Boise Cascade(BCC) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements For Q1 2024, Boise Cascade reported a 6.5% sales increase to $1.65 billion and a 7.6% net income increase to $104.1 million, with diluted EPS of $2.61, while operating cash flow decreased to $27.5 million due to increased working capital Nature of Operations and Consolidation Boise Cascade operates through two segments: Wood Products (EWP and plywood manufacturing) and Building Materials Distribution (wholesale distribution) - The company operates through two primary segments: Wood Products, which manufactures EWP and plywood, and Building Materials Distribution (BMD), a wholesale distributor[27] Summary of Significant Accounting Policies The company's accounting policies involve significant estimates for valuations and contingencies, with revenue recognized upon transfer of control and a notable concentration of credit risk from two major customers - The preparation of financial statements requires management to make significant estimates and assumptions regarding valuations, contingencies, and rebates[30] - As of March 31, 2024, two customers represented a significant concentration of credit risk, accounting for 19% and 11% of total receivables[48] Income Taxes The company recorded an income tax provision of $32.8 million for Q1 2024, with an effective tax rate of 24.0%, primarily influenced by state taxes Income Tax Provision and Effective Rate | Period | Income Tax Expense (millions) | Effective Tax Rate | | :--- | :--- | :--- | | Q1 2024 | $32.8 | 24.0% | | Q1 2023 | $33.3 | 25.6% | Net Income Per Common Share For Q1 2024, basic net income per share was $2.63 and diluted net income per share was $2.61, an increase from Q1 2023 Net Income Per Common Share | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Basic EPS | $2.63 | $2.44 | | Diluted EPS | $2.61 | $2.43 | Acquisition On October 2, 2023, the company's BMD subsidiary acquired Brockway-Smith Company (BROSCO) for $166.2 million in cash, adding $32.3 million in goodwill and $47.0 million in intangible assets - Completed the acquisition of Brockway-Smith Company (BROSCO) on October 2, 2023, for a net purchase price of $166.2 million, funded with cash on hand[56] BROSCO Acquisition - Preliminary Fair Value Allocation | Asset/Liability Category | Fair Value (thousands) | | :--- | :--- | | Inventories | $36,000 | | Property and equipment | $57,331 | | Intangible assets | $47,000 | | Goodwill | $32,296 | | Net assets acquired | $170,170 | Goodwill and Intangible Assets As of March 31, 2024, goodwill remained stable at $170.3 million, with net intangible assets at $185.8 million, and amortization expense for Q1 2024 was $4.9 million - The total goodwill balance remained unchanged at $170.3 million as of March 31, 2024[63] - Amortization expense for intangible assets was $4.9 million for Q1 2024, compared to $4.3 million for Q1 2023[63] Debt Total long-term debt as of March 31, 2024, was $445.5 million, comprising a $50.0 million term loan and $400.0 million in senior notes, with $395.7 million available under its revolving credit facility Long-Term Debt Composition (March 31, 2024) | Component | Amount (thousands) | | :--- | :--- | | Asset-based credit facility term loan due 2027 | $50,000 | | 4.875% senior notes due 2030 | $400,000 | | Deferred financing costs | ($4,498) | | Total Long-term debt | $445,502 | - At March 31, 2024, there were no borrowings outstanding under the Revolving Credit Facility, and availability was $395.7 million[68][71] Leases Total lease cost for Q1 2024 was $7.6 million, with future minimum lease payment obligations of $84.4 million for operating leases and $48.2 million for finance leases as of March 31, 2024 Lease Costs (Q1 2024 vs Q1 2023) | Component | Q1 2024 (thousands) | Q1 2023 (thousands) | | :--- | :--- | :--- | | Operating lease cost | $3,475 | $3,317 | | Finance lease cost | $1,158 | $1,178 | | Variable & Short-term lease cost | $3,041 | $2,936 | | Total lease cost | $7,627 | $7,378 | - As of March 31, 2024, long-term lease obligations totaled $54.9 million for operating leases and $28.3 million for finance leases[83] Stock-Based Compensation The company recognized $4.1 million in stock-based compensation expense in Q1 2024, with $32.5 million of unrecognized expense remaining for nonvested awards Stock-Based Compensation Expense | Period | Expense (thousands) | | :--- | :--- | | Q1 2024 | $4,105 | | Q1 2023 | $3,324 | - As of March 31, 2024, total unrecognized compensation expense was $32.5 million, to be recognized over a weighted-average of 2.2 years[91] Stockholders' Equity The board declared a quarterly dividend of $0.20 per share, and the company repurchased 205,938 shares for $27.0 million in Q1 2024, with 1.72 million shares remaining for repurchase - A quarterly dividend of $0.20 per share was declared, payable on June 17, 2024[92] - In Q1 2024, the company repurchased 205,938 shares for $27.0 million, at an average price of $130.97 per share[94] Transactions With Related Party The company conducts transactions with Louisiana Timber Procurement Company, L.L.C. (LTP), a 50%-owned unconsolidated entity, including $2.6 million in sales to LTP and $19.8 million in wood fiber purchases from LTP in Q1 2024 - The company holds a 50% interest in Louisiana Timber Procurement Company, L.L.C. (LTP), an unconsolidated variable-interest entity[95] Related Party Transactions with LTP (Q1 2024) | Transaction Type | Amount (millions) | | :--- | :--- | | Sales to LTP | $2.6 | | Wood fiber purchases from LTP | $19.8 | Segment Information In Q1 2024, the Building Materials Distribution (BMD) segment led with $1.51 billion in sales and $72.5 million in operating income, while the Wood Products segment contributed $468.9 million in sales and $71.2 million in operating income, with both segments showing improved operating income year-over-year Segment Performance (Q1 2024 vs Q1 2023) | Segment | Net Sales (thousands) | Operating Income (thousands) | | :--- | :--- | :--- | | Q1 2024 | | | | Wood Products | $468,928 | $71,238 | | Building Materials Distribution | $1,505,021 | $72,463 | | Q1 2023 | | | | Wood Products | $437,428 | $69,395 | | Building Materials Distribution | $1,379,242 | $69,685 | Commitments, Legal Proceedings and Contingencies, and Guarantees The company reports no material changes to its commitments, legal proceedings, contingencies, or guarantees as disclosed in its 2023 Form 10-K, and is not party to any legal action expected to have a material adverse effect on its financial position - As of March 31, 2024, there have been no material changes to commitments, legal proceedings, or guarantees from those disclosed in the 2023 Form 10-K[105][106][107] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 7% year-over-year sales increase in Q1 2024, driven by strong demand in single-family residential construction, with operating income rising to $133.0 million as improved BMD margins offset Wood Products' lower EWP pricing and higher input costs, maintaining a strong liquidity position of $1.29 billion Executive Overview Q1 2024 operating income increased to $133.0 million, driven by higher EWP sales volumes in Wood Products and increased gross margin from higher volumes and better product margins in BMD, with the company ending the quarter with $1.29 billion in liquidity - Income from operations was $133.0 million in Q1 2024, an increase from $127.6 million in Q1 2023[113] - The company ended Q1 2024 with total available liquidity of $1.29 billion, comprising $890.2 million in cash and $395.7 million in undrawn bank line availability[114] - Management notes that while home affordability remains a challenge, new residential construction is expected to be a key source of supply for homebuyers in 2024, supporting demand[115] Our Operating Results Total sales for Q1 2024 increased by 7% to $1.65 billion, driven by a 27% rise in single-family housing starts, with Wood Products sales growing 7% due to higher EWP volumes despite price declines, and BMD sales rising 9% on a 12% volume increase Key Performance Indicators (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | U.S. Single-family Starts (thousands) | 239.1 | 188.2 | +27% | | Wood Products LVL Volume (Mcf) | 4.8 | 3.6 | +33% | | Wood Products I-joist Volume (Mlf) | 57 | 39 | +46% | | Wood Products LVL Price ($/cf) | $28.75 | $31.17 | -8% | | Wood Products I-joist Price ($/Mlf) | $2,018 | $2,168 | -7% | | BMD Gross Margin % | 15.1% | 14.8% | +30 bps | - Wood Products sales increased by $31.5 million (7%) due to higher EWP sales volumes, partially offset by lower EWP sales prices and decreased plywood volumes[128] - BMD sales increased by $125.8 million (9%), driven by a 12% sales volume increase across all product lines, partially offset by a 3% price decrease[129] Liquidity and Capital Resources The company's cash position decreased by $59.3 million in Q1 2024 to $890.2 million, with net cash from operations at $27.5 million due to increased working capital, and projected 2024 capital expenditures are $250 million to $270 million Summary of Cash Flows (Q1 2024) | Activity | Cash Flow (thousands) | | :--- | :--- | | Net cash provided by operations | $27,462 | | Net cash used for investment | ($37,158) | | Net cash used for financing | ($49,631) | - The decrease in operating cash flow was primarily due to a $149.2 million increase in working capital in Q1 2024, compared to a $117.7 million increase in the prior-year period[142] - The company expects capital expenditures for 2024 to be approximately $250 million to $270 million, including spending on I-joist production expansion and greenfield distribution centers[145] Seasonal Influences The company's business is subject to seasonal factors, with sales volumes typically lower in the first and fourth quarters due to weather impacting construction, and higher in the second and third quarters - Sales volumes are typically lower in Q1 and Q4 and higher in Q2 and Q3 due to seasonal weather patterns affecting construction activity[150] Employees As of April 28, 2024, Boise Cascade had approximately 7,310 employees, with 18% covered by collective bargaining agreements, and five agreements covering about 460 employees were set to expire on May 31, 2024 - As of April 28, 2024, the company had approximately 7,310 employees, with 18% unionized[152] - Five collective bargaining agreements covering approximately 460 employees were set to expire on May 31, 2024, presenting a near-term negotiation risk[152] Quantitative and Qualitative Disclosures About Market Risk As of March 31, 2024, the company reports no material changes in its exposure to market risks, including commodity prices, interest rates, and foreign currency exchange rates, from those disclosed in its 2023 Form 10-K - There have been no material changes in the company's exposure to market risk since the 2023 Form 10-K[157] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the first quarter - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[159] - No changes occurred in internal control over financial reporting during Q1 2024 that have materially affected, or are reasonably likely to materially affect, internal controls[160] PART II—OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings but does not anticipate any current actions will have a material adverse effect on its financial position, results, or cash flows - 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, results of operations, or cash flows[162] Risk Factors The report refers to the risk factors detailed in the company's 2023 Form 10-K and other SEC filings, with no new or updated risk factors presented in this quarterly report - The report directs readers to review the risk factors listed in the company's 2023 Form 10-K[163] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2024, Boise Cascade repurchased 205,938 shares of its common stock for $27.0 million at an average price of $130.97 per share under its board-authorized program - During Q1 2024, the company repurchased 205,938 shares under its authorized program at a cost of $27.0 million[164] Share Repurchases (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 2024 | — | — | 1,921,311 | | Feb 2024 | 85,711 | $131.12 | 1,835,600 | | Mar 2024 | 120,227 | $130.86 | 1,715,373 | | Total | 205,938 | $130.97 | 1,715,373 | Other Information The company disclosed that during the first quarter of 2024, none of its directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q1 2024[167] Exhibits The report lists several exhibits filed with the Form 10-Q, including forms of stock unit agreements, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and Inline XBRL data files - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and various stock unit agreements (10.1, 10.2, 10.3)[168]