Boise Cascade(BCC) - 2024 Q2 - Quarterly Results

Financial Performance Summary Boise Cascade Company's second quarter 2024 results reflect a decline in profitability amidst a challenging demand environment Second Quarter 2024 Highlights Boise Cascade reported Q2 2024 net income of $112.3 million on $1.8 billion sales, a decline from Q2 2023, reflecting a challenging demand environment and focus on capital returns | Metric | 2Q 2024 | 2Q 2023 | % Change | | :--- | :--- | :--- | :--- | | Consolidated Results | | | | | Sales | $1,797.7M | $1,815.2M | (1)% | | Net Income | $112.3M | $146.3M | (23)% | | Diluted EPS | $2.84 | $3.67 | (23)% | | Adjusted EBITDA | $181.2M | $221.0M | (18)% | | Segment Results | | | | | Wood Products Sales | $489.8M | $530.3M | (8)% | | Wood Products Income | $72.8M | $104.0M | (30)% | | BMD Sales | $1,655.2M | $1,636.5M | 1% | | BMD Income | $85.4M | $98.6M | (13)% | - CEO Nate Jorgensen noted solid financial performance despite a 'somewhat tepid demand environment' and emphasized organic growth and capital returns, including a significant special dividend[4] - Single-family housing starts, a key demand driver, increased by 7% in Q2 2024 year-over-year and 16% year-to-date, while total U.S. housing starts decreased by 7% in the same quarter[6] Segment Performance Analysis Analysis of Wood Products and Building Materials Distribution segments reveals varied performance influenced by pricing, volume, and operational costs Wood Products The Wood Products segment saw an 8% sales decrease and a 30% income drop, primarily due to lower plywood volumes and reduced EWP selling prices, partially offset by higher EWP volumes | Product | Avg. Net Selling Prices (2Q24 vs 2Q23) | Sales Volumes (2Q24 vs 2Q23) | | :--- | :--- | :--- | | LVL | (7)% | 8% | | I-joists | (6)% | 5% | | Plywood | (1)% | (13)% | - The decrease in sales was primarily driven by lower plywood sales volumes and lower sales prices for LVL and I-joists (EWP)[7] - Segment income fell mainly due to lower EWP sales prices, coupled with higher wood fiber and conversion costs, partially mitigated by increased EWP sales volumes[8] Building Materials Distribution (BMD) The BMD segment's sales grew 1% to $1.66 billion, driven by volume increases and the BROSCO acquisition, while segment income declined 13% due to increased expenses - Sales growth was driven by a 2% increase in volume, partially offset by a 1% decrease in prices, with the October 2023 BROSCO acquisition being a significant factor; excluding it, sales would have decreased by 2%[9] - By product line, general line product sales increased by 8%, while commodity sales decreased by 6% and EWP sales decreased by less than 1%[9] - The decrease in segment income was primarily caused by a $10.9 million increase in selling and distribution expenses and a $4.4 million increase in depreciation and amortization[10] Financial Position and Capital Allocation Boise Cascade maintains a strong financial position with substantial liquidity and a strategic approach to capital deployment Balance Sheet and Liquidity As of June 30, 2024, Boise Cascade maintained a robust $1.32 billion liquidity, including $922.1 million in cash, with total outstanding debt at $445.7 million | Metric | Amount (as of June 30, 2024) | | :--- | :--- | | Cash and cash equivalents | $922.1 million | | Undrawn committed bank line | $395.7 million | | Total available liquidity | $1,317.8 million | | Outstanding debt | $445.7 million | Capital Allocation The company projects $250-$270 million in 2024 capital expenditures, declared special and regular dividends, and repurchased $99.4 million in common stock - Expected capital expenditures for 2024 are projected to be between $250 million and $270 million, excluding potential acquisitions[12] - A special dividend of $5.00 per share and a quarterly dividend of $0.21 per share were declared, both payable on September 16, 2024[12] - The company repurchased 677,845 shares for $88.9 million in the first six months of 2024, and an additional 90,000 shares for $10.5 million in July 2024, with approximately 1.2 million shares remaining available for repurchase[12] Outlook The company's outlook anticipates near-term market challenges but remains optimistic about long-term housing fundamentals Market Outlook The company anticipates near-term demand challenges from high mortgage rates and affordability issues, but expects long-term support from favorable housing fundamentals and healthy repair-and-remodel spending - Demand is primarily driven by new residential construction, especially single-family, and repair-and-remodeling activity[13] - Near-term challenges include home affordability issues, elevated mortgage rates, and consumer uncertainty, which have softened renovation spending[13] - Positive long-term drivers include low unemployment, an undersupply of existing housing stock, and favorable demographic trends, which are expected to keep new construction as an important source of housing supply[13] - The company faces risks from volatile commodity product prices and input costs, which can impact sales and profitability in both its manufacturing and distribution businesses[14] Consolidated Financial Statements This section presents the company's consolidated financial statements, including operations, balance sheets, and cash flows Consolidated Statements of Operations For Q2 2024, the company reported $1.80 billion in sales and $112.3 million in net income, with six-month figures showing decreased profitability year-over-year | (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sales | $1,797,670 | $1,815,219 | | Income from operations | $146,981 | $189,975 | | Net income | $112,292 | $146,320 | | Diluted EPS | $2.84 | $3.67 | Consolidated Balance Sheets As of June 30, 2024, total assets increased to $3.67 billion and total stockholders' equity grew to $2.30 billion from year-end 2023 | (in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $922,076 | $949,574 | | Total current assets | $2,267,806 | $2,056,814 | | Total assets | $3,671,964 | $3,458,646 | | Total current liabilities | $691,506 | $594,116 | | Long-term debt | $445,723 | $445,280 | | Total stockholders' equity | $2,302,976 | $2,195,664 | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash from operations decreased to $169.2 million, with significant cash used in investing and financing activities | (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operations | $169,165 | $290,218 | | Net cash used for investment | ($76,667) | ($66,369) | | Net cash used for financing | ($119,996) | ($141,336) | | Net (decrease) in cash | ($27,498) | $82,513 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations of non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to their most directly comparable GAAP measures Reconciliation of Net Income to EBITDA and Adjusted EBITDA This section reconciles Q2 2024 Net Income of $112.3 million to Adjusted EBITDA of $181.2 million, providing non-GAAP financial insights | (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net income | $112,292 | $146,320 | | Adjustments (Interest, Taxes, D&A) | $68,428 | $75,089 | | EBITDA | $180,720 | $221,309 | | Change in fair value of interest rate swaps | $487 | ($333) | | Adjusted EBITDA | $181,207 | $220,976 | Reconciliation of Segment Income to EBITDA This table reconciles Q2 2024 segment income to EBITDA for Wood Products ($72.8M to $95.1M) and Building Materials Distribution ($85.4M to $97.1M) | (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Wood Products | | | | Segment income | $72,780 | $104,035 | | Depreciation and amortization | $22,270 | $23,005 | | EBITDA | $95,050 | $127,040 | | Building Materials Distribution | | | | Segment income | $85,400 | $98,550 | | Depreciation and amortization | $11,741 | $7,386 | | EBITDA | $97,141 | $105,936 |