Boise Cascade Company (NYSE:BCC) Q1 2021 Earnings Conference Call May 7, 2021 11:00 AM ET Company Participants Kelly Hibbs - Incoming SVP, CFO and Treasurer of Boise Cascade Nate Jorgensen - CEO Mike Brown - Head, Wood Products Operations Jeff Strom - Head. Building Materials Distribution Operations Wayne Rancourt - CFO Conference Call Participants Jesse Barone - BMO Capital Markets Kurt Yinger - D.A. Davidson Reuben Garner - The Benchmark Jonathan Hall - Portland Engineering John Babcock - Bank of America ...

Boise Cascade Company (NYSE:BCC) Q4 2020 Earnings Conference Call February 23, 2021 11:00 AM ET Company Participants Wayne Rancourt - Executive Vice President, CFO and Treasurer Nate Jorgensen - CEO Mike Brown - Head, Wood Products Operations Nick Stokes - Head, Building Materials Distribution Operations Conference Call Participants George Staphos - Bank of America Mark Wilde - Bank of Montreal Reuben Garner - The Benchmark Kurt Yinger - D.A. Davidson Paul Quinn - RBC Capital Operator Good morning. My name ...

PART I [Business](index=7&type=section&id=Item%201.%20Business) Boise Cascade manufactures engineered wood products and plywood, and distributes building materials, operating a vertically integrated model - Boise Cascade operates through two vertically integrated segments: Wood Products (manufacturing) and Building Materials Distribution (BMD), with BMD being the largest customer of the Wood Products segment, purchasing **61% of its sales in 2020**[21](index=21&type=chunk)[26](index=26&type=chunk)[67](index=67&type=chunk) - Key business strategies include increasing earnings and stability by growing EWP sales and expanding BMD's product lines and geographic reach[30](index=30&type=chunk) - The company leverages its integrated model to capture margin at both manufacturing and distribution levels, with **80% of EWP sales volume going through BMD in 2020**[46](index=46&type=chunk) - Operational excellence is driven through process improvement and logistics optimization to enhance efficiency[47](index=47&type=chunk) - Innovation and technology are accelerated through new product development, particularly in mass timber, and implementation of a central data repository[47](index=47&type=chunk) - The company serves a diverse customer base including retail lumberyards, home improvement centers, wholesalers, and industrial converters, with **Home Depot and Builders FirstSource as the largest customers**[26](index=26&type=chunk)[77](index=77&type=chunk) - As of February 12, 2021, the company had approximately **6,040 associates**, with **23% covered by collective bargaining agreements**[83](index=83&type=chunk)[127](index=127&type=chunk) [Wood Products Segment](index=15&type=section&id=1.1%20Wood%20Products%20Segment) The Wood Products segment manufactures engineered wood products and plywood, with 2020 sales of **$1,323.9 million** driven by higher plywood prices Wood Products Segment Financials (in millions) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Segment Sales** | $1,323.9 | $1,275.2 | $1,533.3 | | **Segment Income (Loss)** | $127.7 | $54.2 | $(10.0) | | **Segment EBITDA** | $198.9 | $111.9 | $117.0 | Wood Products Sales & Production Volumes (millions) | Product (unit) | 2020 Sales Volume | 2020 Production Volume | | :--- | :--- | :--- | | LVL (cubic feet) | 17.3 | 26.0 | | I-joists (lineal feet) | 241 | 237 | | Plywood (sq. ft. 3/8") | 1,253 | 1,637 | - Wood fiber is the primary raw material, accounting for approximately **42% of operating expenses in 2020**, with logs making up **73% of wood fiber costs**[61](index=61&type=chunk)[62](index=62&type=chunk) - The Building Materials Distribution (BMD) segment is the largest customer, representing **61% of Wood Products' sales in 2020**, with **80% of EWP and 24% of plywood sales volumes** to BMD[67](index=67&type=chunk) [Building Materials Distribution (BMD) Segment](index=18&type=section&id=1.2%20Building%20Materials%20Distribution%20(BMD)%20Segment) The BMD segment operates 38 distribution facilities, with 2020 sales reaching **$4,952.0 million** and income doubling due to higher prices and volumes BMD Segment Financials (in millions) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Segment Sales** | $4,952.0 | $4,137.7 | $4,287.7 | | **Segment Income** | $247.5 | $116.2 | $112.5 | | **Segment EBITDA** | $270.0 | $137.0 | $130.8 | BMD Sales Mix by Product (2020) | Product Line | % of Sales | | :--- | :--- | | Commodity | 46.6% | | General Line | 35.6% | | Engineered Wood Products | 17.8% | - The segment operates a nationwide network of **38 distribution facilities** and has grown through acquisitions in Tennessee, Oregon, Ohio, and Alabama in 2018-2019[71](index=71&type=chunk) - BMD markets products to retail lumberyards, home improvement centers, and specialty distributors, utilizing both warehouse sales and direct-from-manufacturer sales channels[72](index=72&type=chunk)[74](index=74&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, cyclical product demand, intense competition, and supply chain vulnerabilities - **Pandemic & Economic Risks:** The full impact of the COVID-19 pandemic remains unknown and could adversely affect operations, demand, and financial results; demand is closely tied to cyclical U.S. new residential construction, influenced by interest rates, unemployment, and consumer confidence[107](index=107&type=chunk)[108](index=108&type=chunk)[111](index=111&type=chunk) - **Operational & Supply Chain Risks:** The business is exposed to risks from volatile commodity pricing, intense competition, potential cybersecurity breaches, and material disruptions at manufacturing facilities, with **42% of 2020 sales concentrated among the top ten customers**[109](index=109&type=chunk)[114](index=114&type=chunk)[120](index=120&type=chunk)[123](index=123&type=chunk) - **Financial & Strategic Risks:** The company faces risks of non-cash impairment charges on long-lived assets and goodwill, difficulty obtaining wood fiber at favorable prices, environmental compliance costs, challenges in integrating acquisitions, and restrictive debt covenants[131](index=131&type=chunk)[134](index=134&type=chunk)[137](index=137&type=chunk)[150](index=150&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) The company owns all Wood Products manufacturing facilities and operates 38 owned and leased BMD warehouse facilities totaling **5.0 million** square feet Wood Products Facilities (as of Feb 12, 2021) | Facility Type | Number of Facilities | | :--- | :--- | | Plywood and veneer plants | 8 | | LVL/I-joist/laminated beam plants | 5 | | Sawmills | 2 | - The Building Materials Distribution business operates **38 warehouse facilities** across the U.S. with approximately **5.0 million square feet** of space, of which **2.2 million square feet is owned**[166](index=166&type=chunk) [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) The company is party to various ordinary course legal proceedings, none of which are expected to have a material adverse financial effect - The company is involved in ordinary course legal proceedings but does not expect them to have a material adverse effect on its financials[167](index=167&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Boise Cascade's common stock trades on the NYSE under BCC, with **39.2 million** shares outstanding and an active stock repurchase program - Common stock is traded on the NYSE under the symbol **BCC**[170](index=170&type=chunk) - A stock repurchase program allows for the purchase of up to **2 million shares**, with **496,989 shares** still available for purchase as of year-end 2020[175](index=175&type=chunk) [Selected Financial Data](index=39&type=section&id=Item%206.%20Selected%20Financial%20Data) The company's 2020 financial performance improved significantly, with sales increasing to **$5,475 million** and net income more than doubling to **$175 million** Selected Consolidated Financial Data (in millions, except per-share data) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Sales | $5,475 | $4,643 | $4,995 | | Net Income | $175 | $81 | $20 | | Net Income per Share – Diluted | $4.44 | $2.06 | $0.52 | | Adjusted EBITDA | $423 | $215 | $193 | | Cash and Cash Equivalents | $405 | $285 | $192 | | Total Long-Term Debt | $444 | $441 | $439 | Reconciliation of Net Income to Adjusted EBITDA (in millions) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net Income** | **$175** | **$81** | **$20** | | Interest Expense | 26 | 26 | 26 | | Interest Income | (1) | (3) | (2) | | Income Tax Provision | 111 | 27 | 2 | | Depreciation and Amortization | 95 | 80 | 147 | | **EBITDA** | **$407** | **$212** | **$193** | | Change in fair value of interest rate swaps | 2 | 3 | (1) | | Loss on extinguishment of debt | 14 | — | — | | **Adjusted EBITDA** | **$423** | **$215** | **$193** | - Net income in 2020 was negatively impacted by a **$14.0 million** loss on debt extinguishment, **$16.7 million** in costs related to the Roxboro facility curtailment, a **$6.2 million** pension settlement charge, and a **$38.8 million** incremental income tax expense from the pension plan elimination[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, income from operations surged to **$335.0 million** due to robust construction activity and higher commodity prices, with strong liquidity maintained [Our Operating Results](index=47&type=section&id=7.1%20Our%20Operating%20Results) Total sales increased **18%** to **$5,474.8 million** in 2020, driven by higher prices and volumes, leading to improved gross margins in both segments Year-over-Year Sales Comparison (2020 vs 2019) | Segment | 2020 Sales (B) | 2019 Sales (B) | % Change | | :--- | :--- | :--- | :--- | | Wood Products | $1.32 | $1.28 | +4% | | Building Materials Distribution | $4.95 | $4.14 | +20% | | **Total Company** | **$5.47** | **$4.64** | **+18%** | Wood Products - Average Net Selling Price Changes (2020 vs 2019) | Product | Price Change | | :--- | :--- | | Plywood | +30% | | LVL | -2% | | I-joists | -2% | - BMD's **20% sales growth** was driven by a **13% increase** in sales prices and a **7% increase** in sales volume compared to 2019[220](index=220&type=chunk) - Income from operations rose to **$335.0 million** in 2020 from **$136.5 million** in 2019, with Wood Products income increasing by **$73.5 million** and BMD income by **$131.3 million**[192](index=192&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=7.2%20Liquidity%20and%20Capital%20Resources) The company ended 2020 with strong liquidity, including **$405.4 million** in cash, primarily from operations, and refinanced debt by issuing **$400 million** in new notes Summary of Cash Flows (in millions) | Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operations | $294.5 | $245.6 | $163.6 | | Net cash used for investment | $(78.7) | $(94.1) | $(89.3) | | Net cash used for financing | $(95.7) | $(58.0) | $(59.8) | - In July 2020, the company refinanced its debt by issuing **$400 million** of **4.875% senior notes** due 2030 and used proceeds to retire **$350 million** of **5.625% notes** due 2024 and a **$45 million** term loan, resulting in a **$14.0 million** pre-tax loss on debt extinguishment[231](index=231&type=chunk)[267](index=267&type=chunk) - Capital expenditures were **$79.4 million** in 2020, with projected capital expenditures of **$80 million to $90 million** for 2021[263](index=263&type=chunk)[264](index=264&type=chunk) - The company paid **$79.2 million** in dividends in 2020, including a regular quarterly dividend of **$0.10 per share** and a supplemental dividend of **$1.60 per share**[267](index=267&type=chunk)[481](index=481&type=chunk) [Critical Accounting Estimates](index=65&type=section&id=7.3%20Critical%20Accounting%20Estimates) Management identifies critical accounting estimates for EWP rebates and long-lived asset impairment, both requiring significant judgment and assumptions - **EWP Rebates and Allowances:** Estimating rebates for EWP is difficult due to program complexity and data time lags; the accrued liability for EWP rebates was **$40.7 million** at December 31, 2020[311](index=311&type=chunk) - **Long-Lived Asset Impairment:** The company reviews assets for impairment upon a triggering event, requiring significant assumptions about future cash flows, pricing, and costs; no triggering event was identified in 2020[312](index=312&type=chunk)[313](index=313&type=chunk) [Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for the three-year period ended December 31, 2020, including detailed notes Consolidated Statement of Operations Highlights (in millions) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Sales | $5,474.8 | $4,643.4 | $4,995.3 | | Income from Operations | $335.0 | $136.5 | $72.0 | | **Net Income** | **$175.0** | **$80.9** | **$20.5** | Consolidated Balance Sheet Highlights (in millions) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $1,308.9 | $1,022.8 | | Total Assets | $1,965.7 | $1,693.4 | | Total Current Liabilities | $524.0 | $385.0 | | Long-Term Debt | $443.8 | $440.5 | | Total Stockholders' Equity | $850.8 | $701.3 | [Notes to Consolidated Financial Statements](index=73&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, segment information, debt refinancing, and the termination of the pension plan - **Note 6:** The company permanently curtailed I-joist production at its Roxboro, NC facility, resulting in **$15.0 million** of accelerated depreciation and **$1.7 million** in other closure costs in 2020[394](index=394&type=chunk) - **Note 10:** The company issued **$400 million** of **4.875% senior notes** due 2030 and used proceeds to retire its **$350 million** **5.625% notes** due 2024, incurring a **$14.0 million** loss on debt extinguishment[418](index=418&type=chunk)[419](index=419&type=chunk) - **Note 12:** The company terminated its qualified defined benefit pension plan in December 2020, resulting in a **$6.2 million** non-cash settlement charge and the release of **$38.8 million** in stranded tax effects into income tax expense[228](index=228&type=chunk)[437](index=437&type=chunk) - **Note 17:** In 2020, one customer accounted for **11% of total sales**; intersegment sales from Wood Products to BMD were **$801.1 million**[496](index=496&type=chunk)[500](index=500&type=chunk) [Controls and Procedures](index=110&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective[532](index=532&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2020, with an unqualified opinion from KPMG LLP[535](index=535&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=113&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - This section incorporates information by reference from the company's Proxy Statement for its 2021 annual meeting of stockholders[540](index=540&type=chunk) [Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the 2021 Proxy Statement - This section incorporates information by reference from the company's Proxy Statement for its 2021 annual meeting of stockholders[541](index=541&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2021 Proxy Statement - This section incorporates information by reference from the company's Proxy Statement for its 2021 annual meeting of stockholders[542](index=542&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=113&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related-person transactions and director independence is incorporated by reference from the 2021 Proxy Statement - This section incorporates information by reference from the company's Proxy Statement for its 2021 annual meeting of stockholders[543](index=543&type=chunk) [Principal Accountant Fees and Services](index=113&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - This section incorporates information by reference from the company's Proxy Statement for its 2021 annual meeting of stockholders[544](index=544&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K, including consolidated financial statements and an index of exhibits - This section contains a list of all financial statements and exhibits filed with the Form 10-K[546](index=546&type=chunk)[547](index=547&type=chunk)

Boise Cascade Company (NYSE:BCC) Q3 2020 Earnings Conference Call November 2, 2020 11:00 AM ET Company Participants Wayne Rancourt - Vice President, Chief Financial Officer & Treasurer Nate Jorgensen - Chief Executive Officer Mike Brown - Head of Wood Products Operations Nick Stokes - Head of Building Materials Distribution Operations Conference Call Participants George Staphos - Bank of America Mark Wilde - Bank of Montreal Reuben Garner - Benchmark Company Kurt Yinger - D.A. Davidson Paul Quinn - RBC Capi ...