Boise Cascade Company Reports First Quarter 2020 Results and Provides COVID-19 Business Update

Boise Cascade Company (“Boise Cascade,” the “Company,” “we,” or “our”) reported net income of $12.2 million, or $0.31 per share, on sales of $1.2 billion for the first quarter ended March 31, 2020. First quarter 2020 results include $15.0 million and $1.7 million, respectively, of pre-tax accelerated depreciation and other curtailment related costs, or $0.32 per share after-tax, due to the previously announced permanent curtailment of I-joist production at our Roxboro, North Carolina, facility.

“As we respond to the impacts and uncertainties of COVID-19, our focus remains on the health and safety of our associates, followed by business continuity. At the same time, we are fortunate to have entered 2020 in a sound financial position,” commented Nate Jorgensen, CEO. “Our first quarter financial results were strong in both businesses, demonstrating the strength of our integrated business model. We will continue to take the necessary steps to preserve our financial position and effectively support our customers, and ultimately will strive to balance the priorities of the various stakeholders that depend on us.”

Wood Products

Wood Products sales, including sales to Building Materials Distribution (“BMD”), increased $0.5 million to $320.1 million for the three months ended March 31, 2020, from $319.5 million for the three months ended March 31, 2019. The modest increase in sales was driven primarily by higher sales volumes for I-joists and LVL (I-joists and LVL are collectively referred to as EWP). These increases were offset partially by decreases in sales prices and sales volumes for plywood. In addition, LVL net sales prices decreased and I-joists net sales prices were relatively flat compared with the prior year quarter.

Wood Products segment income decreased $7.9 million to $3.8 million for the three months ended March 31, 2020, from $11.6 million for the three months ended March 31, 2019. The decrease in segment income was due primarily to accelerated depreciation of $15.0 million and other closure-related costs of $1.7 million at our Roxboro, North Carolina facility, as well as lower plywood prices. These decreases were offset partially by lower manufacturing costs and higher EWP volumes.

Building Materials Distribution

BMD’s sales increased $142.3 million, or 16%, to $1,050.0 million for the three months ended March 31, 2020, from $907.7 million for the three months ended March 31, 2019. Compared with the same quarter in the prior year, the overall increase in sales was driven by a sales volume increase of 17% offset partially by a sales price decrease of 1%. By product line, commodity sales increased 11%, general line product sales increased 23%, and sales of EWP (substantially all of which is sourced through our Wood Products segment) increased 14%.

BMD segment income increased $11.8 million to $29.3 million for the three months ended March 31, 2020, from $17.5 million in the comparative prior year quarter. The increase in segment income was driven primarily by a gross margin increase of $24.6 million, resulting from improved gross margins on commodity products and higher sales of general line products and EWP compared with first quarter 2019. This improvement was offset partially by increased selling and distribution expenses of $12.2 million.

Balance Sheet and Liquidity

Boise Cascade ended first quarter 2020 with $215.0 million of cash and cash equivalents and $345.4 million of undrawn committed bank line availability, for total available liquidity of $560.4 million. The Company had $439.9 million of outstanding debt at March 31, 2020, with no maturities prior to 2024.

On March 13, 2020, we entered into the sixth amendment to the Amended and Restated Credit Agreement (the Amendment) related to the Company’s senior secured asset-based revolving credit facility and term loan. The Amendment extends the maturity date of the agreement from May 1, 2022, to the earlier of (i) March 13, 2025 and (ii) 90 days prior to the maturity of our $350 million of 5.625% senior notes due September 1, 2024 (or the maturity date of any permitted refinancing indebtedness in respect thereof). In addition, the Amendment reduces the maximum amount available for revolving loans under the agreement from $370.0 million to $350.0 million. The term loan within the Credit Agreement remains at $50.0 million.

In response to the impacts of COVID-19, we have reduced our planned capital spending for 2020 from our previously expected range of $85-to-$95 million to $50-to-$70 million. Included in our 2020 capital spending is the completion of the log utilization center improvement project at our plywood and veneer facility in Florien, Louisiana, as well as BMD’s door shop expansion in Dallas, Texas. We have reduced discretionary spending in response to the COVID-19 impact. In addition, we have identified a number of other cash saving measures that may be implemented in the near term, the timing and extent of which will depend upon the depth and duration of COVID-19 and its impact on our operating results.

Although significant uncertainty remains regarding the impact of COVID-19 on our 2020 operating results and cash flows, we believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, funding of acquisitions, lease obligations, working capital, pension contributions, and to pay cash dividends to holders of our common stock over the next 12 months. We expect to fund our seasonal and intra-month working capital requirements in 2020 from cash on hand and, if necessary, borrowings under our revolving credit facility.

Outlook

The full impacts of the global emergence of COVID-19 on our business and financial results are currently unknown. We are conducting business with modifications to our manufacturing production levels, mill and distribution center housekeeping and cleanliness protocols, employee travel, employee work locations, and virtualization or cancellation of certain sales and marketing events, among other modifications. We have observed other companies as well as various governmental agencies taking precautionary and preemptive actions to address COVID-19, and further actions may yet be taken that alter our normal business operations as well as those in our industry. The U.S. Department of Homeland Security (DHS) has designated the forest products industry, and thereby wood products manufacturing and building materials distribution, as part of the Essential Critical Infrastructure Workforce. However, state and local agencies are not mandated to follow the DHS designations, and in certain geographies across the U.S., additional restrictions have been imposed that further limit or preclude residential construction activity.

Given the current outlook and with sufficient inventory on hand, our Wood Products segment has implemented changes to reduce the volume of EWP and plywood it will produce. In April 2020, we temporarily curtailed or reduced operating schedules at essentially all of our manufacturing facilities, and we expect to continue temporary curtailment of certain operations until market conditions improve. All of our distribution facilities continue to operate, but at reduced activity levels, particularly at locations whose trade areas have been subject to additional state or local restrictions. We expect activity levels across our distribution network to continue to vary widely as COVID-19 impacts geographies across the U.S. to differing degrees and federal, state or local restrictions are implemented or rescinded. To date, we have not experienced disruptions to our supply chain and have been able to source the necessary raw materials and finished goods needed by our operations. We continue to actively monitor evolving developments and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our associates, customers, suppliers and stockholders.

Demand for the products we manufacture, as well as the products we purchase and distribute, is closely correlated with new residential construction in the U.S., which has been historically cyclical. To a lesser extent, demand for our products correlates with residential repair-and-remodeling activity and light commercial construction. The full impacts of the global emergence of COVID-19 on housing starts, residential repair-and-remodeling activity, and light commercial construction is uncertain. However, economists predict that housing starts will be negatively impacted compared to expectations prior to the COVID-19 outbreak. As of April 2020, the Blue Chip Economic Indicators consensus forecast for 2020 and 2021 single- and multi-family housing starts in the U.S. were 1.16 million and 1.25 million units, respectively, compared with actual housing starts of 1.29 million in 2019, as reported by the U.S. Census Bureau. Based upon current housing market indices, among other indicators, housing start levels for the second quarter of 2020 are likely to be below 1.00 million on a seasonally adjusted annual basis.

Although we believe that current U.S. demographics are supportive of higher levels of housing starts, we expect the economic consequences of COVID-19 to negatively impact residential construction. In particular, COVID-19 is expected to adversely affect the pace of household formation rates and residential repair-and-remodeling activity due to high unemployment rates, lower wages, low consumer confidence, prospective home buyers’ lack of ability to view homes in person, prospective home buyers’ access to and cost of financing, and housing affordability, as well as other factors. Household formation rates in turn will be a key factor behind the demand for new construction.

Robust construction activity in the first two months of 2020, as evidenced by seasonally adjusted annual rates of housing starts around 1.6 million, drove sharp increases in commodity products pricing that peaked in mid-March. However, concerns and uncertainty about the impacts of COVID-19 since then have negatively impacted residential construction activity and building products demand, resulting in curtailments of production across the industry and a sharp decline in commodity prices. Current composite panel and lumber prices are approximately 15% below the peaks of mid-March 2020 and are at similar levels to those experienced in second quarter 2019. We anticipate that commodity products pricing in the second quarter of 2020 will remain at current low levels, with the balance of the year subject to price volatility that will be dependent on the impact of COVID-19 on residential construction, industry operating rates, net import and export activity, transportation constraints or disruptions, inventory levels in various distribution channels, and seasonal demand patterns.

For the full first quarter results, click here.

About Boise Cascade

Boise Cascade Company is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. For more information, please visit the Company’s website at www.bc.com.

Contact:

Wayne Rancourt – Investor Relations – (208) 384-6073

Source: Boise Cascade Company