Boise Cascade Company Reports Second Quarter 2022 Results

Boise Cascade Company (“Boise Cascade,” the “Company,” “we,” or “our”) 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

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.

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.

For the full second quarter results, click here.

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.

Contact:

Kelly Hibbs – Investor Relations Contact – (208) 384-3638

Source: Boise Cascade Company