There and Back Again

Careful and calculated financial moves helped Boise Cascade weather the recession and position itself for growth

Wayne Rancourt, Senior Vice President, Chief Financial Officer, and Treasurer for Boise Cascade

Boise Cascade is one of the largest forest products companies in the world, with $3.2 billion in annual sales and a rising publicly traded stock, but the arduous journey over the years has required both dedication and wisdom. When two recessions—one in the 1990s and the more recent economic crisis of 2008—threatened to sink the company, its leaders stepped in to make drastic changes.

In the 1990s, Boise Cascade found itself at the whim of a notoriously cyclical industry with periods of rapid gains and dramatic losses. Two varieties of paper—some of the company’s most popular products—were hit especially hard. Government regulations limited timber harvesting and operating costs climbed. The company’s debt level rose, and sales were down across all divisions.

Wayne Rancourt remembers the period well. Today, he serves as the company’s chief financial officer, but he came to Boise Cascade in 1983 as an entry-level auditor, having watched as upper level managers shut down smaller, regional mills; restructured; and liquidated timberlands and other assets that didn’t generate sufficient returns on capital. They further repositioned the company by investing more in office products and building materials distribution. Finally, after losses in several difficult years, sales started to trend upwards. Boise Cascade was back on track with a profitable year in 1995. On the heels of that success, the company took its office products division, Boise Cascade Office Products, public.

A few years later, in 2003, the growing forest products and office products business found itself competing with major corporations like Office Depot and Staples. In an effort to maximize reach in both sectors, corporate leaders decided to restructure yet again. In a bold move, the corporation purchased OfficeMax and quickly separated the forest products business. It sold timberlands, pulp and paper mills, wood products manufacturing, and building materials distribution—along with the rights to the Boise Cascade name—to private equity firm Madison Dearborn Partners (Madison) in the fall of 2004. The $3.8 billion deal saw Madison invest $420 million, while company management coinvested $20 million. Boise Cascade Corporation changed its name to OfficeMax and retained an equity interest in the company. Rancourt, who had held positions of increasing responsibility within the companies, became the new Boise Cascade’s treasurer.

In early 2005, Rancourt and his peers sold the new company’s timberlands and paid off half of its debt from the leveraged buyout. Three years later, a publicly traded shell company with $400 million in cash and no other assets bought Boise Cascade’s pulp and paper operations and turned the operation into the publicly traded Boise Inc. By 2008, Boise Cascade had very little debt.

“We benefited by good timing because the housing industry was about to experience the three worst years in modern history. It was totally unprecedented,” says Rancourt. “We closed some facilities and reduced operating costs. We generated as much free cash flow as possible, sold assets, and paid down debt. That left us ready for a rebound.” While other companies suffered or collapsed, Boise Cascade mitigated damages and survived. Rancourt became senior vice president and chief financial officer in August 2009.

In late 2012, as the housing market slowly recovered, and with Boise Cascade set for renewed growth, Rancourt and other leaders started discussing an initial public offering. “We had a good operating performance in 2012 relative to our competitors, and the market was receptive,” Rancourt says. In October, they received board approval to pursue the IPO and prepared documents for the Securities and Exchange Commission. Lawyers at Kirkland & Ellis worked with Boise Cascade and its underwriters to get to market as fast as possible. The company completed the review process to complete the transaction in early 2013. The IPO in February 2013 was successful, in part, because the market was expecting a multiyear recovery in housing. “Our mix of businesses is a good way for investors to play the housing recovery, and I think they realized that,” Rancourt says.

Soon after going public, Boise Cascade and others experienced a drop in commodities prices that made things challenging in distribution, but the wood products markets and the company stabilized in the third quarter of 2013. In this environment, Boise Cascade is growing revenues. “We’re focusing on costs and efficiencies, and we’ve had good operating results since the IPO,” Rancourt says. In late 2013, he helped Boise Cascade acquire two plywood operations in the Carolinas in a move viewed favorably in the marketplace. Now, Rancourt continues his push to grow both organically and through future acquisitions.

During this time, Madison started exiting what had become a nine-year investment in Boise Cascade. In 2013, Madison exited the majority of its interest in Boise Cascade and, in early 2014, finished distributing its last shares. Boise Cascade was back to full public ownership with key assets in wood products manufacturing and distribution.

Boise Cascade may be in a position to benefit from good timing once again. As the recovery takes hold, Rancourt says his company is able to support its customers and respond to growing demand. “We think we’ll see the recovery continue for several years, and we’ve done what we can to put ourselves in the right place to capitalize,” he says.

When it comes to market forecasting, Rancourt looks at indicators such as household formation. The number of first-time homebuyers remains low, while the number of people age 20–24 who live with family is high. While those factors may demonstrate that the recovery is slow, Rancourt says it’s a start. In 2013, housing starts were 927,000. That number could exceed one million when 2014 results are in. Until then, Boise Cascade will operate some facilities below capacity until demand rallies, but eventually, Rancourt believes housing starts will climb to 1.5 million. As that happens, Boise Cascade will be ready to respond.

Meanwhile, Boise Cascade’s leadership team is working to ensure the right talent is in place. “We’re working on hiring, training, and succession planning,” says Rancourt, who started at the company thirty-two years ago, at age twenty, and has several long-tenured colleagues. The consistency has helped Boise Cascade maintain its culture throughout the changes.

In its most recent report, Boise Cascade announced net income of $26.4 million on sales of $961.2 million for the second quarter ending June 30, 2014. In that time, total housing starts increased by 12 percent, with single-family rates climbing by 4 percent, reflecting a 12 percent increase over 2013. These trends, coupled with restructuring and a successful IPO, have helped Boise Cascade lead the way in the production and wholesale distribution of building products in the United States.