Boise Cascade Company Reports Second Quarter 2022 Results
BOISE, Idaho - Boise Cascade Company ("Boise Cascade," the "Company," "we," or "our") (NYSE: BCC) today reported net income of $218.1 million, or $5.49 per share, on sales of $2.3 billion for the second quarter ended June 30, 2022, compared with net income of $302.6 million, or $7.62 per share, on sales of $2.4 billion for the second quarter ended June 30, 2021.
“We recently completed the acquisition of Coastal Plywood Company, and I am pleased to welcome our new associates to the Boise Cascade team. The acquisition represents a major step forward in supporting the growth of our EWP capacity and further leveraging our integrated business model. We are focused on successfully integrating the new operations into our system,” commented Nate Jorgensen, CEO. “Both of our businesses continued to operate well during the second quarter, and our financial results reflect that fact. Economic uncertainty and expectations of softening demand for new residential construction are a reality as we move through the balance of the year. However, our balance sheet remains strong and flexible, and I am confident in our ability to effectively adjust to the economic landscape ahead while still executing upon our organic growth plans.”
Second Quarter 2022 Highlights
2Q 2022
2Q 2021
% change
(in thousands, except per-share data and percentages)
Consolidated Results
Sales
$
2,278,072
$
2,443,161
(7)
%
Net income
218,111
302,556
(28)
%
Net income per common share - diluted
5.49
7.62
(28)
%
Adjusted EBITDA 1
317,229
430,323
(26)
%
Segment Results
Wood Products sales
$
536,030
$
594,569
(10)
%
Wood Products income
154,101
213,761
(28)
%
Wood Products EBITDA 1
167,754
227,889
(26)
%
Building Materials Distribution sales
2,131,200
2,172,744
(2)
%
Building Materials Distribution income
154,308
206,338
(25)
%
Building Materials Distribution EBITDA 1
161,036
212,255
(24)
%
1 For reconciliations of non-GAAP measures, see summary notes at the end of this press release.
In second quarter 2022, total U.S. housing starts increased 3% driven by an increase in multi-family housing starts compared to the same period in 2021. However, single-family housing starts decreased 3% compared to the prior year quarter. On a year-to-date basis through June 2022, total housing starts increased 6%, while single-family housing starts remained flat when compared with the same period in 2021. Single-family housing starts are the key demand driver for our sales.
Wood Products
Wood Products' sales, including sales to Building Materials Distribution (BMD), decreased $58.6 million, or 10%, to $536.0 million for the three months ended June 30, 2022, from $594.6 million for the three months ended June 30, 2021. The decrease in sales was driven primarily by lower sales prices and sales volumes for plywood and lower sales volumes for I-joists and LVL (collectively referred to as EWP). These decreases were offset partially by higher sales prices for EWP.
Comparative average net selling prices and sales volume changes for EWP and plywood are as follows:
2Q 2022 vs. 2Q 2021
2Q 2022 vs. 1Q 2022
Average Net Selling Prices
LVL
45%
8%
I-joists
52%
10%
Plywood
(35)%
(17)%
Sales Volumes
LVL
(3)%
(1)%
I-joists
(8)%
6%
Plywood
(17)%
(11)%
Wood Products' segment income decreased $59.7 million to $154.1 million for the three months ended June 30, 2022, from $213.8 million for the three months ended June 30, 2021. The decrease in segment income was due primarily to lower plywood sales prices and higher per-unit labor, wood fiber, and other manufacturing costs due in part to lower plywood and EWP sales volumes. These decreases in segment income were offset partially by higher EWP sales prices.
Building Materials Distribution
BMD's sales decreased $41.5 million, or 2%, to $2,131.2 million for the three months ended June 30, 2022, from $2,172.7 million for the three months ended June 30, 2021. Compared with the same quarter in the prior year, the overall decrease in sales was driven by a sales volume decrease of 4%, offset partially by a sales price increase of 2%. By product line, commodity sales decreased 27%, general line product sales increased 24%, and sales of EWP (substantially all of which are sourced through our Wood Products segment) increased 59%.
BMD segment income decreased $52.0 million to $154.3 million for the three months ended June 30, 2022, from $206.3 million in the comparative prior year quarter. The decrease in segment income was driven by lower sales volumes and a gross margin decrease of $44.5 million, resulting from a decline in commodity prices during the second quarter 2022. However, the negative impacts from commodity price declines were offset partially by margin improvements for both EWP and general line products. In addition, general and administrative and selling and distribution expenses increased $3.3 million and $2.0 million, respectively.
2
Recent Developments
On July 25, 2022, the Company completed the acquisition of Coastal Plywood Company and its plywood manufacturing operations located in Havana, Florida, and Chapman, Alabama, for a purchase price of $517 million, inclusive of estimated working capital at closing of $27 million, which is subject to post-closing adjustments. The Company funded the acquisition and related costs with cash on hand.
Balance Sheet and Liquidity
Boise Cascade ended second quarter 2022 with $1,033.0 million of cash and cash equivalents and $346.0 million of undrawn committed bank line availability, for total available liquidity of $1,379.0 million. The Company had $445.0 million of outstanding debt at June 30, 2022.
Excluding acquisitions, we expect capital expenditures in 2022 to total approximately $100 million to $120 million. Our 2022 capital expenditures range includes funding to complete our BMD organic expansions in Ohio, Kentucky, and Minnesota, replacement of a dryer at our Chester, South Carolina, veneer and plywood plant, and initial veneer equipment related spending at the Chapman, Alabama facility. This level of capital expenditures could increase or decrease as a result of several factors, including acquisitions, efforts to further accelerate organic growth, exercise of lease purchase options, our financial results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases.
Dividends
On July 28, 2022, our board of directors declared a quarterly dividend of $0.12 per share on our common stock, payable on September 15, 2022, to stockholders of record on September 1, 2022.
Future dividend declarations, including amount per share, record date and payment date, will be made at the discretion of our board of directors and will depend upon, among other things, legal capital requirements and surplus, our future operations and earnings, general financial condition, material cash requirements, restrictions imposed by our asset-based credit facility and the indenture governing our senior notes, applicable laws, and other factors that our board of directors may deem relevant.
Stock Repurchase Program
On July 28, 2022, our board of directors authorized the repurchase of an additional 1.5 million shares of our common stock. This increase is in addition to the remaining authorized shares under our prior common stock repurchase program. The total combined authorization is approximately 2.0 million shares and represents approximately 5% of shares outstanding. Share repurchases may be made on an opportunistic basis through open market transactions, privately negotiated transactions, or by other means in accordance with applicable federal securities laws. We are not obligated to purchase any shares, and there is no set date that the program will expire. Our board of directors, at its discretion, may increase or decrease the number of authorized shares or terminate the program at any time.
Outlook
Demand for the products we manufacture, as well as the products we purchase and distribute, is correlated with new residential construction, residential repair-and-remodeling activity and light commercial construction. Consensus forecasts for 2022 single- and multi-family housing starts in the U.S are around 1.6 million units, or essentially flat compared to 2021. We believe that current U.S. demographics and limited new and existing home inventory support this level of housing starts. In addition, the age of U.S. housing stock and elevated levels of homeowner equity provide a favorable backdrop for repair-and-remodel spending. However, recent monetary policy shifts to increase interest rates to combat high levels of inflation have significantly increased mortgage rates and created a great deal of uncertainty broadly across the U.S. economy. As such, we expect the pace of new residential construction in second half of 2022 to slow due to home affordability constraints and a weakening economy. While potentially tempered by an economic slowdown, we anticipate the primary drivers of repair-and-remodeling activity to continue to be supportive of homeowners' further investment in their residences.
3
As a manufacturer of certain commodity products, we have sales and profitability exposure to declines in
commodity product prices and rising input costs. Our distribution business purchases and resells a broad mix of commodity products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability. We expect future commodity product pricing and commodity input costs to be volatile in response to economic uncertainties, industry operating rates, transportation constraints or disruptions, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns. EWP and general line products have historically experienced limited price volatility, but are also subject to price erosion as economic activity slows.
About Boise Cascade
Boise Cascade Company is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. For more information, please visit the Company's website at www.bc.com.
Webcast and Conference Call
Boise Cascade will host a webcast and conference call to discuss second quarter earnings on Tuesday, August 2, 2022, at 11 a.m. Eastern.
To join the webcast, go to the Investor Relations section at www.bc.com and select the Event Calendar link. Analysts and investors who wish to ask questions during the Q&A session can register for the call here. Investors are advised to dial in at least 10 minutes prior to the call.
The archived webcast will be available in the Investor Relations section of Boise Cascade's website.
Use of Non-GAAP Financial Measures
We refer to the terms EBITDA and Adjusted EBITDA in this earnings release and the accompanying Quarterly Statistical Information as supplemental measures of our performance and liquidity that are not required by or presented in accordance with generally accepted accounting principles in the United States (GAAP). We define EBITDA as income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization. Additionally, we disclose Adjusted EBITDA, which further adjusts EBITDA to exclude the change in fair value of interest rate swaps.
We believe EBITDA and Adjusted EBITDA are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. We also believe EBITDA and Adjusted EBITDA are useful to investors because they provide a means to evaluate the operating performance of our segments and our Company on an ongoing basis using criteria that are used by our management and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. EBITDA and Adjusted EBITDA, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as alternatives to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity. The use of EBITDA and Adjusted EBITDA instead of net income (loss) or segment income (loss) have limitations as analytical tools, including: the inability to determine profitability; the exclusion of interest expense, interest income, and associated significant cash requirements; and the exclusion of depreciation and amortization, which represent unavoidable operating costs. Management compensates for these limitations by relying on our GAAP results. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.
4
Forward-Looking Statements
This press release includes statements about our expectations of future operational and financial performance that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements regarding our Outlook. Statements preceded or followed by, or that otherwise include, the words "believes," "expects," "anticipates," "intends," "project," "estimates," "plans," "forecast," "is likely to," and similar expressions or future or conditional verbs such as "will," "may," "would," "should," and "could" are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. The accuracy of such statements is subject to a number of risks, uncertainties, and assumptions that could cause our actual results to differ materially from those projected, including, but not limited to, prices for building products, changes in the competitive position of our products, commodity input costs, the effect of general economic conditions, our ability to efficiently and effectively integrate the Coastal Plywood acquisition, the effect of COVID-19 and related variants, mortgage rates and availability, housing demand, housing vacancy rates, governmental regulations, unforeseen production disruptions, as well as natural disasters. These and other factors that could cause actual results to differ materially from such forward-looking statements are discussed in greater detail in our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date of this press release. We undertake no obligation to revise them in light of new information. Finally, we undertake no obligation to review or confirm analyst expectations or estimates that might be derived from this release.
5
Boise Cascade Company
Consolidated Statements of Operations
(in thousands, except per-share data) (unaudited)
Three Months Ended
Six Months Ended
June 30
March 31, 2022
June 30
2022
2021
2022
2021
Sales
$
2,278,072
$
2,443,161
$
2,326,282
$
4,604,354
$
4,264,477
Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)
1,797,948
1,864,523
1,729,896
3,527,844
3,314,957
Depreciation and amortization
20,694
20,420
20,543
41,237
39,959
Selling and distribution expenses
134,279
130,736
146,651
280,930
251,653
General and administrative expenses
27,701
17,988
26,052
53,753
43,250
Other (income) expense, net
375
(281)
(2,488)
(2,113)
(378)
1,980,997
2,033,386
1,920,654
3,901,651
3,649,441
Income from operations
297,075
409,775
405,628
702,703
615,036
Foreign currency exchange gain (loss)
(499)
147
132
(367)
301
Pension expense (excluding service costs)
(41)
(19)
(171)
(212)
(38)
Interest expense
(6,317)
(6,347)
(6,254)
(12,571)
(12,222)
Interest income
1,385
51
65
1,450
110
Change in fair value of interest rate swaps
394
(25)
2,066
2,460
999
(5,078)
(6,193)
(4,162)
(9,240)
(10,850)
Income before income taxes
291,997
403,582
401,466
693,463
604,186
Income tax provision
(73,886)
(101,026)
(98,866)
(172,752)
(152,474)
Net income
$
218,111
$
302,556
$
302,600
$
520,711
$
451,712
Weighted average common shares outstanding:
Basic
39,544
39,442
39,474
39,509
39,399
Diluted
39,763
39,688
39,768
39,762
39,633
Net income per common share:
Basic
$
5.52
$
7.67
$
7.67
$
13.18
$
11.47
Diluted
$
5.49
$
7.62
$
7.61
$
13.10
$
11.40
Dividends declared per common share
$
2.62
$
2.10
$
0.12
$
2.74
$
2.20
6
Wood Products Segment
Statements of Operations
(in thousands, except percentages) (unaudited)
Three Months Ended
Six Months Ended
June 30
March 31, 2022
June 30
2022
2021
2022
2021
Segment sales
$
536,030
$
594,569
$
558,944
$
1,094,974
$
1,026,904
Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)
351,557
353,916
343,709
695,266
662,524
Depreciation and amortization
13,653
14,128
13,640
27,293
27,474
Selling and distribution expenses
10,349
8,835
9,230
19,579
17,834
General and administrative expenses
5,826
3,872
4,646
10,472
8,191
Other (income) expense, net
544
57
(2,397)
(1,853)
68
381,929
380,808
368,828
750,757
716,091
Segment income
$
154,101
$
213,761
$
190,116
$
344,217
$
310,813
(percentage of sales)
Segment sales
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)
65.6
%
59.5
%
61.5
%
63.5
%
64.5
%
Depreciation and amortization
2.5
%
2.4
%
2.4
%
2.5
%
2.7
%
Selling and distribution expenses
1.9
%
1.5
%
1.7
%
1.8
%
1.7
%
General and administrative expenses
1.1
%
0.7
%
0.8
%
1.0
%
0.8
%
Other (income) expense, net
0.1
%
—
%
(0.4)
%
(0.2
%)
—
%
71.3
%
64.0
%
66.0
%
68.6
%
69.7
%
Segment income
28.7
%
36.0
%
34.0
%
31.4
%
30.3
%
7
Building Materials Distribution Segment
Statements of Operations
(in thousands, except percentages) (unaudited)
Three Months Ended
Six Months Ended
June 30
March 31, 2022
June 30
2022
2021
2022
2021
Segment sales
$
2,131,200
$
2,172,744
$
2,111,833
$
4,243,033
$
3,807,521
Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)
1,835,845
1,832,929
1,730,803
3,566,648
3,220,280
Depreciation and amortization
6,728
5,917
6,576
13,304
11,736
Selling and distribution expenses
123,930
121,901
137,421
261,351
233,821
General and administrative expenses
10,558
7,230
11,226
21,784
16,811
Other (income) expense, net
(169)
(1,571)
(85)
(254)
(1,684)
1,976,892
1,966,406
1,885,941
3,862,833
3,480,964
Segment income
$
154,308
$
206,338
$
225,892
$
380,200
$
326,557
(percentage of sales)
Segment sales
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)
86.1
%
84.4
%
82.0
%
84.1
%
84.6
%
Depreciation and amortization
0.3
%
0.3
%
0.3
%
0.3
%
0.3
%
Selling and distribution expenses
5.8
%
5.6
%
6.5
%
6.2
%
6.1
%
General and administrative expenses
0.5
%
0.3
%
0.5
%
0.5
%
0.4
%
Other (income) expense, net
—
%
(0.1)
%
—
%
—
%
—
%
92.8
%
90.5
%
89.3
%
91.0
%
91.4
%
Segment income
7.2
%
9.5
%
10.7
%
9.0
%
8.6
%
8
Segment Information
(in thousands) (unaudited)
Three Months Ended
Six Months Ended
June 30
March 31, 2022
June 30
2022
2021
2022
2021
Segment sales
Wood Products
$
536,030
$
594,569
$
558,944
$
1,094,974
$
1,026,904
Building Materials Distribution
2,131,200
2,172,744
2,111,833
4,243,033
3,807,521
Intersegment eliminations
(389,158)
(324,152)
(344,495)
(733,653)
(569,948)
Total net sales
$
2,278,072
$
2,443,161
$
2,326,282
$
4,604,354
$
4,264,477
Segment income
Wood Products
$
154,101
$
213,761
$
190,116
$
344,217
$
310,813
Building Materials Distribution
154,308
206,338
225,892
380,200
326,557
Total segment income
308,409
420,099
416,008
724,417
637,370
Unallocated corporate costs
(11,334)
(10,324)
(10,380)
(21,714)
(22,334)
Income from operations
$
297,075
$
409,775
$
405,628
$
702,703
$
615,036
Segment EBITDA (a)
Wood Products
$
167,754
$
227,889
$
203,756
$
371,510
$
338,287
Building Materials Distribution
161,036
212,255
232,468
393,504
338,293
See accompanying summary notes to consolidated financial statements and segment information.
9
Boise Cascade Company
Consolidated Balance Sheets
(in thousands) (unaudited)
June 30, 2022
December 31, 2021
ASSETS
Current
Cash and cash equivalents
$
1,032,987
$
748,907
Receivables
Trade, less allowances of $2,047 and $2,054
575,601
444,325
Related parties
149
211
Other
16,471
17,692
Inventories
803,607
660,671
Prepaid expenses and other
19,645
14,072
Total current assets
2,448,460
1,885,878
Property and equipment, net
493,817
495,240
Operating lease right-of-use assets
62,302
62,663
Finance lease right-of-use assets
27,768
29,057
Timber deposits
7,828
9,461
Goodwill
60,382
60,382
Intangible assets, net
14,743
15,351
Deferred income taxes
8,760
6,589
Other assets
11,112
8,019
Total assets
$
3,135,172
$
2,572,640
10
Boise Cascade Company
Consolidated Balance Sheets (continued)
(in thousands, except per-share data) (unaudited)
June 30, 2022
December 31, 2021
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable
Trade
$
435,843
$
334,985
Related parties
1,382
1,498
Accrued liabilities
Compensation and benefits
123,222
128,518
Interest payable
9,890
9,886
Other
198,740
165,859
Total current liabilities
769,077
640,746
Debt
Long-term debt
445,045
444,628
Other
Compensation and benefits
30,031
28,365
Operating lease liabilities, net of current portion
54,867
55,263
Finance lease liabilities, net of current portion
31,000
31,898
Deferred income taxes
25,262
3,641
Other long-term liabilities
14,905
15,480
156,065
134,647
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, $0.01 par value per share; 50,000 shares authorized, no shares issued and outstanding
—
—
Common stock, $0.01 par value per share; 300,000 shares authorized, 44,815 and 44,698 shares issued, respectively
448
447
Treasury stock, 5,367 shares at cost
(138,909)
(138,909)
Additional paid-in capital
544,748
543,249
Accumulated other comprehensive loss
(917)
(1,047)
Retained earnings
1,359,615
948,879
Total stockholders' equity
1,764,985
1,352,619
Total liabilities and stockholders' equity
$
3,135,172
$
2,572,640
11
Boise Cascade Company
Consolidated Statements of Cash Flows
(in thousands) (unaudited)
Six Months Ended June 30
2022
2021
Cash provided by (used for) operations
Net income
$
520,711
$
451,712
Items in net income not using (providing) cash
Depreciation and amortization, including deferred financing costs and other
42,240
40,826
Stock-based compensation
5,403
3,503
Pension expense
212
38
Deferred income taxes
19,287
(10,481)
Change in fair value of interest rate swaps
(2,460)
(999)
Other
(1,987)
1,017
Decrease (increase) in working capital
Receivables
(129,993)
(219,112)
Inventories
(142,936)
(225,006)
Prepaid expenses and other
(7,602)
(7,448)
Accounts payable and accrued liabilities
127,935
248,139
Pension contributions
(794)
(153)
Income taxes payable
4,507
7,253
Other
1,533
1,890
Net cash provided by operations
436,056
291,179
Cash provided by (used for) investment
Expenditures for property and equipment
(40,808)
(31,502)
Proceeds from sales of assets and other
2,864
500
Net cash used for investment
(37,944)
(31,002)
Cash provided by (used for) financing
Borrowings of long-term debt, including revolving credit facility
—
28,000
Payments of long-term debt, including revolving credit facility
—
(28,000)
Dividends paid on common stock
(109,291)
(8,373)
Tax withholding payments on stock-based awards
(3,930)
(2,729)
Other
(811)
(690)
Net cash used for financing
(114,032)
(11,792)
Net increase in cash and cash equivalents
284,080
248,385
Balance at beginning of the period
748,907
405,382
Balance at end of the period
$
1,032,987
$
653,767
12
Summary Notes to Consolidated Financial Statements and Segment Information
The Consolidated Statements of Operations, Segment Statements of Operations, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and Segment Information presented herein do not include the notes accompanying the Company's Consolidated Financial Statements and should be read in conjunction with the Company’s 2021 Form 10-K and the Company's other filings with the Securities and Exchange Commission. Net income for all periods presented involved estimates and accruals.
(a)EBITDA represents income before interest (interest expense and interest income), income taxes, and depreciation and amortization. Additionally, we disclose Adjusted EBITDA, which further adjusts EBITDA to exclude the change in fair value of interest rate swaps. The following table reconciles net income to EBITDA and Adjusted EBITDA for the three months ended June 30, 2022 and 2021, and March 31, 2022, and the six months ended June 30, 2022 and 2021:
Three Months Ended
Six Months Ended
June 30
March 31, 2022
June 30
2022
2021
2022
2021
(in thousands)
Net income
$
218,111
$
302,556
$
302,600
$
520,711
$
451,712
Interest expense
6,317
6,347
6,254
12,571
12,222
Interest income
(1,385)
(51)
(65)
(1,450)
(110)
Income tax provision
73,886
101,026
98,866
172,752
152,474
Depreciation and amortization
20,694
20,420
20,543
41,237
39,959
EBITDA
317,623
430,298
428,198
745,821
656,257
Change in fair value of interest rate swaps
(394)
25
(2,066)
(2,460)
(999)
Adjusted EBITDA
$
317,229
$
430,323
$
426,132
$
743,361
$
655,258
13
The following table reconciles segment income and unallocated corporate costs to EBITDA and adjusted EBITDA for the three months ended June 30, 2022 and 2021, and March 31, 2022, and the six months ended June 30, 2022 and 2021:
