Boise Cascade(BCC) - 2021 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Boise Cascade Company as of September 30, 2021, highlighting significant increases in nine-month sales, net income, cash, and stockholders' equity driven by favorable market conditions Consolidated Statements of Operations Nine-month sales increased by 53.5% to $6.14 billion and net income surged by 265% to $543.4 million, while Q3 sales grew 18.3% to $1.88 billion but net income decreased 11.1% to $91.7 million Consolidated Statements of Operations Highlights (in thousands, except per-share data) | Metric | Q3 2021 | Q3 2020 | Change | Nine Months 2021 | Nine Months 2020 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $1,879,451 | $1,589,313 | +18.3% | $6,143,928 | $4,002,607 | +53.5% | | Income from operations | $129,386 | $158,572 | -18.4% | $744,422 | $235,889 | +215.6% | | Net income | $91,699 | $103,192 | -11.1% | $543,411 | $148,978 | +264.8% | | Diluted EPS | $2.31 | $2.61 | -11.5% | $13.71 | $3.78 | +262.7% | Consolidated Balance Sheets Total assets increased 31.7% to $2.59 billion as of September 30, 2021, driven by a 94% rise in cash to $786.9 million, with total stockholders' equity growing 53.5% to $1.31 billion Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $786,886 | $405,382 | +94.1% | | Total current assets | $1,937,991 | $1,308,855 | +48.1% | | Total assets | $2,588,365 | $1,965,718 | +31.7% | | Total current liabilities | $700,295 | $524,002 | +33.6% | | Long-term debt | $444,419 | $443,792 | +0.1% | | Total stockholders' equity | $1,305,605 | $850,799 | +53.5% | Consolidated Statements of Cash Flows Net cash provided by operations increased 80% to $527.1 million for the first nine months of 2021 due to higher net income, while investing activities used $50.8 million and financing activities used $94.8 million primarily for dividends Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operations | $527,091 | $293,771 | +$233,320 | | Net cash used for investment | ($50,824) | ($46,431) | +$4,393 | | Net cash used for financing | ($94,763) | ($28,642) | +$66,121 | | Net increase in cash | $381,504 | $218,698 | +$162,806 | Condensed Notes to Unaudited Quarterly Consolidated Financial Statements Detailed notes disclose the company's Wood Products and BMD segments, significant accounting policies, debt, segment performance, and dividend declarations, including a $3.00 per share supplemental dividend and significant customer receivable concentrations - The company operates through two reportable segments: Wood Products (manufactures EWP and plywood) and Building Materials Distribution (BMD, a wholesale distributor)[27] - A significant concentration of credit risk exists, with two customers accounting for approximately 19% and 12% of total receivables at September 30, 2021[49] - On October 28, 2021, the board declared a quarterly dividend of $0.12 per share and a supplemental dividend of $3.00 per share, payable on December 15, 2021[90] Segment Operating Income (in thousands) | Segment | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Wood Products | $122,056 | $66,035 | $432,869 | $86,872 | | Building Materials Distribution | $16,565 | $107,901 | $343,122 | $180,413 | | Total Segment Operating Income | $138,621 | $173,936 | $775,991 | $267,285 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 operating income decline to $129.4 million, driven by a $91.3 million decrease in BMD segment income due to falling commodity prices, partially offset by a $56.0 million increase in Wood Products income from higher prices, while maintaining $1.13 billion in liquidity Executive Overview Q3 2021 income from operations decreased to $129.4 million, as a $56.0 million increase in Wood Products income was offset by a $91.3 million decrease in BMD income due to falling commodity prices, with the company maintaining $1.13 billion in total liquidity - Wood Products segment income increased by $56.0 million in Q3 2021 YoY, driven by higher sales prices for EWP, plywood, and lumber[110] - BMD segment income decreased by $91.3 million in Q3 2021 YoY, primarily due to a gross margin decrease of $100.5 million from a sharp decline in commodity prices[110] - The company maintained total available liquidity of $1,132.2 million at the end of Q3 2021[111] Our Operating Results Q3 2021 total sales increased 18% to $1.88 billion, with Wood Products sales up 37% due to higher prices, and BMD sales up 20% despite its gross margin falling from 16.4% to 7.9% due to declining commodity prices Sales Growth by Segment (Q3 2021 vs Q3 2020) | Segment | Q3 2021 Sales (millions) | Q3 2020 Sales (millions) | Growth | | :--- | :--- | :--- | :--- | | Wood Products | $497.3 | $363.7 | +37% | | Building Materials Distribution | $1,721.2 | $1,437.7 | +20% | - The increase in Wood Products sales was driven by higher average net selling prices for plywood (+31%), LVL (+23%), and I-joists (+27%)[127] - BMD's gross margin percentage fell to 7.9% in Q3 2021 from 16.4% in Q3 2020, primarily due to a sharp decline in commodity prices during the quarter[123][140] Liquidity and Capital Resources The company ended Q3 2021 with $786.9 million in cash and $1.13 billion in total liquidity, with net cash from operations increasing to $527.1 million for the first nine months, while projecting $90-$100 million in 2021 capital expenditures and using $94.8 million for financing activities, mainly dividends Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operations | $527,091 | $293,771 | | Net cash used for investment | ($50,824) | ($46,431) | | Net cash used for financing | ($94,763) | ($28,642) | - Capital expenditures are expected to be approximately $90 million to $100 million in 2021 and are forecasted to increase to $100 million to $130 million in 2022[154] - During the first nine months of 2021, the company paid $91.0 million in common stock dividends[155] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its exposure to market risk, which continues to include commodity prices, interest rates, and foreign currency exchange rates, from those disclosed in its 2020 Form 10-K - As of September 30, 2021, there have been no material changes in the company's exposure to market risk, which includes commodity prices, interest rates, and foreign currency exchange rates[168] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the third quarter - The CEO and CFO concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level[169] - No changes occurred during Q3 2021 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[169] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, none of which are believed by management to have a material adverse effect on its financial position, results, or cash flows - The company states that it is not reasonably possible that any current legal actions will have a material adverse effect on its financial position, results of operations, or cash flows[171] Risk Factors New and updated risk factors include potential adverse impacts from proposed federal COVID-19 vaccination or testing mandates, which could increase costs and disrupt operations, and the potential for tax reform legislation, such as an increased U.S. corporate income tax rate, to adversely affect financial position - A new risk factor is the proposed regulation requiring mandatory COVID-19 vaccination or testing for employees, which could increase costs, interrupt operations, and increase employee turnover[173][174] - The company identifies potential tax reform, such as a proposed increase in the U.S. corporate income tax rate, as a risk that could adversely impact its financial results[175] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[175] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - Exhibits filed include CEO/CFO certifications (302 and 906) and Inline XBRL documents[179][180][181][182][183]