boise cascade company investor presentation
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Boise Cascade CompanyInvestor Presentation
September 2020
1
Forward Looking StatementsNon-GAAP Financial Measures
Forward-Looking Statements
During the course of this presentation, we may make forward-looking statements or provide forward-looking information. All statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as “expects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “projects,” and “indicates.” Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks, uncertainties, and assumptions which are difficult to predict. Some of the factors that may cause actual outcomes and results to differ materially from those expressed in, or implied by, the forward-looking statements include, but are not necessarily limited to, prices for building products, changes in the competitive position of our products, commodity input costs, the effect of general economic conditions, mortgage rates and availability, housing demand, housing vacancy rates, governmental regulations, unforeseen production disruptions, as well as natural disasters. The Company does not undertake any obligation to update any forward-looking statements as a result of future developments or new information.
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures, including Free Cash Flow, EBITDA and Adjusted EBITDA, designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. Our non-GAAP financial measures are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the metrics of calculation. For a reconciliation of Free Cash Flow, net income to EBITDA and Adjusted EBITDA and segment income (loss) to segment EBITDA, see the Appendix to this presentation.
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Experienced Management Years of
Experience with Company
Wayne RancourtExecutive Vice President, Chief Financial
Officer and Treasurer35
Nate JorgensenChief Executive Officer 33*
Former VP of Distribution for Weyerhaeuser Joined Boise Cascade in 2015 Appointed CEO in 2020
Began career with Boise Cascade in 1983 Appointed CFO in 2009
Seasoned management team with extensive industry experience and proven ability to operate through economic cycles
Nick StokesExecutive Vice President, Building Materials
Division41
Mike BrownExecutive Vice President, Wood Products 21
Began career with Boise Cascade in 1979 Appointed Executive Vice President, Building
Materials Division in 2014
Began career with Boise Cascade in 1999 Appointed Executive Vice President, Wood Products
in 2019
Erin NuxollSenior Vice President, Human Resources 27
Began career with Boise Cascade in 2007 Appointed Vice President, General Counsel and
Corporate Secretary in 2019
* 33 years of industry experience. 5 years with Boise Cascade.
Jill TwedtVice President, General Counsel 13
Began career with Boise Cascade in 1983 Served 10 years as VP of HR for a large, private
multi-national company before returning to BCC Appointed SVP, Human Resources in 2019
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Geographic Footprint
$241mm LTM Adj. EBITDA2
(1) Segment percentages are calculated before intersegment eliminations.(2) Segment percentages exclude Corporate and Other Segment Expenses.
Large, vertically-integrated building products company operating through two segments:
Wood Products
Leading manufacturer of engineered wood products (“EWP”) and plywood
LTM Sales of ~$1.2Bn and EBITDA of $118mm (9.6% margin)
Building Materials Distribution (“BMD”)
Leading national wholesale distributor
LTM Sales of ~$4.3Bn and EBITDA of $159mm (3.7% margin)
Broad geographic footprint – 54 facilities across North America
Products primarily used in new home construction, repair and remodel, light commercial construction, and certain industrial applications
$4.8Bn LTM Sales1
Boise Cascade at a Glance
ID
FL
NM
DEMD
TX
OK
KS
NE
SD
NDMT
WY
COUT
AZ
NV
WA
CA
OR
KY
ME
NY
VT
NH
MA
RICT
WVINIL
NCTN
SC
ALMSAR
LA
MO
IA
MN
WI
NJ
GA
DCVA
MI
OHPA
HeadquartersEWP Manufacturing Facilities (5)Plywood/Veneer Manufacturing Facilities (8)Lumber Manufacturing Facilities (2)BMD Facilities (38)Component Manufacturing Plant (1)
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Balance exposure to commodity production
Drive operational excellence
Pursue innovation, including commercial opportunities
Manufacturing Distribution
Identify/execute on scalable, adjacent distribution platforms
Drive operational excellence
Accelerate pace of market penetration, including underserved geographies
Leverage the Integrated Model
Increase Earnings Stability
Accelerate Pace of Transformation
Strategic Priorities
5
Business Model
Manufacturing has superior access to the market through a committed distributor
EWP supply chain visibility and optimization benefits both manufacturing and distribution
BMD benefits from committed manufacturing partnership
Joint service offerings provide unique and significant value to customers
From manufacturing sales through BMD, the Company captures EBITDA margin at both levels
Building Materials Distribution
(“BMD”)
Execution of Vertical Integration is Key Driver of Success
Wood Products(“Manufacturing”)
Vertical Integration Drives Value Proposition
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58%30%
4%8%
Large-scale manufacturing position through the operation of 5 EWP facilities, 8 plywood/veneer plants and 2 sawmills
Products manufactured include EWP, plywood and ponderosa pine shop lumber
34.0 million cubic feet of laminated veneer lumber (“LVL”) capacity and 2,230 million square feet of plywood and parallel laminated veneer (PLV) capacity
Strong “branded” position for EWP products and services
The largest customer is the Company’s Building Material Distribution segment at approximately 60% of Wood Product segment sales
External customers include wholesalers, home improvement centers, retail lumberyards and industrial converters in North America
Segment Description LTM Sales by Product
Engineered Wood Products
Plywood
Other
Sales & Marketing – Technical support services are provided, including
Integrated design
Engineering
Product specification software
Distributor inventory management software
Job-pack preparation systems
Key Services
LVL I-joists Laminated Beams
Wood Products Overview
Lumber
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Leading Manufacturing Platform
Highlights
#2 engineered wood products (“EWP”) producer in North America
#2 plywood producer in North America
Manufacturing facilities located in 6 states throughout the United States and 1 province in Canada
Competitive Landscape
All Other
Martco Plywood
West FraserRoseburg Forest
Products
Boise Cascade
Georgia Pacific
2019 N.A. Plywood Production Capacity
Source: BCC estimates, FEA, APA
2019 N.A. EWP Solid Section Production Capacity
Boise Cascade
Weyerhaeuser
Pacific Woodtech
Louisiana Pacific
Roseburg Forest Products
Murphy
All Other
Source: BCC estimates, FEA, APA, 10-K filings
Weyerhaeuser
23%
18%
7%6%5%
4%
37%
33%
26%
13%
8%
6%
5%9%
Manufacturing Geographic Footprint
ID
FL
NM
DEMD
TX
OK
KS
NE
SD
NDMT
WY
COUT
AZ
NV
WA
CA
OR
KY
ME
NY
VT
NH
MA
RICT
WVINIL
NCTN
SC
ALMSAR
LA
MO
IA
MN
WI
NJ
GA
DCVA
MI
OHPA
HeadquartersEWP Manufacturing Facilities (5)Plywood/Veneer Manufacturing Facilities (8)Lumber Manufacturing Facilities (2)
8
69%
59%
31%
41%
0
500
1,000
1,500
2,000
2,500
2015 2019
Plywood% EWP%
Wood Products Primary Operations
Volume Mix – 2019Veneer Usage & End Product Use
2,315
(MMSF – 3/8”)
External Distribution
BCC Distribution
77%
23%
EWP
External Distribution
BCC Distribution32%
68%
Plywood
2,181
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Siding Metal Products Insulation Roofing Composite Decking Doors
41%
39%
20% One of the largest U.S. wholesale building
products distributors in North America with 38 distribution facilities and 1 component manufacturing plant
Broad product line of wood products as well as siding, composite decking, doors, metal products, insulation and roofing. Strong alignment with market-leading supplier brands
~4.6 million square feet of warehouse space
~1,000 third-party suppliers, ranging from large manufacturers to smaller regional producers
Sales channel is primarily retail lumberyards and home improvement centers
BMD has ~180 associates dedicated to EWP sales and support services
Segment Description LTM Sales by Product
General Line
Commodity
EWP
Logistics – Truckload shipments, break bulk / packaging, mill direct shipments
Financial – Credit, price risk mitigation related to commodities
Sales & Marketing – Market development / product knowledge, customer service (special orders, warranty claims), technical service (EWP design and specification)
Key Services
Plywood OSB Framing
Lumber
BMD Overview
LVL I-joists Laminated
beams
10
Commodity41%
EWP20%
General Line39%
BMD % ofLTM Sales
Independent Pro Dealers50%
National Pro Chains24%
Home Centers
10%
Other16%
BMD CustomerSales Breakdown
LTM
BMD Products and Channels
Suppliers*
OSBNorbordLouisiana PacificGeorgia PacificWeyerhaeuserHuber
Top 5 Producers ~80% of Market
PlywoodGeorgia PacificBoise CascadeRoseburgWest FraserWeyerhaeuser
Top 5 Producers ~60% of Market
EWPWeyerhaeuserBoise CascadeLouisiana PacificPacific WoodTechRoseburg
Top 5 Producers ~90% of Market
General LineSiding Composite DeckingRebarRoofingDoorsGypsum DrywallMetal Connectors
LumberWest FraserCanforWeyerhaeuserGeorgia PacificInterfor
Top 5 Producers ~35% of Market
*BCC suppliers highlighted in green
Customers
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Prudent Balance Sheet Management and Financial Policy
Net Leverage Over Time
Financial Policy and Operating Priorities
Capital Allocation Priorities
Support organic growth in both businesses Pursue acquisitions opportunistically Modest annual dividend (~$16 million) Supplemental dividends and share
repurchases when appropriate
Conservative Capital Structure
Target gross debt-to-EBITDA of 2.5x Target net leverage under 2.0x
Ample Liquidity $361 million of cash as of June 30, 2020 $345 million of undrawn committed bank line
availability as of June 30, 2020
Increase Productivity and Reduce Expenses
Optimize veneer use within manufacturing system
Drive continuous improvement in cost position
Leverage footprint in place
Liquidity Over Time
12
Capital Allocation Overview
Adjusted EBITDA and Uses of Capital
13
Historical Financial Performance
Total Net Sales ($MM)
Free Cash Flow1 ($MM)
Adjusted EBITDA ($MM)
Capital Expenditures Excl. Acquisitions ($MM)
1 Defined as Adjusted EBITDA less Capital Expenditures (excl. acquisitions)* Decrease in 2016 was primarily due to lower plywood and lumber sales prices. Decrease in 2018 was primarily due to recording impairment losses on assets related to the sale of facilities.
14
Segment Performance
Wood Products Building Materials Distribution
Segment Revenue ($MM)
Segment EBITDA ($MM)
Segment Revenue ($MM)
Segment EBITDA ($MM)
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Appendix
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EWP primarily used in new residential construction
Increased use in residential construction
Stronger and longer than lumber
Fewer pieces used
Open rooms and taller walls
Lower installed cost
Reduced need for skilled labor
Simplified mechanical runs
Consistent, high-quality products result in fewer builder call-backs
Offsite construction requires precise dimensions which plays to EWP strengths
LVL Light Duty
Header
LVL Wall FramingLVL Beam
Glulam
LVL Window & Door Header
Rimboard
I-JoistsStair Stringer
Building Method Trends Favor EWP
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70
80
90
100
110
120
130
2016 2017 2018 2019 LTM 2Q20
Inde
xed
to 1
00
Plywood Price Plywood Volume
Plywood
80
90
100
110
120
2016 2017 2018 2019 LTM 2Q20
Inde
xed
to 1
00
I-joist Price I-joist VolumeLVL Price LVL Volume
EWP
Wood Products Historical Price & Volume
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Structural Panels
79% 79% 79% 80% 81%
55%56%
56% 56% 56%
43%42%
40% 37% 42%
60%61%
62% 63%62%
(5)
-
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019
billi
on s
quar
e fe
et -
3/8"
bas
is
Source: FEA, APA, Boise Cascade
Percentages represent OSB's portion of each market
New Residential
Non-Residential
Industrial
Repair & Remodel
Exports
Imports
64%65%
65% 66%
% of Total
64%
Total Structural Panel Usage for North America
19
Total Company EBITDA Reconciliation and Supplemental Segment Information
Note: EBITDA represents income before interest (interest expense and interest income), income taxes, and depreciation and amortization. Additionally, we disclose Adjusted EBITDA, which further adjusts EBITDA to exclude the change in fair value of interest rate swaps and loss on extinguishment of debt.
($ in millions) Q22015 2016 2017 2018 2019 2020 LTM
Net Income $52.2 $38.3 $83.0 $20.5 $80.9 $87.6
Interest Expense 22.5 26.7 25.4 26.2 26.1 26.2
Interest Income (0.3) (0.4) (0.5) (1.6) (2.8) (2.7)
Income Tax Provision 28.5 5.0 34.6 1.6 27.3 29.7
Depreciation and Amortization 55.6 72.8 80.4 146.8 80.1 96.7EBITDA $158.5 $142.5 $222.8 $193.5 $211.6 $237.4
Change in Fair Value of Interest Rate Swaps -- ($4.2) ($0.5) ($0.6) $3.0 $3.3
Loss on Extinguishment of Debt -- 14.3 -- -- -- --Adjusted EBITDA $158.5 $152.5 $222.3 $192.9 $214.6 $240.7
Wood Products $1,282.1 $1,280.4 $1,373.8 $1,533.3 $1,275.2 $1,223.0
Building Materials Distribution 2,891.3 3,227.2 3,773.8 4,287.7 4,137.7 4,316.8
Eliminations & Other (540.0) (596.4) (715.6) (825.7) (769.5) (755.3)Total Sales $3,633.4 $3,911.2 $4,432.0 $4,995.3 $4,643.4 $4,784.5
Wood Products $107.5 $83.5 $116.7 $117.0 $111.9 $117.9
Building Materials Distribution 72.7 98.1 132.3 130.8 137.0 159.0
Corporate & Other (21.7) (29.0) (26.8) (54.8) (34.3) (36.1)Total Company Adjusted EBITDA $158.5 $152.5 $222.3 $192.9 $214.6 $240.7
20
Segment Financial Performance and Free Cash Flow Reconciliation
Wood Products
Building Materials Distribution
Free Cash Flow Reconciliation
Note: Free Cash Flow defined as Company Adj. EBITDA less Capital Expenditures (excl. acquisitions)
($ in millions) Q22015 2016 2017 2018 2019 2020 LTM
Segment Income (Loss) $64.2 $25.9 $53.6 ($10.0) $54.2 $44.5
Depreciation and Amortization 43.3 57.5 63.1 127.0 57.7 73.4Segment EBITDA $107.5 $83.5 $116.7 $117.0 $111.9 $117.9
($ in millions) Q22015 2016 2017 2018 2019 2020 LTM
Segment Income $60.8 $84.4 $116.8 $112.5 $116.2 $137.4
Depreciation and Amortization 11.9 13.8 15.5 18.3 20.8 21.5Segment EBITDA $72.7 $98.1 $132.3 $130.8 $137.0 $159.0
($ in millions) Q22015 2016 2017 2018 2019 2020 LTM
Company Adjusted EBITDA $158.5 $152.5 $222.3 $192.9 $214.6 $240.7
Capital Expenditures (excl. acquisitions) 87.5 83.6 75.5 80.0 82.7 78.7Free Cash Flow $70.9 $69.0 $146.8 $113.0 $131.9 $161.9
21
Random Lengths Panel Composite
22
Random Lengths Lumber Composite