Boise Cascade(BCC) - 2024 Q3 - Quarterly Results

Third Quarter 2024 Financial Performance Boise Cascade reported a decline in third-quarter 2024 financial results, with sales and net income decreasing significantly, while the CEO highlighted resilience in a moderate demand environment and ongoing strategic investments Third Quarter 2024 Highlights Boise Cascade reported a decline in its third-quarter 2024 financial results compared to the same period in 2023, with sales decreasing by 7% to $1.71 billion and net income falling by 36% to $91.0 million Consolidated Results Q3 2024 vs Q3 2023 (in millions, except per-share data) | Metric | 3Q 2024 | 3Q 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $1,713.7 | $1,834.4 | (7)% | | Net Income | $91.0 | $143.1 | (36)% | | Net Income per common share - diluted | $2.33 | $3.58 | (35)% | | Adjusted EBITDA | $154.5 | $216.5 | (29)% | - The financial results were achieved in what the company described as a 'moderate demand environment'[3] CEO Commentary CEO Nate Jorgensen credited the company's associates and its integrated business model for delivering good financial results despite a moderate demand environment, confirming progress on strategic investments and capital deployment - The CEO highlighted the company's ability to deliver good financial results due to the efforts of its associates and its unique business model combining engineered wood products (EWP) with a nationwide wholesale distribution network[3] - The company is continuing to advance its key strategic investment initiatives and deploy capital to shareholders[3] - Looking ahead, the company expects normal seasonality through the winter and is prepared to adjust to changes in customer and vendor demand[3] Segment Performance Both Wood Products and Building Materials Distribution segments experienced sales and income declines in Q3 2024, primarily due to lower prices and increased costs Wood Products The Wood Products segment experienced a 12% decrease in sales to $453.9 million and a 46% drop in segment income to $53.9 million in Q3 2024, driven by lower sales prices and reduced volumes Wood Products Segment Financials (in millions) | Metric | 3Q 2024 | 3Q 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $453.9 | $515.2 | (12)% | | Segment Income | $53.9 | $99.6 | (46)% | Price and Volume Changes (Q3 2024 vs. Q3 2023) | Product | Average Net Selling Prices | Sales Volumes | | :--- | :--- | :--- | | LVL | (5)% | —% | | I-joists | (6)% | (8)% | | Plywood | (13)% | —% | - The decrease in segment income was attributed to lower EWP and plywood sales prices, higher conversion costs, and lower I-joist sales volumes[7] Building Materials Distribution The Building Materials Distribution (BMD) segment reported a 6% decrease in sales to $1.57 billion and a 23% decrease in segment income to $74.8 million for Q3 2024, driven by lower prices and increased expenses BMD Segment Financials (in millions) | Metric | 3Q 2024 | 3Q 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $1,567.5 | $1,670.3 | (6)% | | Segment Income | $74.8 | $97.1 | (23)% | - The sales decrease was driven by a 6% decline in sales prices, with sales volumes remaining flat year-over-year[8] - Excluding the BROSCO acquisition, sales would have decreased by 9%[8] - By product line, commodity sales fell 12% and EWP sales fell 14%, while general line product sales increased by 4%[8] - Segment income decreased due to a $7.7 million reduction in gross margin and increased selling, distribution, depreciation, and amortization expenses[9] Financial Position and Capital Allocation Boise Cascade maintains a strong liquidity position with substantial cash reserves and undrawn credit, while actively deploying capital through planned expenditures, dividends, and share repurchases Balance Sheet and Liquidity As of September 30, 2024, Boise Cascade maintained a strong liquidity position with $1.16 billion in total available liquidity, comprising $761.6 million in cash and $395.7 million in undrawn credit, against $450.0 million of outstanding debt Liquidity Position as of September 30, 2024 (in millions) | Component | Amount | | :--- | :--- | | Cash and cash equivalents | $761.6 | | Undrawn committed bank line | $395.7 | | Total available liquidity | $1,157.3 | | Outstanding debt | $450.0 | Capital Allocation The company plans capital expenditures of $220-$240 million for 2024 and $200-$220 million for 2025, while actively returning capital to shareholders through dividends and share repurchases - Capital expenditure is projected to be between $220 million and $240 million in 2024, and between $200 million and $220 million in 2025[11] - A quarterly dividend of $0.21 per share was declared, payable on December 18, 2024[12] - The company repurchased 1,232,345 shares for $158.5 million in the first nine months of 2024[13] - The board authorized an additional 1.4 million shares for repurchase, leaving approximately 2 million shares available under the program as of October 31, 2024[13] Outlook The company's outlook is driven by residential construction trends and faces risks from commodity price volatility and rising input costs Market Outlook The company's market outlook is tied to residential construction, with U.S. housing starts projected at 1.35 million in 2024 and 1.40 million in 2025, supported by demographics despite affordability challenges - Demand is primarily correlated with new residential construction, especially single-family housing starts[14] - Current industry forecasts for U.S. housing starts are approximately 1.35 million in 2024 and modestly above 1.40 million in 2025[14] - Home affordability remains a challenge, but large homebuilders are addressing it by reducing home sizes and offering mortgage rate buydowns[14] - Favorable demographic trends and low unemployment are expected to support demand[14] Business Risks The company faces significant business risks from commodity price volatility and rising input costs, which can lead to sales declines and margin compression in both its manufacturing and distribution segments - The company has sales and profitability exposure to declines in commodity product prices and rising input costs[15] - The distribution business faces margin pressure during periods of declining prices, which can negatively impact sales and profitability[15] Financial Statements The financial statements detail the company's Q3 2024 performance, balance sheet position, and cash flow activities, reflecting decreased sales and profitability alongside a strong liquidity profile Consolidated Statements of Operations For the third quarter of 2024, Boise Cascade generated sales of $1.71 billion, with income from operations at $117.4 million and net income at $91.0 million, representing a significant decrease from the prior-year quarter Q3 Consolidated Statements of Operations Highlights (in millions) | Line Item | 3Q 2024 | 3Q 2023 | | :--- | :--- | :--- | | Sales | $1,713.7 | $1,834.4 | | Income from operations | $117.4 | $185.6 | | Net income | $91.0 | $143.1 | Consolidated Balance Sheets As of September 30, 2024, the company's balance sheet showed total assets of $3.44 billion, with cash and cash equivalents at $761.6 million, total liabilities at $1.32 billion, and total stockholders' equity at $2.12 billion Balance Sheet Highlights (in millions) | Line Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $761.6 | $949.6 | | Total current assets | $2,012.2 | $2,056.8 | | Total assets | $3,441.6 | $3,458.6 | | Total current liabilities | $643.2 | $594.1 | | Total stockholders' equity | $2,123.4 | $2,195.7 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operations was $343.8 million, while net cash used for financing activities significantly increased to $391.6 million, resulting in a net decrease in cash of $188.0 million Nine Months Ended Sep 30 Cash Flow Highlights (in millions) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operations | $343.8 | $521.1 | | Net cash used for investment | ($140.1) | ($96.8) | | Net cash used for financing | ($391.6) | ($149.7) | | Net (decrease) increase in cash | ($188.0) | $274.6 | Supplemental Information This section provides detailed segment-level financial data and reconciliations of non-GAAP measures like Adjusted EBITDA to GAAP net income Segment Information In Q3 2024, the Wood Products segment generated sales of $453.9 million and income of $53.9 million, while the Building Materials Distribution segment had sales of $1.57 billion and income of $74.8 million Q3 2024 Segment Sales and Income (in millions) | Segment | Sales | Income | | :--- | :--- | :--- | | Wood Products | $453.9 | $53.9 | | Building Materials Distribution | $1,567.5 | $74.8 | | Total Segment Income | - | $128.7 | Reconciliation of Non-GAAP Measures The company provides a reconciliation from GAAP Net Income to non-GAAP measures EBITDA and Adjusted EBITDA, showing Net Income of $91.0 million reconciled to an Adjusted EBITDA of $154.5 million for Q3 2024 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | 3Q 2024 | 3Q 2023 | | :--- | :--- | :--- | | Net income | $91.0 | $143.1 | | Interest, Taxes, D&A | $62.6 | $73.1 | | EBITDA | $153.6 | $216.1 | | Change in fair value of interest rate swaps | $0.9 | $0.3 | | Adjusted EBITDA | $154.5 | $216.5 | Segment EBITDA (in millions) | Segment | 3Q 2024 | 3Q 2023 | | :--- | :--- | :--- | | Wood Products EBITDA | $77.4 | $122.9 | | Building Materials Distribution EBITDA | $87.7 | $104.9 |