Boise cascade company reports first quarter 2020 results and provides covid-19 business update
Boise, idaho--(business wire)--boise cascade company ("boise cascade," the "company," "we," or "our") (nyse: bcc) today 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." for discussion of the impacts and our continued response to covid-19, see 'balance sheet and liquidity' and 'outlook' below. first quarter 2020 highlights 1q 2020 1q 2019 % change (in thousands, except per-share data and percentages) consolidated results sales $ 1,170,534 $ 1,042,086 12 % net income 12,200 11,389 7 % net income per common share - diluted 0.31 0.29 7 % adjusted ebitda 1 59,619 40,734 46 % segment results wood products sales $ 320,061 $ 319,523 — % wood products income 3,763 11,630 (68 )% wood products ebitda 1 33,366 25,368 32 % building materials distribution sales 1,049,997 907,708 16 % building materials distribution income 29,302 17,517 67 % building materials distribution ebitda 1 34,646 22,649 53 % 1 for reconciliations of non-gaap measures, see summary notes at the end of this press release. in the first quarter 2020, total u.s. housing starts increased 22% compared to the same period last year. single-family housing starts, the primary driver of our sales volumes, also increased 12%. 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. comparative average net selling prices and sales volume changes for ewp and plywood are as follows: 1q 2020 vs. 1q 2019 1q 2020 vs. 4q 2019 average net selling prices lvl (2)% —% i-joists 1% 1% plywood (7)% 6% sales volumes lvl 8% 8% i-joists 14% 10% plywood (5)% 1% on february 20, 2020, we decided to permanently curtail i-joist production at our roxboro, north carolina facility by march 31, 2020. as a result of the curtailment, we recorded $15.0 million of accelerated depreciation during first quarter 2020 to fully depreciate the curtailed i-joist assets. in addition, we recorded $1.7 million of various closure-related costs. 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. dividends on may 7, 2020, our board of directors declared a dividend of $0.10 per share on our common stock, payable on june 15, 2020, to stockholders of record on june 1, 2020. future dividend declarations, including amount per share, record date and payment date, will be made at the discretion of our board of directors and will depend upon, among other things, legal capital requirements and surplus, our future operations and earnings, general financial condition, contractual restrictions, and other factors that our board of directors may deem relevant. 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. 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. webcast and conference call boise cascade will host a webcast and conference call to discuss first quarter earnings, and our continued response to the covid-19 situation on friday, may 8, 2020, at 11 a.m. eastern. to participate in the conference call, dial 844-795-4410 and use participant passcode 6587475 (international callers should dial 661-378-9637). to join the webcast, go to the investor relations section at www.bc.com and select the event calendar link. a replay of the conference call will be available from friday, may 8, 2020 at 2 p.m. eastern through friday, may 15, 2020 at 2 p.m. eastern. replay numbers are 855-859-2056 for u.s. callers and 404-537-3406 for international callers with a passcode of 6587475. the archived webcast will be available in the investor relations section of boise cascade's website. use of non-gaap financial measures we refer to the terms ebitda and adjusted ebitda in this earnings release and the accompanying quarterly statistical information as supplemental measures of our performance and liquidity that are not required by or presented in accordance with generally accepted accounting principles in the united states (gaap). we define ebitda as income (loss) before interest (interest expense and interest income), income taxes, and depreciation and amortization. additionally, we disclose adjusted ebitda, which further adjusts ebitda to exclude the change in fair value of interest rate swaps. we believe ebitda and adjusted ebitda are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. we also believe ebitda and adjusted ebitda are useful to investors because they provide a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that are used by our management and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. ebitda and adjusted ebitda, however, are not measures of our liquidity or financial performance under gaap and should not be considered as alternatives to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with gaap or as alternatives to cash flow from operating activities as a measure of our liquidity. the use of ebitda and adjusted ebitda instead of net income (loss) or segment income (loss) have limitations as analytical tools, including: the inability to determine profitability; the exclusion of interest expense, interest income, and associated significant cash requirements; and the exclusion of depreciation and amortization, which represent unavoidable operating costs. management compensates for these limitations by relying on our gaap results. our measures of ebitda and adjusted ebitda are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. forward-looking statements this press release includes statements about our expectations of future operational and financial performance that are forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. statements preceded or followed by, or that otherwise include, the words "believes," "expects," "anticipates," "intends," "project," "estimates," "plans," "forecast," "is likely to," and similar expressions or future or conditional verbs such as "will," "may," "would," "should," and "could" are generally forward-looking in nature and not historical facts. such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. the accuracy of such statements is subject to a number of risks, uncertainties, and assumptions that could cause our actual results to differ materially from those projected, including, but not limited to, prices for building products, changes in the competitive position of our products, commodity input costs, the effect of general economic conditions, the effect of covid-19, mortgage rates and availability, housing demand, housing vacancy rates, governmental regulations, unforeseen production disruptions, as well as natural disasters. these and other factors that could cause actual results to differ materially from such forward-looking statements are discussed in greater detail in our filings with the securities and exchange commission including the risk of impairment of long-lived assets and goodwill due to the severity of the covid-19 impact on the economy should it continue unabated. forward-looking statements speak only as of the date of this press release. we undertake no obligation to revise them in light of new information. finally, we undertake no obligation to review or confirm analyst expectations or estimates that might be derived from this release. boise cascade company consolidated statements of operations (in thousands, except per-share data) three months ended march 31 december 31, 2019 2020 2019 sales $ 1,170,534 $ 1,042,086 $ 1,101,713 costs and expenses materials, labor, and other operating expenses (excluding depreciation) 992,270 897,822 939,375 depreciation and amortization 35,332 19,217 20,501 selling and distribution expenses 99,463 87,026 98,280 general and administrative expenses 16,084 16,675 19,008 loss on curtailment of facility 1,669 — — other (income) expense, net 169 (308 ) (226 ) 1,144,987 1,020,432 1,076,938 income from operations 25,547 21,654 24,775 foreign currency exchange gain (loss) (873 ) 162 239 pension expense (excluding service costs) (387 ) (299 ) (272 ) interest expense (6,421 ) (6,437 ) (6,596 ) interest income 655 492 1,066 change in fair value of interest rate swaps (2,314 ) (983 ) 140 (9,340 ) (7,065 ) (5,423 ) income before income taxes 16,207 14,589 19,352 income tax provision (4,007 ) (3,200 ) (4,705 ) net income $ 12,200 $ 11,389 $ 14,647 weighted average common shares outstanding: basic 39,163 38,884 39,093 diluted 39,405 39,203 39,418 net income per common share: basic $ 0.31 $ 0.29 $ 0.37 diluted $ 0.31 $ 0.29 $ 0.37 dividends declared per common share $ 0.10 $ 0.09 $ 1.10 see accompanying summary notes to consolidated financial statements and segment information. wood products segment statements of operations (in thousands, except percentages) three months ended march 31 december 31, 2019 2020 2019 segment sales $ 320,061 $ 319,523 $ 296,286 costs and expenses materials, labor, and other operating expenses (excluding depreciation) 274,034 283,030 261,611 depreciation and amortization 29,603 13,738 14,589 selling and distribution expenses 7,984 7,705 8,201 general and administrative expenses 3,012 3,628 3,962 loss on curtailment of facility 1,669 — — other (income) expense, net (4 ) (208 ) (139 ) 316,298 307,893 288,224 segment income $ 3,763 $ 11,630 $ 8,062 (percentage of sales) segment sales 100.0 % 100.0 % 100.0 % costs and expenses materials, labor, and other operating expenses (excluding depreciation) 85.6 % 88.6 % 88.3 % depreciation and amortization 9.2 % 4.3 % 4.9 % selling and distribution expenses 2.5 % 2.4 % 2.8 % general and administrative expenses 0.9 % 1.1 % 1.3 % loss on curtailment of facility 0.5 % — % — % other (income) expense, net — % (0.1 %) — % 98.8 % 96.4 % 97.3 % segment income 1.2 % 3.6 % 2.7 % building materials distribution segment statements of operations (in thousands, except percentages) three months ended march 31 december 31, 2019 2020 2019 segment sales $ 1,049,997 $ 907,708 $ 986,969 costs and expenses materials, labor, and other operating expenses (excluding depreciation) 917,841 800,200 859,102 depreciation and amortization 5,344 5,132 5,331 selling and distribution expenses 91,423 79,265 90,027 general and administrative expenses 6,135 5,694 6,365 other (income) expense, net (48 ) (100 ) (110 ) 1,020,695 890,191 960,715 segment income $ 29,302 $ 17,517 $ 26,254 (percentage of sales) segment sales 100.0 % 100.0 % 100.0 % costs and expenses materials, labor, and other operating expenses (excluding depreciation) 87.4 % 88.2 % 87.0 % depreciation and amortization 0.5 % 0.6 % 0.5 % selling and distribution expenses 8.7 % 8.7 % 9.1 % general and administrative expenses 0.6 % 0.6 % 0.6 % other (income) expense, net — % — % — % 97.2 % 98.1 % 97.3 % segment income 2.8 % 1.9 % 2.7 % segment information (in thousands) three months ended march 31 december 31, 2019 2020 2019 segment sales wood products $ 320,061 $ 319,523 $ 296,286 building materials distribution 1,049,997 907,708 986,969 intersegment eliminations (199,524 ) (185,145 ) (181,542 ) total net sales $ 1,170,534 $ 1,042,086 $ 1,101,713 segment income wood products $ 3,763 $ 11,630 $ 8,062 building materials distribution 29,302 17,517 26,254 total segment income 33,065 29,147 34,316 unallocated corporate costs (7,518 ) (7,493 ) (9,541 ) income from operations $ 25,547 $ 21,654 $ 24,775 segment ebitda (a) wood products $ 33,366 $ 25,368 $ 22,651 building materials distribution 34,646 22,649 31,585 see accompanying summary notes to consolidated financial statements and segment information. boise cascade company consolidated balance sheets (in thousands) march 31, 2020 december 31, 2019 assets current cash and cash equivalents $ 214,992 $ 285,237 receivables trade, less allowances of $980 and $591 327,254 215,894 related parties 585 568 other 12,288 15,184 inventories 536,314 497,596 prepaid expenses and other 13,957 8,285 total current assets 1,105,390 1,022,764 property and equipment, net 455,506 476,949 operating lease right-of-use assets 64,496 64,228 finance lease right-of-use assets 22,325 21,798 timber deposits 14,658 12,287 goodwill 60,382 60,382 intangible assets, net 17,492 17,797 deferred income taxes 7,509 7,952 other assets 7,609 9,194 total assets $ 1,755,367 $ 1,693,351 boise cascade company consolidated balance sheets (continued) (in thousands, except per-share data) march 31, 2020 december 31, 2019 liabilities and stockholders' equity current accounts payable trade $ 307,224 $ 222,930 related parties 2,431 1,624 accrued liabilities compensation and benefits 56,379 83,943 interest payable 1,782 6,723 other 71,120 69,772 total current liabilities 438,936 384,992 debt long-term debt 439,915 440,544 other compensation and benefits 41,953 45,586 operating lease liabilities, net of current portion 58,367 58,029 finance lease liabilities, net of current portion 23,919 23,419 deferred income taxes 28,128 26,694 other long-term liabilities 15,878 12,757 168,245 166,485 commitments and contingent liabilities stockholders' equity preferred stock, $0.01 par value per share; 50,000 shares authorized, no shares issued and outstanding — — common stock, $0.01 par value per share; 300,000 shares authorized, 44,564 and 44,353 shares issued, respectively 446 444 treasury stock, 5,367 shares at cost (138,909 ) (138,909 ) additional paid-in capital 531,735 533,345 accumulated other comprehensive loss (50,033 ) (50,248 ) retained earnings 365,032 356,698 total stockholders' equity 708,271 701,330 total liabilities and stockholders' equity $ 1,755,367 $ 1,693,351 boise cascade company consolidated statements of cash flows (in thousands) three months ended march 31 2020 2019 cash provided by (used for) operations net income $ 12,200 $ 11,389 items in net income not using (providing) cash depreciation and amortization, including deferred financing costs and other 35,859 19,788 stock-based compensation 1,674 2,200 pension expense 555 460 deferred income taxes 1,197 1,313 change in fair value of interest rate swaps 2,314 983 loss on curtailment of facility (excluding severance) 1,438 — other 155 (49 ) decrease (increase) in working capital receivables (108,229 ) (75,606 ) inventories (39,045 ) (39,483 ) prepaid expenses and other (3,205 ) (1,883 ) accounts payable and accrued liabilities 55,629 29,810 pension contributions (726 ) (469 ) income taxes payable (2,111 ) 12,753 other (172 ) 1,835 net cash used for operations (42,467 ) (36,959 ) cash provided by (used for) investment expenditures for property and equipment (18,563 ) (14,347 ) proceeds from sales of facilities — 2,493 proceeds from sales of assets and other 103 1,149 net cash used for investment (18,460 ) (10,705 ) cash provided by (used for) financing dividends paid on common stock (4,645 ) (4,053 ) tax withholding payments on stock-based awards (3,309 ) (3,569 ) other (1,364 ) (181 ) net cash used for financing (9,318 ) (7,803 ) net decrease in cash and cash equivalents (70,245 ) (55,467 ) balance at beginning of the period 285,237 191,671 balance at end of the period $ 214,992 $ 136,204 summary notes to consolidated financial statements and segment information the consolidated statements of operations, segment statements of operations, consolidated balance sheets, consolidated statements of cash flows, and segment information presented herein do not include the notes accompanying the company's consolidated financial statements and should be read in conjunction with the company’s 2019 form 10-k and the company's other filings with the securities and exchange commission. net income for all periods presented involved estimates and accruals. ebitda represents income before interest (interest expense and interest income), income taxes, and depreciation and amortization. additionally, we disclose adjusted ebitda, which further adjusts ebitda to exclude the change in fair value of interest rate swaps. the following table reconciles net income to ebitda and adjusted ebitda for the three months ended march 31, 2020 and 2019, and december 31, 2019: three months ended march 31 december 31, 2019 2020 2019 (in thousands) net income $ 12,200 $ 11,389 $ 14,647 interest expense 6,421 6,437 6,596 interest income (655 ) (492 ) (1,066 ) income tax provision 4,007 3,200 4,705 depreciation and amortization 35,332 19,217 20,501 ebitda 57,305 39,751 45,383 change in fair value of interest rate swaps 2,314 983 (140 ) adjusted ebitda $ 59,619 $ 40,734 $ 45,243 the following table reconciles segment income and unallocated corporate costs to ebitda and adjusted ebitda for the three months ended march 31, 2020 and 2019, and december 31, 2019: three months ended march 31 december 31, 2019 2020 2019 (in thousands) wood products segment income $ 3,763 $ 11,630 $ 8,062 depreciation and amortization 29,603 13,738 14,589 ebitda $ 33,366 $ 25,368 $ 22,651 building materials distribution segment income $ 29,302 $ 17,517 $ 26,254 depreciation and amortization 5,344 5,132 5,331 ebitda $ 34,646 $ 22,649 $ 31,585 corporate unallocated corporate costs $ (7,518 ) $ (7,493 ) $ (9,541 ) foreign currency exchange gain (loss) (873 ) 162 239 pension expense (excluding service costs) (387 ) (299 ) (272 ) change in fair value of interest rate swaps (2,314 ) (983 ) 140 depreciation and amortization 385 347 581 ebitda (10,707 ) (8,266 ) (8,853 ) change in fair value of interest rate swaps 2,314 983 (140 ) corporate adjusted ebitda $ (8,393 ) $ (7,283 ) $ (8,993 ) total company adjusted ebitda $ 59,619 $ 40,734 $ 45,243
