Boise Cascade Company — Q1 2024 Form 10-Q
Business context and period. Unaudited results for the three months ended March 31, 2024, compared with Q1 2023. Boise Cascade manufactures engineered wood products and plywood through Wood Products and wholesales building materials through Building Materials Distribution (BMD). Results are seasonal and are not necessarily indicative of full-year performance.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Sales | $1,645.4 million | $1,544.3 million |
| Income from operations | $133.0 million | $127.6 million |
| Operating margin | 8.1% | 8.3% |
| Net income | $104.1 million | $96.7 million |
| Diluted EPS | $2.61 | $2.43 |
| Operating cash flow | $27.5 million | $48.0 million |
- Sales rose 7% year over year; net income rose about 8%. Income tax expense was $32.8 million, with a 24.0% effective tax rate versus 25.6%.
- Wood Products segment operating income was $71.2 million versus $69.4 million. Higher EWP volumes and plywood prices were partly offset by lower EWP prices, higher wood-fiber costs, and $2.2 million of accelerated depreciation.
- BMD segment operating income was $72.5 million versus $69.7 million. Its gross-margin percentage improved to 15.1% from 14.8%; higher volumes and improved general-line and commodity margins were partly offset by higher selling, distribution, and depreciation costs.
- Cash from operations fell as working capital increased, including higher receivables and inventories. Capital expenditures were $34.3 million; financing used $49.6 million, including $27.0 million of share repurchases and $11.2 million of dividends paid. Cash declined $59.3 million to $890.2 million.
- At March 31, cash was $890.2 million, debt was $445.5 million, and undrawn committed bank-line availability was $395.7 million, for stated total available liquidity of $1,286.0 million. The revolving facility had no borrowings; $50.0 million was outstanding under the term loan and $400.0 million of 4.875% senior notes mature in 2030.
Material changes and operating trends
- BMD sales increased 9% to $1,505.0 million, with volume up 12% and average selling prices down 3%. General-line sales rose 16%; EWP sales rose 12%; commodity sales rose 1%.
- Wood Products sales increased 7% to $468.9 million. LVL and I-joist volumes rose 31% and 46%, respectively, while plywood volume fell 8% as more internally produced veneer was allocated to EWP production.
- U.S. housing starts increased 1% year over year; single-family starts rose 27%, while multifamily starts declined. Management cited mortgage rates and housing affordability as constraints, and expects pressure on multifamily starts to continue.
- Compared with Q1 2023, selling and distribution costs rose 12% and depreciation and amortization rose 15%, partly reflecting the BROSCO acquisition completed in October 2023. The filing reports $3.4 million of acquisition-related post-closing cash adjustments in Q1 2024.
Outlook, risks, and notable items
- Management expects 2024 U.S. housing starts to be generally consistent with 2023’s 1.42 million. Home-improvement spending is expected to remain healthy relative to history, but industry forecasts cited by management project mid-single-digit declines in 2024.
- Expected 2024 capital expenditures are approximately $250–$270 million, excluding potential acquisitions. Planned projects include EWP and plywood capacity investments and new BMD distribution centers in Texas and South Carolina.
- Management believes cash, operating cash flows, and borrowing capacity will be adequate for the next 12 months, including operations, capital spending, debt service, working capital, and dividends. Seasonal working-capital needs may be funded from cash and, if necessary, the revolver.
- Commodity-price and input-cost volatility, housing demand and affordability, customer concentration and credit risk, raw-material and transportation availability, operational disruptions, and labor costs are among the stated risks. Two customers represented approximately 19% and 11% of receivables at quarter-end.
- Five collective bargaining agreements covering about 460 employees were due to expire May 31, 2024; management warned that failed or unfavorable negotiations could cause disruption or higher costs. Ordinary-course legal proceedings were not believed likely to have a material adverse effect.
- Q1 included $2.2 million of accelerated depreciation following the indefinite curtailment of lumber production at the Chapman, Alabama facility. The board declared a $0.20-per-share quarterly dividend on May 2, 2024, payable June 17, 2024.
Important facts for investors to verify
- Whether housing starts, mortgage rates, and repair-and-remodel demand develop in line with management’s expectations, and how those trends affect volumes and product pricing.
- Whether BMD gross-margin gains and Wood Products EWP volumes persist amid commodity-price movements and higher input costs.
- Execution, timing, and returns on the $250–$270 million 2024 capital-spending plan, and any effects from the Chapman production curtailment.
- Working-capital requirements and operating cash generation through the seasonal building period, alongside planned dividends and share repurchases.
- Outcomes of the upcoming labor negotiations and any resulting operating disruption or cost changes.