Boise Cascade Company (NYSE:BCC) Q1 2023 Results Conference Call May 5, 2023 11:00 AM ET Company Participants Kelly Hibbs - SVP, CFO, & Treasurer Nate Jorgensen - CEO & Director Mike Brown - Head, Wood Products Operations Jeff Strom - Head, Building Materials Distribution Conference Call Participants Kurt Yinger - D.A. Davidson Susan Maklari - Goldman Sachs George Staphos - Bank of America Ketan Mamtora - BMO Michael Roxland - Truist Operator Good morning. My name is Michelle, and I will be your conference ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35805 Boise Cascade Company (Exact name of registrant as specified in its charter) Delaware 20-1496201 (State or other jurisdiction of incorpor ...

Boise Cascade Company (NYSE:BCC) Q4 2022 Earnings Conference Call February 22, 2023 11:00 AM ET Company Participants Kelly Hibbs - SVP, CFO, Principal Financial & Accounting Officer and Treasurer Nathan Jorgensen - CEO & Director Jeff Strom - EVP, Building Materials Distribution Dean Brown - EVP Conference Call Participants George Staphos - Bank of America Merrill Lynch Susan Maklari - Goldman Sachs Group Ketan Mamtora - BMO Capital Markets Kurt Yinger - D.A. Davidson & Co. Operator Good morning. My name is ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |--------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------| | | | | ...

Financial Data and Key Metrics Changes - Consolidated third quarter sales were $2.2 billion, up 15% from the third quarter of 2021 [6] - Net income was $219.6 million or $5.52 per share, compared to $91.7 million or $2.31 per share in the year-ago quarter [6] - Segment EBITDA for Wood Products was $177.3 million, up from $136 million in the prior year [6][9] - Building Materials Distribution (BMD) reported segment EBITDA of $161.2 million, compared to $22.6 million in the prior year [7][10] Business Line Data and Key Metrics Changes - Wood Products sales were $595.3 million, up from $497.3 million in the third quarter of 2021 [9] - BMD sales were $2 billion, up 14% from the third quarter of 2021 [10] - Sales volumes for LVL were up 12%, while I-joists were down 15% compared to the third quarter of 2021 [10] - Plywood sales volume was 329 million feet, up from 314 million feet in the prior year [12] Market Data and Key Metrics Changes - Total U.S. housing starts decreased by 7%, with single-family housing starts down 18% compared to the same period last year [6] - Pricing for LVL and I-joists increased by 19% and 18%, respectively, compared to the second quarter of 2022 [11] - Plywood average net sales price was $477 per 1,000 feet, down 15% from the third quarter of 2021 [12] Company Strategy and Development Direction - The company is focused on integrating Coastal Plywood operations and expanding EWP capacity [20] - BMD is executing organic growth and expanding projects in various locations [20] - The company aims to manage market uncertainties and volatile commodity pricing effectively [21] Management's Comments on Operating Environment and Future Outlook - The company expects a decline in demand for new residential construction due to home affordability constraints and a weakening economy [18] - Home improvement spending is anticipated to remain supported by the age of U.S. housing stock and elevated homeowner equity [19] - The company remains well-positioned to navigate market uncertainties and is committed to strategic priorities [21] Other Important Information - The Board authorized a quarterly dividend of $0.15 per share, representing a 25% increase, and a special dividend of $1 per share [8][16] - Total available liquidity at September 30 was approximately $1.3 billion [15] Q&A Session Summary Question: Outlook on EWP pricing trajectory - Management indicated that EWP pricing tends to adjust more slowly than commodity pricing, and future pricing will depend on housing starts [24][25] Question: Opportunities for new partnerships in BMD - Management noted that there are limited options for growth in tight supply markets, but they see opportunities for expanding product offerings [30] Question: Contribution from Coastal acquisition - Management stated that specific performance at a location level is not typically disclosed, but purchase price accounting impacted expectations [47] Question: Capital expenditures for 2023 - Management outlined that capital expenditures will focus on expanding EWP capacity and organic growth projects [41][43] Question: Inventory levels relative to historical peaks - Management confirmed that current inventory levels are aligned with sales pace and down from peak levels [62]

PART I—FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Boise Cascade reported significant Q3 2022 profitability growth, with net income reaching $219.6 million on $2.15 billion sales, strengthening its balance sheet and cash flow Consolidated Statements of Operations Highlights (Three Months Ended Sep 30) | Financial Metric | 2022 (in thousands) | 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Sales** | $2,154,647 | $1,879,451 | +14.6% | | **Income from operations** | $299,370 | $129,386 | +131.4% | | **Net income** | $219,587 | $91,699 | +139.5% | | **Diluted EPS** | $5.52 | $2.31 | +138.9% | Consolidated Balance Sheet Highlights | Account | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Total current assets** | $2,181,437 | $1,885,878 | +15.7% | | **Total assets** | $3,348,534 | $2,572,640 | +30.2% | | **Total current liabilities** | $739,463 | $640,746 | +15.4% | | **Total stockholders' equity** | $1,983,072 | $1,352,619 | +46.6% | Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30) | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | **Net cash provided by operations** | $814,125 | $527,091 | | **Net cash used for investment** | ($575,622) | ($50,824) | | **Net cash used for financing** | ($120,346) | ($94,763) | | **Net increase in cash** | $118,157 | $381,504 | [Note 1. Nature of Operations and Consolidation](index=11&type=section&id=1.%20Nature%20of%20Operations%20and%20Consolidation) Boise Cascade operates in Wood Products (EWP, plywood) and Building Materials Distribution (BMD) segments, with consolidated financial statements reflecting interim period adjustments - The company is a major North American producer of EWP and plywood and a leading U.S. wholesale distributor of building products[29](index=29&type=chunk) - The business is structured into two reportable segments: Wood Products and Building Materials Distribution (BMD)[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note details accounting policies for revenue recognition, rebates, leases, and financial instruments, highlighting interest rate swap usage and significant customer credit risk concentration - Customer rebates payable were **$136.1 million** as of September 30, 2022, recorded as a decrease in Sales[36](index=36&type=chunk) - The company manages interest rate risk on its **$50.0 million** variable-rate debt using receive-variable, pay-fixed interest rate swaps, with fair value changes recognized in earnings[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - As of September 30, 2022, two customers represented a significant concentration of credit risk, accounting for approximately **18% and 12% of total receivables**[52](index=52&type=chunk) [Note 3. Income Taxes](index=15&type=section&id=3.%20Income%20Taxes) The effective tax rate was **25.7%** for Q3 2022 and **25.2%** for the nine months, slightly above the federal rate due to state taxes Income Tax Expense and Effective Rates | Period | Income Tax Expense (in millions) | Effective Tax Rate | | :--- | :--- | :--- | | **Q3 2022** | $76.0 | 25.7% | | **Q3 2021** | $31.2 | 25.4% | | **Nine Months 2022** | $248.8 | 25.2% | | **Nine Months 2021** | $183.6 | 25.3% | [Note 4. Net Income Per Common Share](index=15&type=section&id=4.%20Net%20Income%20Per%20Common%20Share) Basic and diluted net income per common share significantly increased year-over-year, with Q3 2022 diluted EPS at **$5.52** and nine-month diluted EPS at **$18.62** Net Income Per Common Share | Period | Basic EPS | Diluted EPS | | :--- | :--- | :--- | | **Q3 2022** | $5.55 | $5.52 | | **Q3 2021** | $2.32 | $2.31 | | **Nine Months 2022** | $18.73 | $18.62 | | **Nine Months 2021** | $13.79 | $13.71 | [Note 5. Acquisition](index=16&type=section&id=5.%20Acquisition) Boise Cascade acquired Coastal Plywood for **$516.9 million** in July 2022 to expand EWP capacity, with a preliminary **$74.0 million** goodwill allocation and Q3 contributions of **$43.0 million** sales - Completed the acquisition of Coastal Plywood Company on July 25, 2022, for a purchase price of **$516.9 million**, funded with cash on hand[60](index=60&type=chunk) - The strategic rationale for the acquisition is to secure incremental stress-rated veneer to optimize and expand southeastern U.S. EWP production capacity[61](index=61&type=chunk) Preliminary Purchase Price Allocation (in thousands) | Asset/Liability | Fair Value | | :--- | :--- | | Property and equipment | $251,329 | | Customer relationships | $156,700 | | **Goodwill** | **$73,974** | | Inventories | $22,300 | | **Net assets acquired** | **$516,881** | [Note 6. Goodwill and Intangible Assets](index=18&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased to **$134.4 million** and net intangible assets to **$169.5 million** as of September 30, 2022, primarily due to the Coastal Plywood acquisition - Goodwill increased by **$74.0 million** to a total of **$134.4 million**, entirely due to the Coastal Plywood acquisition[68](index=68&type=chunk) - Net intangible assets grew to **$169.5 million**, with the majority of the increase from acquired customer relationships with a weighted-average useful life of approximately **10 years**[69](index=69&type=chunk)[70](index=70&type=chunk) [Note 7. Debt](index=19&type=section&id=7.%20Debt) Total long-term debt was **$444.2 million** as of September 30, 2022, following an amendment to increase the revolving credit facility to **$400 million** and extend its maturity to 2027 Long-Term Debt Composition (in thousands) | Debt Instrument | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Asset-based credit facility term loan due 2027 | $50,000 | $50,000 | | 4.875% senior notes due 2030 | $400,000 | $400,000 | | Deferred financing costs | ($5,825) | ($5,372) | | **Total Long-term debt** | **$444,175** | **$444,628** | - On September 9, 2022, the company amended its credit agreement, increasing the revolving credit facility to **$400 million** and extending the maturity to 2027[73](index=73&type=chunk) [Note 8. Leases](index=21&type=section&id=8.%20Leases) Total lease cost for Q3 2022 was **$7.1 million**, with total lease obligations of **$63.4 million** for operating leases and **$32.3 million** for finance leases as of September 30, 2022 Lease Costs (in thousands) | Lease Component | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Operating lease cost** | $3,588 | $3,474 | $10,734 | $10,199 | | **Finance lease cost** | $1,204 | $1,190 | $3,625 | $3,578 | | **Total lease cost** | $7,147 | $6,869 | $21,264 | $19,898 | - As of September 30, 2022, total future minimum lease payments are **$79.2 million** for operating leases and **$53.2 million** for finance leases[93](index=93&type=chunk) [Note 9. Stock-Based Compensation](index=22&type=section&id=9.%20Stock-Based%20Compensation) Stock-based compensation expense was **$3.3 million** for Q3 2022, with **$16.9 million** of unrecognized expense remaining as of quarter-end, to be recognized over **1.9 years** Stock-Based Compensation Expense (in thousands) | Period | PSUs | RSUs | Total | | :--- | :--- | :--- | :--- | | **Q3 2022** | $1,933 | $1,354 | $3,287 | | **Q3 2021** | $1,190 | $991 | $2,181 | | **Nine Months 2022** | $4,934 | $3,756 | $8,690 | | **Nine Months 2021** | $3,024 | $2,660 | $5,684 | - Total unrecognized compensation expense related to nonvested share-based awards was **$16.9 million** as of September 30, 2022[101](index=101&type=chunk) [Note 10. Stockholders' Equity](index=24&type=section&id=10.%20Stockholders'%20Equity) The board declared a quarterly dividend of **$0.15 per share** and a special dividend of **$1.00 per share**, while increasing the stock repurchase authorization to approximately **2.0 million shares** - On October 27, 2022, the board declared a quarterly dividend of **$0.15 per share** and a special dividend of **$1.00 per share**[103](index=103&type=chunk) - The stock repurchase program was increased by **1.5 million shares** in July 2022, for a total authorization of approximately **2.0 million shares**; no shares were purchased in the first nine months of 2022[105](index=105&type=chunk) [Note 11. Transactions With Related Party](index=24&type=section&id=11.%20Transactions%20With%20Related%20Party) The company transacts with Louisiana Timber Procurement Company (LTP), a 50%-owned joint venture, reporting **$10.6 million** in sales to LTP and **$67.4 million** in purchases from LTP for the nine months ended September 30, 2022 - Transactions are with Louisiana Timber Procurement Company, L.L.C. (LTP), a **50/50 joint venture** with Packaging Corporation of America (PCA) for wood fiber procurement[108](index=108&type=chunk) Related Party Transactions with LTP (Nine Months Ended Sep 30, in millions) | Transaction Type | 2022 | 2021 | | :--- | :--- | :--- | | **Sales to LTP** | $10.6 | $10.2 | | **Purchases from LTP** | $67.4 | $63.3 | [Note 12. Segment Information](index=25&type=section&id=12.%20Segment%20Information) Both Wood Products and BMD segments reported significant Q3 2022 operating income increases, driven by higher EWP prices and improved gross margins on commodity products, respectively Segment Operating Income (Three Months Ended Sep 30, in thousands) | Segment | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | **Wood Products** | $155,972 | $122,056 | +27.8% | | **Building Materials Distribution** | $154,436 | $16,565 | +832.3% | | **Total segment operating income** | $310,408 | $138,621 | +123.9% | [Note 13. Commitments, Legal Proceedings and Contingencies, and Guarantees](index=26&type=section&id=13.%20Commitments,%20Legal%20Proceedings%20and%20Contingencies,%20and%20Guarantees) No material changes to commitments, legal proceedings, contingencies, or guarantees have occurred since the 2021 Form 10-K, with no expected material adverse effects from current legal actions - There have been no material changes to commitments, legal proceedings, or guarantees since the 2021 Form 10-K[114](index=114&type=chunk)[116](index=116&type=chunk) - The company is not party to any legal action expected to have a material adverse effect on its financial results[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strong Q3 2022 operating income of **$299.4 million** was driven by EWP price increases and BMD margin improvements, despite concerns over rising interest rates impacting future demand [Executive Overview](index=28&type=section&id=Executive%20Overview) Q3 2022 income from operations more than doubled to **$299.4 million**, driven by strong segment performance and the **$516.9 million** Coastal Plywood acquisition, ending with **$1.26 billion** in liquidity - Q3 2022 income from operations was **$299.4 million**, a significant increase from **$129.4 million** in Q3 2021[122](index=122&type=chunk) - Completed the acquisition of Coastal Plywood for **$516.9 million** using cash on hand to expand EWP production capacity[123](index=123&type=chunk) - Ended Q3 2022 with total available liquidity of **$1,263.2 million**, comprising **$867.1 million** in cash and **$396.2 million** in undrawn bank line availability[124](index=124&type=chunk) [Factors That Affect Our Operating Results and Trends](index=28&type=section&id=Factors%20That%20Affect%20Our%20Operating%20Results%20and%20Trends) Operating results are influenced by commodity prices, housing starts, interest rates, and raw material costs, with demand expected to decline into 2023 due to rising interest rates - Key influencing factors include commodity price volatility, housing starts, interest rates, raw material costs (wood fiber, glues), and transportation costs[127](index=127&type=chunk)[128](index=128&type=chunk) - Due to rising mortgage rates and home affordability constraints, the company expects demand to decline for the remainder of 2022 and into 2023[125](index=125&type=chunk) - Consensus forecasts for 2023 U.S. housing starts are estimated to be **15% to 20% below 2022 levels**[125](index=125&type=chunk) [Our Operating Results](index=30&type=section&id=Our%20Operating%20Results) Total Q3 2022 sales increased **15%** to **$2.15 billion**, driven by **20%** growth in Wood Products sales and a significant increase in BMD segment gross margin to **15.4%** Wood Products - Average Net Selling Prices (Q3 2022 vs Q3 2021) | Product | Q3 2022 Price | Q3 2021 Price | % Change | | :--- | :--- | :--- | :--- | | **Laminated veneer lumber (LVL)** (per cubic foot) | $33.82 | $22.30 | +51.7% | | **I-joists** (per 1,000 lineal feet) | $2,429 | $1,575 | +54.2% | | **Plywood** (per 1,000 sq. ft.) | $477 | $561 | -15.0% | - BMD segment gross margin percentage increased significantly to **15.4%** in Q3 2022 from **7.9%** in Q3 2021, primarily due to margin improvements on commodity products[133](index=133&type=chunk)[149](index=149&type=chunk) - Selling and distribution expenses increased **24%** in Q3 2022, primarily due to higher employee-related incentive compensation and increased shipping costs[145](index=145&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$867.1 million** in cash and **$1.26 billion** total available liquidity, generating **$814.1 million** from operations for the nine months ended September 30, 2022 Sources and Uses of Cash (Nine Months Ended Sep 30, in thousands) | Category | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash provided by operations** | $814,125 | $527,091 | | **Net cash used for investment** | ($575,622) | ($50,824) | | **Net cash used for financing** | ($120,346) | ($94,763) | - The primary use of cash for investment activities in 2022 was the **$516.9 million** acquisition of Coastal Plywood[161](index=161&type=chunk) - Projected capital expenditures are expected to be **$100 million to $120 million** in 2022 and increase to approximately **$120 million to $140 million** in 2023, excluding acquisitions[162](index=162&type=chunk)[163](index=163&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in exposure to market risks, including commodity prices, interest rates, and foreign currency, have occurred since the 2021 Form 10-K - There have been no material changes in the company's exposure to market risk since the 2021 Form 10-K[178](index=178&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[179](index=179&type=chunk) - No changes occurred during Q3 2022 that materially affected internal control over financial reporting[180](index=180&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary legal proceedings but anticipates no material adverse effect on its financial position or results - The company does not believe it is party to any legal action that could reasonably be expected to have a material adverse effect on its financial position or results[182](index=182&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) A key risk involves potential difficulties in efficiently integrating acquired operations, such as Coastal Plywood, which could disrupt business and hinder expected benefit realization - A key risk is the inability to efficiently integrate acquired operations, such as the recent Coastal Plywood acquisition, which could disrupt business and prevent the realization of expected benefits[184](index=184&type=chunk)[185](index=185&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported - None[186](index=186&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Eighth Amendment to the Credit Agreement and required certifications - Key exhibits include the Eighth Amendment to the Amended and Restated Credit Agreement and CEO/CFO certifications[188](index=188&type=chunk)

Financial Data and Key Metrics Changes - Consolidated second quarter sales were $2.3 billion, down 7% from the second quarter of 2021 [7] - Net income was $218.1 million or $5.49 per share, compared to $302.6 million or $7.63 per share in the prior year quarter [7] - Total U.S. housing starts increased 3% compared to the same period last year, with multifamily starts driving the increase [8] Business Line Data and Key Metrics Changes - Wood Products reported segment EBITDA of $167.8 million, down from $227.9 million in the year-ago quarter, impacted by lower plywood sales prices and higher per unit costs [8][10] - Building Materials Distribution (BMD) reported segment EBITDA of $161 million on sales of $2.1 billion, compared to $212.3 million on sales of $2.2 billion in the prior year quarter [8][11] - BMD sales were down 2% from the second quarter of 2021, driven by a sales volume decrease of 4% offset partially by a sales price increase of 2% [13] Market Data and Key Metrics Changes - Plywood sales volumes decreased to 281 million feet from 338 million feet in the second quarter of 2021, primarily due to downtime related to facility upgrades and staffing shortages [12] - Average plywood net sales price was $569 per 1000 feet, down 35% from the second quarter of 2021 and down 17% sequentially [12] Company Strategy and Development Direction - The company completed the acquisition of Coastal Plywood for $517 million, which is expected to enhance production capacity and support housing construction in the Southern and Eastern U.S. [18][19] - The acquisition is anticipated to be EPS accretive in 2022, with a mid-cycle EBITDA benefit of approximately $80 million once fully integrated [19][20] - The company plans to focus on integrating Coastal Plywood operations and expanding EWP production capacity [22] Management's Comments on Operating Environment and Future Outlook - The company expects a slowdown in new residential construction in the second half of 2022 due to home affordability constraints and a weakening economy [21] - Despite potential economic downturns, the company remains optimistic about long-term housing demand and plans to continue supporting growth through strategic investments [22][23] - Management highlighted the importance of managing inventory levels and maintaining margins in a potentially challenging economic environment [34][82] Other Important Information - The company finished the second quarter with $1 billion in cash and total available liquidity of approximately $1.4 billion [15] - A quarterly dividend of $0.12 per share was approved, along with a share repurchase program authorization for an additional 1.5 million shares [17] Q&A Session Summary Question: Sustainability of EWP pricing in a slowing macro environment - Management indicated that EWP pricing may come under pressure in the forthcoming quarters, but remains robust for the near term [26][27] Question: Trajectory of BMD margins in a stable pricing environment - Management noted that margins have held up well in July and expect some normalization but above historical levels as they continue to execute their strategy [28][29] Question: Supply-demand tension in distribution products - Management described a mixed bag in supply-demand dynamics, with some products still under tension while others are easing [36][37] Question: Labor issues and their impact - Labor availability remains challenging, particularly in manufacturing, with some improvement in applications but specific roles like truck drivers still difficult to fill [42][43] Question: Impact of Coastal acquisition on future capacity and operations - Management confirmed that the acquisition will enhance production capabilities and allow for better market positioning, particularly in EWP [48][56]