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Boise Cascade Company Reports Second Quarter 2022 Results

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BOISE, Idaho, August 01, 2022--(BUSINESS WIRE)--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.

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.

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.

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.

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

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

%

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

%

...