Boise Cascade Company Reports Fourth Quarter and Full Year 2021 Results

Boise Cascade Company (“Boise Cascade,” the “Company,” “we,” or “our”) reported fourth quarter net income of $169.1 million, or $4.26 per share, on sales of $1.8 billion. For the full year 2021, Boise Cascade reported net income of $712.5 million, or $17.97 per share, on sales of $7.9 billion. For 2020 comparative results, see the table below, as well as ‘Other Items Impacting 2020 Results.’

“As I reflect on 2021, strong demand and supply-side constraints made for an unprecedented year. Above all else, the tireless work of our associates and their unwavering focus on supporting each other and our vendor and customer partners made it possible for the Company to deliver outstanding results,” stated Nate Jorgensen, CEO. “In addition, we leveraged our balanced approach to capital allocation by returning capital to our shareholders while advancing upon our growth strategies, which included the recent expansion announcements in our distribution business. The demand environment in 2022 is expected to remain strong, and we are positioned to capture opportunities ahead of us. Our values of integrity, safety, respect, and pursuit of excellence will continue to be our guideposts as we navigate the future.”

In the fourth quarter 2021, total U.S. housing starts increased 6% driven by an increase in multi-family housing starts compared to the same period in 2020. However, single-family housing starts decreased 5% compared to the prior year quarter. For the full year 2021, total and single-family housing starts increased 16% and 14%, respectively, compared with the same period in 2020. Single-family housing starts is the key demand driver for our sales.

Wood Products

Wood Products’ sales, including sales to Building Materials Distribution (BMD), increased $87.9 million, or 25%, to $446.6 million for the three months ended December 31, 2021, from $358.7 million for the three months ended December 31, 2020. The increase in sales was driven primarily by higher net sales prices for I-joists and LVL (collectively referred to as EWP), as well as higher sales volumes for LVL. The increase in EWP pricing was due to realizations of previously announced price increases and certain temporary price protection arrangements expiring in the current period. These increases were offset partially by lower sales volumes for I-joists, as well as lower plywood prices. Plywood sales volumes were flat compared with the same period in the prior year. Wood Products’ segment income increased $57.5 million to $98.4 million for the three months ended December 31, 2021, from $40.8 million for the three months ended December 31, 2020. The increase in segment income was due primarily to higher EWP sales prices, as well as higher LVL sales volumes. These improvements were offset partially by higher wood fiber costs and other manufacturing costs.

For the year ended December 31, 2021, sales, including sales to BMD, increased $646.9 million, or 49%, to $1,970.8 million from $1,323.9 million in 2020. The increase in sales was driven by higher plywood, EWP, and lumber prices, as well as higher sales volumes for EWP. The increase in EWP pricing was due to realizations of previously announced price increases and certain temporary price protection arrangements expiring in the current year. Wood Products’ segment income increased $403.5 million to $531.2 million for the year ended December 31, 2021, from $127.7 million for the year ended December 31, 2020. The increase in segment income was due primarily to higher plywood, EWP, and lumber sales prices, as well as higher EWP sales volumes. In addition, 2020 results included accelerated depreciation of $15.0 million and other closure-related costs of $1.7 million at our Roxboro, North Carolina facility. These increases were offset partially by higher wood fiber costs and other manufacturing costs.

Building Materials Distribution

BMD’s sales increased $315.4 million, or 24%, to $1,645.5 million for the three months ended December 31, 2021, from $1,330.1 million for the three months ended December 31, 2020. Compared with the same quarter in the prior year, the overall increase in sales was driven by sales price and sales volume increases of 19% and 5%, respectively. By product line, commodity sales increased 9%, general line product sales increased 26%, and sales of EWP (substantially all of which is sourced through our Wood Products segment) increased 62%. BMD segment income increased $70.9 million to $138.0 million for the three months ended December 31, 2021, from $67.1 million in the comparative prior year quarter. The improvement in segment income was driven by a gross margin increase of $94.1 million, resulting from improved gross margins across all product lines. The margin improvement was offset partially by increased selling and distribution expenses of $22.0 million.

For the year ended December 31, 2021, sales increased $2,222.3 million, or 45%, to $7,174.3 million from $4,952.0 million in 2020. The increase in sales was driven by sales price and sales volume increases of 42% and 3%, respectively. By product line, commodity sales increased 60%, general line product sales increased 23%, and sales of EWP increased 48%. BMD segment income increased $233.6 million to $481.1 million for the year ended December 31, 2021, from $247.5 million for the year ended December 31, 2020. The increase in segment income was driven by a gross margin increase of $296.8 million, resulting from improved gross margins across our EWP, general line, and commodity product categories compared with 2020. The improvement was offset partially by increased selling and distribution expenses of $60.6 million.

Other Items Impacting 2020 Results

Fourth quarter 2020 results included $6.2 million of pre-tax pension settlement charges, or $0.12 per share after-tax, related to the elimination of the qualified defined benefit pension plan (Plan Termination) and $38.8 million of income tax expense, or $0.98 per share, related to the release of stranded tax effects upon Plan Termination.

Full year 2020 results included the above items, as well as $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 permanent curtailment of I-joist production at our Roxboro, North Carolina, facility. In addition, full year 2020 results included $14.0 million of pre-tax loss on extinguishment of debt, or $0.27 per share after-tax, as the Company refinanced its senior notes.

Balance Sheet and Liquidity

Boise Cascade ended fourth quarter 2021 with $748.9 million of cash and cash equivalents and $346.0 million of undrawn committed bank line availability, for total available liquidity of $1,094.9 million. The Company had $444.6 million of outstanding debt at December 31, 2021.

We expect capital expenditures in 2022 to total approximately $110 million to $130 million. Our 2022 capital expenditures range includes funding to complete our recently announced BMD organic expansions in Ohio, Kentucky, and Minnesota, and a new dryer at our Chester, South Carolina veneer and plywood plant. This level of capital expenditures could increase or decrease as a result of a number of factors, including acquisitions, efforts to further accelerate organic growth, exercise of lease purchase options, our financial results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases.

Dividends

On February 7, 2022, our board of directors declared a quarterly dividend of $0.12 per share on our common stock, payable on March 15, 2022, to stockholders of record on February 22, 2022.

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, material cash requirements, restrictions imposed by our asset-based credit facility and the indenture governing our senior notes, applicable laws, and other factors that our board of directors may deem relevant.

Outlook

During 2021, our Wood Products and BMD locations continued to experience periodic short-term disruptions due to COVID-19 as we continued efforts to increase production rates and distribution capabilities in response to strong end-product demand. Furthermore, supply-side constraints across product lines including shortages of materials, labor, and transportation resources limited the industry’s ability to meet underlying demand. The effects of the COVID-19 vaccine and COVID-19 safety protocols helped slow pandemic-related disruptions at times; however, COVID-19 variants continue to spread throughout the United States, causing more short-term disruptions as we entered 2022. We continue to conduct business with certain modifications to 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. In addition, we continue to actively monitor evolving developments, including the impact of COVID-19 variants, and may take 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 employees, customers, suppliers, communities, and stockholders.

Economic uncertainty due to the ongoing COVID-19 pandemic continues. However, mortgage rate levels, continuation of work-from-home practices by many in the economy, and demographics in the U.S. have created a favorable demand environment for new residential construction, which we expect to continue in 2022. As of February 2022, the Blue Chip Economic Indicators consensus forecast for 2022 single- and multi-family housing starts in the U.S. was 1.60 million units, compared with actual housing starts of 1.60 million in 2021 and 1.38 million in 2020, as reported by the U.S. Census Bureau. In addition, limited new and existing home inventory availability and the age of the U.S. housing stock will continue to provide a favorable backdrop for residential construction and repair-and-remodel spending. Although we believe that current U.S. demographics support the higher level of forecasted housing starts, and many national home builders are reporting strong near-term backlogs, labor shortages and supply induced constraints on residential construction activity may continue to extend build times and limit activity. In addition, the pace of residential construction and repair-and-modeling activity may be affected by the economic impact of the cost of building materials and construction, housing affordability, mortgage interest rates, wage growth, prospective home buyers’ access to financing, consumer confidence, as well as other factors.

As a manufacturer of certain commodity products, we have sales and profitability exposure to declines in commodity product prices and rising input costs. Our distribution business purchases and sells a broad mix of commodity products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability. Our 2021 results were favorably impacted by historically high commodity wood products pricing, as well as rising prices for EWP and general line products. Composite lumber and panel prices were very volatile throughout 2021 with rapidly rising prices in second quarter, sharp price declines in third quarter, and prices steadily increasing again during fourth quarter. As we enter 2022, commodity wood products pricing continues to be above historical averages as strong demand and capacity constraints continue to create supply/demand imbalances in the marketplace. We expect future commodity product pricing and commodity input costs to be volatile in response to capacity restoration and industry operating rates, the impact of the ongoing COVID-19 pandemic on residential construction, net import and export activity, transportation constraints or disruptions, inventory levels in various distribution channels, and seasonal demand patterns. EWP and general line products have historically experienced limited price volatility, and we expect the firm pricing environment to continue in 2022.

For the full fourth 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:

Kelly Hibbs – Investor Relations – (203) 384-3638

Source: Boise Cascade Company