | 13,676 |
|
| | — |
| | 210,324 |
| | 3,600 |
| | — |
| | — |
| | 213,924 |
|
| | | | | | | | | | | | |
Redeemable equity units | | |
| | |
| | |
| | |
| | |
| | |
|
Series B equity units | | 2,522 |
| | — |
| | — |
| | — |
| | — |
| | 2,522 |
|
Series C equity units | | 6,227 |
| | — |
| | — |
| | — |
| | — |
| | 6,227 |
|
Redeemable equity units | | — |
| | 8,749 |
| | — |
| | — |
| | (8,749 | ) | | — |
|
| | 8,749 |
| | 8,749 |
| | — |
| | — |
| | (8,749 | ) | | 8,749 |
|
| | | | | | | | | | | | |
Commitments and contingent liabilities | | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | |
Capital | | |
| | |
| | |
| | |
| | |
| | |
|
Series A equity units | | 104,008 |
| | — |
| | — |
| | — |
| | — |
| | 104,008 |
|
Series B equity units | | 178,615 |
| | — |
| | — |
| | — |
| | 120,846 |
| | 299,461 |
|
Series C equity units | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Accumulated other comprehensive loss | | — |
| | (120,846 | ) | | — |
| | — |
| | — |
| | (120,846 | ) |
Subsidiary equity | | — |
| | 403,465 |
| | 543,592 |
| | 14,333 |
| | (961,390 | ) | | — |
|
Total capital | | 282,623 |
| | 282,619 |
| | 543,592 |
| | 14,333 |
| | (840,544 | ) | | 282,623 |
|
Total liabilities and capital | | $ | 291,372 |
| | $ | 748,180 |
| | $ | 696,136 |
| | $ | 16,496 |
| | $ | (849,349 | ) | | $ | 902,835 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2012 (unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
Cash provided by (used for) operations | | |
| | |
| | |
| | |
| | |
| | |
|
Net income (loss) | | $ | 1,668 |
| | $ | 1,668 |
| | $ | 10,847 |
| | $ | (674 | ) | | $ | (11,841 | ) | | $ | 1,668 |
|
Items in net income (loss) not using (providing) cash | | |
| | |
| | |
| | |
| | |
| | |
|
Equity in net (income) loss of affiliates | | (1,668 | ) | | (10,173 | ) | | — |
| | — |
| | 11,841 |
| | — |
|
Depreciation and amortization of deferred financing costs and other | | — |
| | 633 |
| | 7,640 |
| | 447 |
| | — |
| | 8,720 |
|
Pension expense | | — |
| | 3,235 |
| | — |
| | — |
| | — |
| | 3,235 |
|
Other | | — |
| | (15 | ) | | (98 | ) | | (315 | ) | | — |
| | (428 | ) |
Decrease (increase) in working capital, net of acquisitions | | |
| | |
| | |
| | |
| | |
| | |
|
Receivables | | — |
| | 967 |
| | (42,701 | ) | | (696 | ) | | (56 | ) | | (42,486 | ) |
Inventories | | — |
| | — |
| | (34,992 | ) | | 375 |
| | — |
| | (34,617 | ) |
Prepaid expenses and other | | — |
| | (1,383 | ) | | 1,231 |
| | (44 | ) | | — |
| | (196 | ) |
Accounts payable and accrued liabilities | | — |
| | 3,770 |
| | 55,799 |
| | (841 | ) | | 56 |
| | 58,784 |
|
Pension contributions | | — |
| | (3,941 | ) | | — |
| | — |
| | — |
| | (3,941 | ) |
Other | | — |
| | (461 | ) | | (239 | ) | | — |
| | — |
| | (700 | ) |
Net cash used for operations | | — |
| | (5,700 | ) | | (2,513 | ) | | (1,748 | ) | | — |
| | (9,961 | ) |
Cash provided by (used for) investment | | |
| | |
| | |
| | |
| | |
| | |
|
Expenditures for property and equipment | | — |
| | (5 | ) | | (4,646 | ) | | (76 | ) | | — |
| | (4,727 | ) |
Acquisitions of businesses and facilities | | — |
| | — |
| | (2,355 | ) | | — |
| | — |
| | (2,355 | ) |
Other | | — |
| | — |
| | (971 | ) | | — |
| | — |
| | (971 | ) |
Net cash used for investment | | — |
| | (5 | ) | | (7,972 | ) | | (76 | ) | | — |
| | (8,053 | ) |
Cash provided by (used for) financing | | |
| | |
| | |
| | |
| | |
| | |
|
Due to (from) affiliates | | — |
| | (12,280 | ) | | 10,485 |
| | 1,795 |
| | — |
| | — |
|
Net cash provided by (used for) financing | | — |
| | (12,280 | ) | | 10,485 |
| | 1,795 |
| | — |
| | — |
|
Net decrease in cash and cash equivalents | | — |
| | (17,985 | ) | | — |
| | (29 | ) | | — |
| | (18,014 | ) |
Balance at beginning of the period | | 4 |
| | 182,326 |
| | 20 |
| | 109 |
| | — |
| | 182,459 |
|
Balance at end of the period | | $ | 4 |
| | $ | 164,341 |
| | $ | 20 |
| | $ | 80 |
| | $ | — |
| | $ | 164,445 |
|
Boise Cascade Holdings, L.L.C., and Subsidiaries Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2011 (unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Boise Cascade Holdings, L.L.C. (Parent) | | Boise Cascade, L.L.C. | | Guarantor Subsidiaries | | Non- guarantor Subsidiaries | | Eliminations | | Consolidated |
| | (thousands) |
Cash provided by (used for) operations | | |
| | |
| | |
| | |
| | |
| | |
|
Net income (loss) | | $ | (19,001 | ) | | $ | (19,001 | ) | | $ | (10,442 | ) | | $ | (1,153 | ) | | $ | 30,596 |
| | $ | (19,001 | ) |
Items in net income (loss) not using (providing) cash | | | | | | | | | | | | |
|
Equity in net (income) loss of affiliates | | 19,001 |
| | 11,595 |
| | — |
| | — |
| | (30,596 | ) | | — |
|
Depreciation and amortization of deferred financing costs and other | | — |
| | 482 |
| | 8,380 |
| | 466 |
| | — |
| | 9,328 |
|
Pension expense | | — |
| | 3,804 |
| | — |
| | — |
| | — |
| | 3,804 |
|
Other | | — |
| | (90 | ) | | 620 |
| | 224 |
| | — |
| | 754 |
|
Decrease (increase) in working capital | | | | | | | | | | | | |
Receivables | | — |
| | 60 |
| | (37,553 | ) | | 75 |
| | — |
| | (37,418 | ) |
Inventories | | — |
| | — |
| | (38,076 | ) | | (2,017 | ) | | — |
| | (40,093 | ) |
Prepaid expenses and other | | — |
| | (1,817 | ) | | 1,133 |
| | (109 | ) | | — |
| | (793 | ) |
Accounts payable and accrued liabilities | | — |
| | 4,908 |
| | 9,571 |
| | (514 | ) | | — |
| | 13,965 |
|
Pension contributions | | — |
| | (882 | ) | | — |
| | — |
| | — |
| | (882 | ) |
Other | | — |
| | (2,094 | ) | | 307 |
| | (5 | ) | | — |
| | (1,792 | ) |
Net cash used for operations | | — |
| | (3,035 | ) | | (66,060 | ) | | (3,033 | ) | | — |
| | (72,128 | ) |
Cash provided by (used for) investment | | |
| | |
| | |
| | |
| | |
| | |
|
Expenditures for property and equipment | | — |
| | (11 | ) | | (9,521 | ) | | (76 | ) | | — |
| | (9,608 | ) |
Other | | — |
| | 95 |
| | (297 | ) | | 87 |
| | — |
| | (115 | ) |
Net cash provided by (used for) investment | | — |
| | 84 |
| | (9,818 | ) | | 11 |
| | — |
| | (9,723 | ) |
Cash provided by (used for) financing | | |
| | |
| | |
| | |
| | |
| | |
|
Parent/subsidiary equity transactions | | (1 | ) | | 1 |
| | — |
| | — |
| | — |
| | — |
|
Due to (from) affiliates | | — |
| | (78,854 | ) | | 75,878 |
| | 2,976 |
| | — |
| | — |
|
Net cash provided by (used for) financing | | (1 | ) | | (78,853 | ) | | 75,878 |
| | 2,976 |
| | — |
| | — |
|
Net decrease in cash and cash equivalents | | (1 | ) | | (81,804 | ) | | — |
| | (46 | ) | | — |
| | (81,851 | ) |
Balance at beginning of the period | | 5 |
| | 264,364 |
| | 16 |
| | 221 |
| | — |
| | 264,606 |
|
Balance at end of the period | | $ | 4 |
| | $ | 182,560 |
| | $ | 16 |
| | $ | 175 |
| | $ | — |
| | $ | 182,755 |
|
| |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Understanding Our Financial Information
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in "Item 1. Financial Statements" of this Form 10-Q, as well as our 2011 Form 10-K. The following discussion includes statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other nonhistorical statements in the discussion, are forward-looking. These forward-looking statements include, without limitation, any statement that may predict, indicate, or imply future results, performance, or achievements and may contain the words "may," "will," "expect," "believe," "should," "plan," "anticipate," and other similar expressions. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Item 1A. Risk Factors" in our 2011 Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). There have been no material changes to our risk factors during the three months ended March 31, 2012, from those listed in our 2011 Form 10-K. We do not assume an obligation to update any forward-looking statement. Our future actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q.
Background
Boise Cascade Holdings, L.L.C., is a privately held building products company headquartered in Boise, Idaho. As used in this Form 10-Q, the terms "BC Holdings," "we," and "our" refer to Boise Cascade Holdings, L.L.C., and its consolidated subsidiaries. Boise Cascade, L.L.C., our wholly owned direct subsidiary, is a leading U.S. wholesale distributor of building products and one of the largest producers of engineered wood products (EWP) and plywood in North America.
We operate our business using three reportable segments: (1) Building Materials Distribution, which is a wholesale distributor of building materials, (2) Wood Products, which manufactures and sells EWP, plywood, particleboard, dimension lumber, and ponderosa pine lumber, and (3) Corporate and Other, which includes corporate support staff services, related assets and liabilities, and foreign exchange gains and losses. For more information, see Note 8, Segment Information, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q.
Executive Overview
Our first quarter 2012 revenues and earnings were positively affected by improved demand for our products, compared with the same period in the prior year. While our revenues and earnings continue to be negatively affected by demand below historical levels for the products we distribute and manufacture, we believe the mild winter in the U.S., improved residential construction activity, and our market share gains in EWP and plywood contributed to a better start of the year.
We recorded income from operations of $6.2 million during the three months ended March 31, 2012, compared with a loss from operations of $14.8 million during the three months ended March 31, 2011. Our improved results were driven primarily by sales volume growth and commodity price increases. Also, the three months ended March 31, 2011, was negatively affected by $2.7 million of charges related to the closure of a manufacturing plant in our Wood Products segment and noncash asset write-downs. These changes are discussed further in "Our Operating Results" below.
At March 31, 2012, we had $164.4 million of cash and cash equivalents and $207.4 million of usable committed bank line availability. We used $18.0 million of cash during the three months ended March 31, 2012, principally to fund seasonal working capital increases, capital spending, pension contributions, and acquisitions, as discussed further in "Liquidity and Capital Resources" below.
Demand for our products closely correlates with the level of residential construction activity in the U.S., which has historically been cyclical. As of April 2012, the Blue Chip Economic Indicators consensus forecast for 2012 single- and multi-family housing starts in the U.S. was 0.74 million units, compared with actual housing starts of 0.61 million in 2011 and 0.59 million in 2010, as reported by the U.S. Census Bureau. These amounts are significantly below historical trends of approximately 1.3 million units per year over the ten years prior to 2012. Single-family housing starts are a primary driver of
our sales, and although 2012 housing starts are projected to be higher than in 2011, the mix of housing starts in recent years has included a lower proportion of single-family detached units, which typically have higher building product utilization per start, than multi-family units. We estimate that a detached single-family unit uses approximately three times more building products than a typical multi-family unit, based on higher square footage per unit as well as greater materials usage per square foot.
Unemployment rates in the U.S. improved to 8.2% as of March 31, 2012, from 8.9% as of March 31, 2011. We believe continued employment growth, prospective homebuyers' access to capital, and improved consumer confidence will be necessary to increase household formation rates. Improved household formation rates in turn will help reduce excess housing inventory and stimulate new construction. Along with many forecasters, we believe household formation rates will eventually return to long-term historical levels.
Although we have seen improvements in new residential construction and unemployment rates during the last year, we remain cautious regarding the timing and extent of a sustained recovery in construction activity. For the remainder of 2012, we expect the demand for new residential construction to remain depressed, as excess housing inventory levels, a weak labor market, competition from distressed home sales, household formation below historical levels, and restrictive lending conditions for both home buyers and builders persist. The near-term weakness in residential construction will likely cause us to continue to operate some of our facilities below their capacity, as we manage our production levels to sales demand.
Factors That Affect Our Operating Results
Our results of operations and financial performance are influenced by a variety of factors, including the following:
| |
• | General economic conditions, including but not limited to housing starts, repair-and-remodel activity and light commercial construction, foreclosure rates, interest rates, unemployment rates, and relative currency values; |
| |
• | Inventory levels of new and existing homes for sale; |
| |
• | Mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products; |
| |
• | Availability and affordability of raw materials, including wood fiber, glues and resins, and energy; |
| |
• | The commodity nature of our products and their price movements, which are driven largely by supply and demand; |
| |
• | Industry cycles and capacity utilization rates; |
| |
• | Actions of suppliers, customers, and competitors, including merger and acquisition activities, plant closures, and financial failures; |
| |
• | Availability of financing in the banking and capital markets, which affects our ability to fund our liquidity needs; |
| |
• | The impact of actuarial assumptions on pension costs and pension funding requirements; |
| |
• | Cost of compliance with government regulations; |
| |
• | Legislative or regulatory environments, requirements, or changes affecting the businesses in which we are engaged; |
| |
• | Labor and personnel relations and shortages of skilled and technical labor; |
| |
• | The financial condition and creditworthiness of our customers; |
| |
• | Major equipment failure; |
| |
• | Severe weather phenomena such as drought, hurricanes, tornadoes, and fire; |
| |
• | Attraction and retention of key management and other key employees; and |
| |
• | The other factors described in "Item 1A. Risk Factors" in our 2011 Form 10-K. |
Our Operating Results
The following tables set forth our operating results in dollars and as a percentage of sales for the three months ended March 31, 2012 and 2011:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2012 | | 2011 |
| (millions) |
Sales | | | |
Trade | $ | 582.0 |
| | $ | 478.8 |
|
Related parties | 4.9 |
| | 4.4 |
|
| 587.0 |
| | 483.2 |
|
| | | |
Costs and expenses | |
| | |
|
Materials, labor, and other operating expenses | 498.8 |
| | 422.8 |
|
Materials, labor, and other operating expenses from related party | 11.3 |
| | 8.4 |
|
Depreciation and amortization | 8.1 |
| | 8.9 |
|
Selling and distribution expenses | 53.8 |
| | 47.0 |
|
General and administrative expenses | 9.0 |
| | 8.3 |
|
Other (income) expense, net | (0.4 | ) | | 2.6 |
|
| 580.7 |
| | 498.0 |
|
| | | |
Income (loss) from operations | $ | 6.2 |
| | $ | (14.8 | ) |
| | | |
| (percentage of sales) |
Sales | | | |
Trade | 99.2 | % | | 99.1 | % |
Related parties | 0.8 |
| | 0.9 |
|
| 100.0 | % | | 100.0 | % |
| | | |
Costs and expenses | | | |
Materials, labor, and other operating expenses, including related party | 86.9 | % | | 89.2 | % |
Depreciation and amortization | 1.4 |
| | 1.8 |
|
Selling and distribution expenses | 9.2 |
| | 9.7 |
|
General and administrative expenses | 1.5 |
| | 1.7 |
|
Other (income) expense, net | (0.1 | ) | | 0.5 |
|
| 98.9 | % | | 103.1 | % |
| | | |
Income (loss) from operations | 1.1 | % | | (3.1 | )% |
Sales Volumes and Prices
Set forth below are historical U.S. housing starts data, sales mix information for our Building Materials Distribution segment, and segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment for the three months ended March 31, 2012 and 2011.
|
| | | | | | | |
| Three Months Ended March 31 |
| 2012 | | 2011 |
| (millions) |
U.S. Housing Starts (a) | | | |
Single-family | 104.6 |
| | 89.6 |
|
Multi-family | 45.0 |
| | 35.9 |
|
| 149.6 |
| | 125.5 |
|
| | | |
Segment Sales | | | |
Building Materials Distribution | $ | 451.4 |
| | $ | 377.8 |
|
Wood Products | 211.1 |
| | 154.9 |
|
Intersegment eliminations | (75.6 | ) | | (49.5 | ) |
| $ | 587.0 |
| | $ | 483.2 |
|
| | | |
| (percentage of Building Materials Distribution sales) |
Building Materials Distribution | | | |
Product Line Sales | | | |
Commodity | 50.2 | % | | 50.8 | % |
General line | 36.5 | % | | 38.4 | % |
Engineered wood | 13.3 | % | | 10.8 | % |
| | | |
| (millions) |
Wood Products | | | |
Sales Volumes | | | |
Laminated veneer lumber (LVL) (cubic feet) | 2.1 |
| | 1.6 |
|
I-joists (equivalent lineal feet) | 30 |
| | 22 |
|
Plywood (sq. ft.) (3/8" basis) | 328 |
| | 240 |
|
Lumber (board feet) | 41 |
| | 38 |
|
| | | |
| (dollars per unit) |
Wood Products | | | |
Average Net Selling Prices | | | |
Laminated veneer lumber (LVL) (cubic foot) | $ | 15.05 |
| | $ | 16.14 |
|
I-joists (1,000 equivalent lineal feet) | 935 |
| | 974 |
|
Plywood (1,000 sq. ft.) (3/8" basis) | 267 |
| | 232 |
|
Lumber (1,000 board feet) | 414 |
| | 410 |
|
_______________________________________
(a) Actual U.S. housing starts data as reported by the U.S. Census Bureau.
Sales
For the three months ended March 31, 2012, total sales increased $103.8 million, or 21%, to $587.0 million from $483.2 million during the three months ended March 31, 2011. The increase in sales was driven primarily by increases in sales volumes and prices for many of the products we manufacture and distribute. U.S. housing starts increased 19% in first quarter 2012, compared with the same period in the prior year. Single-family housing starts, which are a primary driver of our sales and typically result in higher building product utilization per start than multi-family units, experienced an increase of 17% for the
quarter, compared with the same period in 2011. Despite the prolonged weakness in residential construction, we believe we are continuing to gain market share for EWP and plywood.
Building Materials Distribution. Sales increased $73.6 million, or 19%, to $451.4 million for the three months ended March 31, 2012, from $377.8 million for the three months ended March 31, 2011. The increase in sales was driven primarily by improvements in sales volumes and prices of 16% and 3%, respectively. By product line, sales of EWP (sourced through our Wood Products segment), commodity, and general line products increased 48%, 18%, and 13%, respectively.
Wood Products. Sales, including sales to our Building Materials Distribution segment, increased $56.2 million, or 36%, to $211.1 million for the three months ended March 31, 2012, from $154.9 million for the three months ended March 31, 2011. The increase in sales was due primarily to higher plywood sales volumes and prices, increased EWP sales volumes, and higher byproduct sales, offset partially by declines in EWP prices. Plywood sales volumes increased 37% primarily as a result of increased operating rates and market share gains. LVL and I-joist sales volumes increased 32% and 36%, respectively, due to the capture of further sales opportunities with customers and further EWP market penetration. Plywood prices increased 15%, offset partially by declines in LVL and I-joist sales prices of 7% and 4%, respectively.
Costs and Expenses
Materials, labor, and other operating expenses, including from related party, increased $78.8 million, or 18%, to $510.1 million for the three months ended March 31, 2012, compared with $431.3 million during the same period in the prior year. The increase primarily reflects higher purchased materials costs as a result of higher sales volumes in our Building Materials Distribution segment. In addition, higher manufacturing costs were driven by higher sales volumes of plywood and EWP in our Wood Products segment, as well as higher per-unit log costs. However, manufacturing costs in our Wood Products segment decreased as a percentage of sales due to higher average sales prices, productivity improvements, and the leveraging of our fixed manufacturing costs due to higher sales volumes.
Depreciation and amortization expenses decreased $0.8 million, or 9%, to $8.1 million for the three months ended March 31, 2012, compared with $8.9 million during the same period in the prior year. The decrease was due primarily to certain property and equipment becoming fully depreciated during 2011.
Selling and distribution expenses increased $6.8 million, or 15%, to $53.8 million for the three months ended March 31, 2012, compared with $47.0 million for the same period in the prior year. The increase was due primarily to higher transportation costs in our Building Materials Distribution segment, as well as increased compensation and benefit costs. Increased operating performance resulted in higher incentive compensation costs.
General and administrative expenses increased $0.7 million, or 9%, to $9.0 million for the three months ended March 31, 2012, compared with $8.3 million for the same period in the prior year. The increase was due primarily to higher incentive compensation costs as a result of increased operating performance.
For the three months ended March 31, 2012, other (income) expense, net, was insignificant. Other (income) expense, net, for the three months ended March 31, 2011, was $2.6 million of expense, including $1.4 million related to the closure of a manufacturing plant in our Wood Products segment and $1.2 million in noncash asset write-downs.
Income (Loss) From Operations
Income (loss) from operations increased $21.0 million to $6.2 million of income for the three months ended March 31, 2012, compared with a $14.8 million loss for the three months ended March 31, 2011. Our improved financial results were driven primarily by higher sales volumes and prices for many of the products we manufacture and distribute. In addition, during the three months ended March 31, 2011, we recorded $2.7 million of charges related to the closure of a manufacturing plant in our Wood Products segment and noncash asset write-downs. These changes are discussed in more detail below.
Building Materials Distribution. Segment loss decreased $3.8 million, or 82%, to $0.8 million for the three months ended March 31, 2012, from $4.6 million for the three months ended March 31, 2011. The decrease in segment loss was driven primarily by improvements in sales volumes and prices of 16% and 3%, respectively. Gross margins were flat, compared with the same period in the prior year. While total selling and distribution expenses increased 12%, these costs decreased as a percentage of segment sales by 70 basis points, as selling and distribution expenses did not increase at the same rate as sales. In addition, during the three months ended March 31, 2011, we recorded a noncash asset write-down of $0.8 million.
Wood Products. Segment income (loss) increased $18.1 million to $10.8 million of income for the three months ended
March 31, 2012, from a $7.3 million loss for the three months ended March 31, 2011. This increase in segment income was driven primarily by higher plywood sales prices and increased byproduct sales, as well as lower per-unit manufacturing costs resulting from higher sales volumes of EWP and plywood and productivity improvements. These improvements were offset partially by higher log costs, an increase in selling and distribution costs, and declines in EWP prices. In addition, during the three months ended March 31, 2011, we recorded charges of $1.9 million related to the closure of a manufacturing plant and noncash asset write-downs.
Liquidity and Capital Resources
Continued concerns over the low level of residential construction activity, high number of actual and pending foreclosures, availability and cost of credit, high levels of unemployment, and lack of consumer and business confidence create uncertainty around the amount of cash flow we will generate during the remainder of 2012. In response to the continued economic uncertainty and to conserve our liquidity, we will continue to manage production levels to sales demand.
We ended first quarter 2012 with $164.4 million of cash and $219.6 million of long-term debt. At March 31, 2012, we had $371.9 million of available liquidity (cash and cash equivalents and unused borrowing capacity under our senior secured asset-based revolving credit facility). We used $18.0 million of cash during the three months ended March 31, 2012, principally to fund seasonal working capital increases, capital spending, pension contributions, and acquisitions, as discussed below.
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations, working capital, and pension contributions for at least the next 12 months.
Sources and Uses of Cash
We generate cash from sales of our products and from short-term and long-term borrowings as well as from cash proceeds from the sale of nonstrategic assets. Our primary uses of cash are for expenses related to the manufacture and distribution of building products, including fiber, inventory purchased for resale, labor, energy, and glues and resins. In addition to paying for ongoing operating costs, we use cash to invest in our business, repay debt, and meet our contractual obligations and commercial commitments. Below is a discussion of our sources and uses of cash for operating activities, investing activities, and financing activities.
|
| | | | | | | |
| Three Months Ended March 31 |
| 2012 | | 2011 |
| (thousands) |
Cash used for operations | $ | (9,961 | ) | | $ | (72,128 | ) |
Cash used for investment | (8,053 | ) | | (9,723 | ) |
Cash provided by (used for) financing | — |
| | — |
|
Operating Activities
For the three months ended March 31, 2012, our operating activities used $10.0 million of cash, compared with $72.1 million of cash used for operations in the same period in 2011. The $10.0 million of cash used for operations was due primarily to an $18.5 million increase in working capital and pension contributions of $3.9 million, partially offset by $13.2 million of income (net of noncash income and expenses). The $72.1 million of cash used for operations during the three months ended March 31, 2011, was driven primarily by increases in working capital of $64.3 million and $5.1 million of loss (net of noncash income and expenses).
The increases in working capital in both periods were attributable primarily to higher receivables and inventories, partially offset by an increase in accounts payable and accrued liabilities. The increases in receivables in both periods primarily reflect increased sales of approximately 23% and 21%, comparing sales for the months of March 2012 and 2011 with sales for the months of December 2011 and 2010, respectively. The increases in inventories during the three months ended March 31, 2012 and 2011, represent normal seasonal inventory build. The increase in accounts payable and accrued liabilities provided $58.8 million of cash during the three months ended March 31, 2012, compared with $14.0 million in the same period a year ago. During the three months ended March 31, 2012, extended terms offered by major vendors to our Building Materials Distribution segment led to the significant increase in accounts payable.
Investment Activities
During the three months ended March 31, 2012 and 2011, we used approximately $4.7 million and $9.6 million, respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance. We expect capital expenditures in 2012 to total approximately $25 million to $30 million, excluding acquisitions. This level of capital expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, and timing of equipment purchases. During the three months ended March 31, 2012, we also used $2.4 million for the acquisition of a sawmill in Arden, Washington, which we believe will improve fiber integration and enhance the product mix capabilities in our Inland Region lumber operations.
Financing Activities
Cash used for financing activities was zero for each of the three months ended March 31, 2012 and 2011.
For more information related to our debt structure, see the discussion under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2011 Form 10-K. Except as updated in Note 4, Debt, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q, as of the date of this filing, there have been no other changes to our debt structure.
Contractual Obligations
For information on contractual obligations, see Contractual Obligations in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2011 Form 10-K. During the three months ended March 31, 2012, there were no material changes to our contractual obligations outside the normal course of business.
Off-Balance-Sheet Activities
At March 31, 2012, and December 31, 2011, we had no material off-balance-sheet arrangements with unconsolidated entities.
Guarantees
Note 10, Debt, Note 16, Commitments, Legal Proceedings and Contingencies, and Guarantees, and Note 18, Consolidating Guarantor and Nonguarantor Financial Information, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2011 Form 10-K describe the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make. As of March 31, 2012, there have been no material changes to the guarantees disclosed in our 2011 Form 10-K.
Seasonal and Inflationary Influences
We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products industry. Seasonal changes in levels of building activity affect our building products businesses, which are dependent on housing starts, repair-and-remodel activities, and light commercial construction activities. We typically report lower sales in the first and fourth quarters due to the impact of poor weather on the construction market, and we generally have higher sales in the second and third quarters, reflecting an increase in construction due to more favorable weather conditions. We typically have higher working capital in the second and third quarters due to the summer building season. Seasonally cold weather increases costs, especially energy consumption, at most of our manufacturing facilities.
Our major costs of production are wood fiber, labor, glue and resins, and energy. Wood fiber costs, glue and resin costs, and diesel fuel prices have been volatile in recent years.
Employees
As of March 31, 2012, we had approximately 4,380 employees. Approximately 31% of these employees work pursuant to collective bargaining agreements. As of March 31, 2012, we had ten collective bargaining agreements, of which five agreements, representing 616 employees, are up for renewal in 2012 and one agreement, covering 90 employees at our AllJoist facility in Canada, expired on December 31, 2011. We are continuing to work under the expired contract pending
negotiations. On May 31, 2012, the contracts at four Wood Products manufacturing facilities and one Building Materials Distribution location in the Pacific Northwest expire, and related negotiations commenced at the end of April 2012. We do not expect material work interruptions or increases in our costs during the course of the negotiations with our collective bargaining units. Nevertheless, if our expectations are not accurate, we could experience a material labor disruption or significantly increased labor costs at one or more of our facilities, any of which could prevent us from meeting customer demand or reduce our sales and profitability.
Environmental
For additional information on environmental issues, see Environmental in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2011 Form 10-K.
Critical Accounting Estimates
Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments, often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our board of directors. For information about critical accounting estimates, see Critical Accounting Estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2011 Form 10-K. As of March 31, 2012, there have been no changes to our critical accounting estimates disclosed in our 2011 Form 10-K.
New and Recently Adopted Accounting Standards
For information related to new and recently adopted accounting standards, see "New and Recently Adopted Accounting Standards" in Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information relating to quantitative and qualitative disclosures about market risk, see the discussion under "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" and under the headings "Disclosures of Financial Market Risks" and "Financial Instruments" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2011 Form 10-K. As of March 31, 2012, there have been no material changes in our exposure to market risk from those disclosed in our 2011 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Attached as exhibits to this Form 10-Q are certifications of our chief executive officer (CEO) and chief financial officer (CFO). Rule 13a-14 of the Securities Exchange Act of 1934, as amended, requires that we include these certifications with this report. This Controls and Procedures section includes information concerning the disclosure controls and procedures referred to in the certifications. You should read this section in conjunction with the certifications.
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, defines such term. We have designed these controls and procedures to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We have also designed our disclosure controls to provide reasonable assurance that such information is accumulated and communicated to our senior management, including the CEO and CFO, as appropriate, to allow them to make timely decisions regarding our required disclosures.
We evaluate the effectiveness of our disclosure controls and procedures on at least a quarterly basis. A number of key components in our internal control system assist us in these evaluations. Since the company's inception, we have had a disclosure committee. The committee meets regularly and includes input from our senior management, general counsel, and internal audit staff. This committee is charged with considering and evaluating the materiality of information and reviewing the company's disclosure obligations on a timely basis. Our internal audit department also evaluates components of our internal controls on an ongoing basis. To assist in its evaluations, the internal audit staff identifies, documents, and tests our controls
and procedures. Our intent is to maintain disclosure controls and procedures as dynamic processes that change as our business and working environments change.
Under an Outsourcing Services Agreement, Boise Inc. provides a number of corporate staff services to us at cost. These services include information technology, accounting, and human resource transactional services. Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, including the effectiveness of the services provided to us under the Outsourcing Services Agreement, as of the end of the quarter covered by this Form 10-Q. Based on that evaluation, our CEO and CFO have concluded that, as of such date, our disclosure controls and procedures were effective in meeting the objectives for which they were designed and were operating at a reasonable assurance level.
Limitations on the Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, we recognized that disclosure controls and procedures, no matter how well conceived and well operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. We have also designed our disclosure controls and procedures based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to routine legal proceedings that arise in the ordinary course of our business. We are not currently a party to any legal proceedings or environmental claims that we believe would, individually or in the aggregate, have a material adverse effect on our financial position, results of operations, or cash flows.
ITEM 1A. RISK FACTORS
This report on Form 10-Q contains forward-looking statements. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results, projected capital expenditures, and future business prospects, are forward-looking statements. You can identify these statements by our use of words such as "may," "will," "expect," "believe," "should," "plan," "anticipate," and other similar expressions. You can find examples of these statements throughout this report, including "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." We cannot guarantee that our actual results will be consistent with the forward-looking statements we make in this report. You should review carefully the risk factors listed in "Item 1A. Risk Factors" in our 2011 Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission. There have been no material changes to our risk factors during the three months ended March 31, 2012, from those listed in our 2011 Form 10-K. We do not assume an obligation to update any forward-looking statement.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Required exhibits are listed in the Index to Exhibits and are incorporated by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| | |
| | BOISE CASCADE HOLDINGS, L.L.C. |
| | |
| | |
| | /s/ Kelly E. Hibbs |
| | Kelly E. Hibbs Vice President and Controller |
| | (As Duly Authorized Officer and Chief Accounting Officer) |
Date: May 3, 2012
BOISE CASCADE HOLDINGS, L.L.C.
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2012
|
| | | |
Number | | Description |
| | |
| | |
31.1 |
| | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
31.2 |
| | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
101 |
| (a) | Financial Statements in XBRL Format |
| | |
(a) Furnished with this Quarterly Report on Form 10-Q. |