What changed in this filing

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Item 1A. Risk Factors

2021-02-22 compared with 2020-02-24 · 73 added, 82 removed, 188 unchanged (45% of the section changed)

Risks Relating to Our Business

The full effect of the COVID-19 pandemic on our business is currently unknown but it may adversely affect our business and operating results.

The full impacts of the global emergence of COVID-19 on our business and financial results remain unknown.

We continue to conduct 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.

Companies and various governmental agencies have taken 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.

Department of Homeland Security (DHS) has continued to designate 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.

Furthermore, a re-acceleration of COVID-19 cases, or delays in vaccine distribution or effectiveness, could prompt state or local officials to reinstitute restrictions that could limit or constrain building activity.

All of our manufacturing and distribution facilities are operating, but we have experienced periodic disruptions at many locations due to COVID-19.

We may be required to implement temporary curtailments and to operate both manufacturing and distribution facilities at reduced levels, which would result in negative impacts on our business, financial condition, results of operations, and cash flows.

In addition, the economic consequences of COVID-19 may adversely affect the pace of household formation rates and residential repair-and-remodeling activity due to high unemployment rates, lower wages, reduced consumer confidence, availability of construction labor, materials, and building lots, homebuyers' access to and cost of financing, and housing affordability, as well as other factors.

We continue to actively monitor evolving developments 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 associates, customers, suppliers, and stockholders.

Many of the products we manufacture or purchase and resell are commodities whose price is determined by the market's supply and demand for such products, and the markets in which we operate are cyclical and competitive.

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and, to a lesser extent, residential repair-and-remodeling activity and light commercial construction.

New residential construction activity has historically been volatile with demand for new residential construction influenced by seasonal weather factors, mortgage availability and rates, housing affordability, unemployment levels, household formation rates, domestic population growth, immigration rates, residential vacancy and foreclosure rates, demand for second homes, consumer confidence, and other general economic factors.

New residential construction activity has historically been volatile with demand for new residential construction influenced by seasonal weather factors, mortgage availability and rates, housing affordability, unemployment levels, wage growth, household formation rates, domestic population growth, immigration rates, residential vacancy and foreclosure rates, demand for second homes, consumer confidence, and other general economic factors.

Furthermore, the size of new single-family residences as well as the mix of single and multi-family starts influences product consumption.

For example, I-joist consumption per housing start has trended modestly downward in recent years which we believe is due to decreases in the median home size and an increasing proportion of slab on grade new home construction.

Industry supply for the products we produce and distribute is influenced primarily by price-induced changes in the operating rates of existing facilities, but is also influenced over time by the introduction of new product technologies, capacity additions and closures, restart of idled capacity, and log availability.

New LVL capacity in the southeastern United States came on-line in late 2019, which we expect will add competitive volume and pricing pressure to the LVL marketplace.

The balance of supply and demand in the U.S.

is also heavily influenced by imported products, principally from Canada and South America.

New LVL capacity in the southeastern United States came online in late 2019, which we expect will add competitive volume and pricing pressure to the LVL marketplace.

In addition, we sell wood chips that are a byproduct of processing logs at our manufacturing operations, or created through the chipping of small diameter logs that we are unable to process at our manufacturing operations.

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Certain mills operated by our competitors may be lower-cost manufacturers than the mills operated by us.

Our Wood Products segment provides financial incentives, including temporary price protection, to various parties along the supply chain (including wholesale distributors, retail lumberyards, and homebuilders) to increase sales of and loyalty to our EWP products.

As a result of these commercial arrangements, the full effects of announced price increases may be delayed or reduced, impacting our financial results.

The building products distribution industry that our Building Materials Distribution segment competes in is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low.

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If we are unable to compete effectively, our net sales and net income will be reduced.

Labor disruptions, shortages of skilled and technical labor, or increased labor costs could adversely affect our business.

As of February 9, 2020 , we had approximately 6,010 employees.

Approximately 23% of these employees work pursuant to collective bargaining agreements.

As of February 9, 2020 , we had ten collective bargaining agreements.

Five agreements, covering approximately 450 employees at our Elgin plywood plant, Kettle Falls plywood plant, and Woodinville BMD facility, are set to expire on May 31, 2020.

Another agreement, covering approximately 35 employees at our Vancouver BMD facility, is set to expire on December 31, 2020.

If these agreements are not renewed or extended upon their termination, we could experience a material labor disruption, strike, or significantly increased labor costs at one or more of our facilities, either in the course of negotiations of a labor agreement or otherwise.

In addition, the ongoing recovery in the U.S.

economy and our industry, when coupled with low unemployment rates, has made it difficult to acquire and retain the skilled labor necessary to successfully operate our facilities.

Labor disruptions or shortages could prevent us from meeting customer demands or result in increased costs, thereby reducing our sales and profitability.

We may be unable to attract and retain key management and other key employees.

Our key managers are important to our success and may be difficult to replace because they have a significant amount of experience in wood products manufacturing and building materials distribution.

While our senior management team has considerable experience, certain members of our management team are nearing or have reached retirement age.

In addition, certain of our employees have assumed key roles in recent years and may not have the experience of retiring key managers.

The failure to successfully formulate and implement succession plans for retiring employees, and training plans for new key managers, could result in inadequate depth of institutional knowledge or inadequate skill sets, which could adversely affect our business.

Cyber security risks related to the technology used in our operations and other business processes, as well as security breaches of company, customer, employee, and vendor information, could adversely affect our business.

We rely on various information technology systems to capture, process, store, and report data and interact with customers, vendors, and employees.

We also rely on information technology systems that automate aspects of our manufacturing processes.

We work to install new, and upgrade existing, information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches.

Despite careful security and controls design, including independent third-party assessments, our information technology systems, and those of our third-party providers, have been subject to security breaches and cyber-attacks.

To date, none of the known security breaches or cyber-attacks have had material adverse effects on our operations.

However, in the future, network, system, and data breaches could result in misappropriation of sensitive data or operational disruptions, including interruption to systems availability and denial of access to and misuse of applications required by our customers to conduct business with us.

In addition, sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of the systems.

Misuse of internal applications;

theft of intellectual property, trade secrets, or other corporate assets;

and unauthorized disclosure of confidential information could stem from such incidents.

Delayed sales, slowed production, or other repercussions resulting from these disruptions could result in lost sales, business delays, and negative publicity and could have a material adverse effect on our operations, financial condition, or cash flows.

A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, including the demand from our Building Materials Distribution business, reduce our sales, and/or negatively affect our financial results.

Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including but not limited to:

• labor difficulties, including the inability to staff our facilities due to the COVID-19 outbreak;

• equipment failure, particularly a press at one of our major EWP production facilities;

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• utility, information technology, telephonic, and transportation infrastructure disruptions;

labor difficulties;

• other operational problems;

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Our suppliers' inability to produce the necessary raw materials for our manufacturing processes or supply the finished goods that we distribute through our Building Materials Distribution segment may adversely affect our results of operations, cash flows, and financial position.

We rely on various information technology systems to capture, process, store, and report data and interact with customers, vendors, and employees.

We also rely on information technology systems that automate aspects of our manufacturing processes.

The Company works to install new, and upgrade its existing, information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches.

To date, none of the known security breaches or cyber-attacks have had material adverse effects on our operations.

Misuse of internal applications;

theft of intellectual property, trade secrets, or other corporate assets;

and unauthorized disclosure of confidential information could stem

from such incidents.

A significant portion of our sales are concentrated with a small number of customers.

For the year ended December 31, 2019 , our top ten customers represented approximately 40% of our sales.

For the year ended December 31, 2020, our top ten customers represented approximately 42% of our sales, with one customer accounting for approximately 11% of total sales.

At December 31, 2020, receivables from two customers accounted for approximately 12% and 13% of total receivables.

Although we believe that our relationships with our customers are strong, the loss of one or more of these customers could have a material adverse effect on our operating results, cash flow, and liquidity.

Adverse housing market conditions may increase the credit risk from our customers.

Our Building Materials Distribution and Wood Products segments extend credit to numerous customers who are generally susceptible to the same economic business risks as we are.

Unfavorable housing market conditions could result in financial failures of one or more of our significant customers.

Adverse market conditions, including the inability of our customers to conduct operations due to the COVID-19 pandemic, may increase the credit risk from our customers.

Our Building Materials Distribution and Wood Products segments extend credit to numerous customers who are generally susceptible to the same economic business risks as we are, including the COVID-19 pandemic outbreak.

Unfavorable market conditions or the inability of our customers to conduct operations due to the COVID-19 pandemic could result in financial failures of one or more of our significant customers.

Furthermore, we may not necessarily be aware of any deterioration in our customers' financial position.

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Our ability to offer a wide variety of products to our Building Materials Distribution customers is dependent upon our ability to obtain adequate product supply from manufacturers and other suppliers.

In most instances, the commodity products we sell are obtainable from various sources and in sufficient quantities with our customers purchasing decision focused primarily on price and availability.

In the case of the general line and EWP products that we distribute, brand preference and product performance characteristics can have a high degree of influence on our customers purchasing decision.

In addition, in many instances we have agreements with our suppliers, but these agreements are generally terminable by either party on limited notice.

Our customers' purchasing decisions for commodity products we sell are primarily based on price and availability, and these commodities may be sourced from various manufacturers.

In the case of the general line and EWP products that we distribute, brand preference and product performance

characteristics can have a high degree of influence on our customers purchasing decision.

Supply chains, including key products purchased from our suppliers, may be disrupted during a pandemic outbreak such as COVID-19.

In addition, although we have agreements in place with many of our suppliers, such agreements are generally terminable by either party on relatively short notice.

The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows.

Labor disruptions, shortages of skilled and technical labor, or increased labor costs could adversely affect our business.

As of February 12, 2021, we had approximately 6,040 employees.

Approximately 23% of these employees work pursuant to collective bargaining agreements.

As of February 12, 2021, we had ten collective bargaining agreements.

Two agreements covering approximately 760 employees at our Oakdale and Florien plywood plants are set to expire on July 15, 2021.

If any of these agreements are not renewed or extended upon their termination, we could experience a material labor disruption, strike, or significantly increased labor costs at one or more of our facilities, either in the course of negotiations of a labor agreement or otherwise.

In addition, our ability to attract and retain talent is challenging due to a shortage of both hourly and technically skilled workers for our manufacturing and distribution facilities, as well as changing workforce expectations.

The pandemic adds challenges recruiting associates unwilling to work in a ‘dense’ work environment.

Despite increases in unemployment rates due to the pandemic, those unemployed may not reside in the same areas as our manufacturing facilities, or may be unwilling to accept shift work or the physical nature of our positions.

Labor disruptions or shortages could prevent us from meeting customer demands or result in increased costs, thereby reducing our sales and profitability.

We may be unable to attract and retain key management and other key employees.

Our key managers are important to our success and may be difficult to replace because they have a significant amount of experience in wood products manufacturing and building materials distribution.

While our senior management team has considerable experience, certain members of our management team are nearing or have reached retirement age.

In addition, certain of our employees have assumed key roles in recent years and may not have the experience of retiring key managers.

Our long-lived assets, goodwill, and/or intangible assets may become impaired, which may require us to record non-cash impairment charges that could have a material impact on our results of operations.

We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

We also test goodwill in each of our reporting units and intangible assets with indefinite lives for impairment annually in the fourth quarter or sooner if events or changes in circumstances indicate that the carrying value of the asset may exceed fair value.

To the extent that long-lived assets, goodwill, and/or intangible assets do not provide the future economic benefit we expect, it may result in non-cash impairment or accelerated depreciation charges.

These non-cash impairments or accelerated depreciation charges could have a material impact on our results of operations in the period in which these charges are recognized.

Future events or circumstances such as sustained negative economic impact of the COVID-19 pandemic, declines in single-family housing starts, environmental regulations or restrictions, sustained periods of weak commodity prices, loss of key customers, capacity additions by competitors, changes in the competitive position of our products, or changes in raw materials or manufacturing costs that lead us to believe the long-lived asset will no longer provide a sufficient return on investment, could prompt decisions to invest capital differently than expected, sell facilities, or to curtail operations.

Any of these factors, among others, could result in non-cash impairment or accelerated depreciation charges in the future with respect to the book value of certain assets and past investments we have made.

For additional information and a discussion regarding the impact of impairment of long-lived assets and accelerated depreciation charges on our results of operations and financial condition, see Note 6, Curtailment of Manufacturing Facilities, and Note 7, Sale of Manufacturing Facilities, of the Notes to the Consolidated Financial Statements in "Item 8, Financial Statements and Supplementary Data" and "Long-Lived Asset Impairment" included in "Critical Accounting Estimates" in "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K.

Our manufacturing operations may have difficulty obtaining wood fiber at favorable prices or at all.

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Our primary source of wood fiber is logs.

Log prices have been cyclical historically in response to changes in domestic and foreign demand and supply.

Log prices have been historically cyclical in response to changes in domestic and foreign demand and supply.

In the future, we expect the level of foreign demand for log exports from the western U.S.

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Future domestic or foreign legislation and litigation concerning the use of timberlands, timber harvest methodologies, forest road construction and maintenance, the protection of endangered species, forest-based carbon sequestration, the promotion of forest health, and the response to and prevention of catastrophic wildfires can affect log and fiber supply from both government and private lands.

Availability of harvested logs and fiber may be further limited by fire, insect infestation, disease, ice storms, windstorms, hurricanes, flooding, and other natural and man-made causes, thereby reducing supply and increasing prices.

Availability of harvested logs and fiber may be further limited by pandemics, fire, insect infestation, disease, ice storms, windstorms, hurricanes, flooding, and other natural and man-made causes, thereby reducing supply and increasing prices.

Changes in global climate conditions could amplify one or more of these factors.

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We may be unable to efficiently integrate acquired operations or realize expected benefits from such acquisitions.

We evaluate potential acquisitions from time to time and have in the past grown through acquisitions.

In the future, we may be unable to successfully identify attractive potential acquisitions or effectively integrate potential acquisitions due to multiple factors, including those noted below, and potential issues related to regulatory review of the proposed transactions.

We may also be required to incur additional debt in order to consummate acquisitions, which debt may be substantial and may limit our flexibility in using our cash flow from operations.

We may not be able to integrate the operations of acquired businesses in an efficient and cost-effective manner or without disruption to our existing operations or may not be able to realize expected benefits.

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Subsequent to making the investment, performance of the acquired assets is subject to economic uncertainties, as described in our other risk factors, as well as difficulties integrating acquired personnel into our business, the potential loss of key employees, customers, or suppliers, difficulties in integrating different computer and accounting systems, exposure to unknown or unforeseen liabilities of acquired companies, and the diversion of management attention and resources from existing operations.

We evaluate potential acquisitions from time to time and have in the past grown through acquisitions.

In the future, we may be unable to successfully identify attractive potential acquisitions or effectively integrate potential acquisitions due to multiple factors, including those noted above, and potential issues related to regulatory review of the proposed transactions.

We may also be required to incur additional debt in order to consummate acquisitions, which debt may be substantial and may limit our flexibility in using our cash flow from operations.

Our failure to integrate future acquired businesses effectively, realize expected benefits, or to manage other consequences of our acquisitions could adversely affect our financial condition, operating results, and cash flows.

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As local jurisdictions adopt the new code, we may be competitively disadvantaged in houses that are built with ground floors over unfinished basements and could be subject to substitution by dimension lumber or other products.

We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

These non-cash impairments or accelerated depreciation charges could have a material impact on our results of operations in the period in which these charges are recognized.

Future events or circumstances such as declines in single-family housing starts, sustained periods of weak commodity prices, loss of key customers, capacity additions by competitors, changes in the competitive position of our products, or changes in raw materials or manufacturing costs that lead us to believe the long-lived asset will no longer provide a sufficient return on investment, could prompt decisions to invest capital differently than expected, sell facilities, or to curtail operations.

For additional information and a discussion regarding the impact of impairment of long-lived assets and accelerated depreciation charges on our results of operations and financial condition, see Note 6, Curtailment of Manufacturing Facilities , and Note 7, Sale of Manufacturing Facilities , of the Notes to the Consolidated Financial Statements in "Item 8, Financial Statements and Supplementary Data" and "Long-Lived Asset Impairment" included in "Critical Accounting Estimates" in "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K.

Our operations require substantial capital, and recent significant capital investments and acquisitions have increased fixed costs, which could negatively affect our profitability.

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including the replacement or rebuild of veneer dryers and log utilization centers (or improvements to other manufacturing equipment), increasing our outdoor storage acreage, and leasing additional warehouse space.

These capital investments, along with acquisitions, have resulted in increased fixed costs, which could negatively affect our profitability if the housing market does not continue to recover and revenues do not improve to offset our incremental fixed costs.

These capital investments, along with acquisitions, have resulted in increased fixed costs, which could negatively affect our profitability if our revenue and operating results do not offset our incremental fixed costs.

Capital expenditures for expansion or replacement of existing facilities or equipment or to comply with future changes in environmental laws and regulations may be substantial.

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Product liability, product warranty, casualty, construction defect, and other claims can be expensive to defend and can divert the attention of management and other personnel for significant periods, regardless of the ultimate outcome.

Claims of this nature could also have a negative impact on customer confidence in our products and our company.

Claims of this nature could also have a negative impact on our reputation and customer confidence in our products and our company.

We cannot assure that any current or future claims will not adversely affect our financial condition, operating results, and cash flows.

Significant changes in discount rates, actual investment return on pension assets, and other factors could affect our earnings, equity, and pension contributions in future periods.

Our earnings may be negatively affected by the amount of expense we record for our pension plans.

Generally accepted accounting principles (GAAP) require that we calculate expense for the plans using actuarial valuations.

These valuations reflect assumptions relating to financial market and other economic conditions.

Changes in key economic indicators can change the assumptions.

The most significant assumptions used to estimate pension expense are the discount rate and the expected long-term rate of return on plan assets.

In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to equity through a reduction or increase to "Accumulated other comprehensive loss." Our pension plan liabilities are sensitive to changes in interest rates.

As interest rates decrease, the present value of our liabilities increases, potentially increasing pension expense and funding requirements.

A decline in the market value of the pension assets could also increase our pension expense and funding requirements.

Changes in demographics, including increased numbers of retirements or changes in life expectancy assumptions may also increase the funding requirements of the obligations related to the pension plans.

Our defined benefit pension plans are underfunded.

We anticipate future funding payments as the status of our defined benefit plans continues to be underfunded, reducing the cash available for our business.

Our ability to service our indebtedness or to fund our other liquidity needs is subject to various risks.

Our ability to make scheduled payments on our indebtedness and fund other liquidity needs depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business, and other factors, including the availability of financing in the banking and capital markets as well as the other risks

described herein.

In particular, demand for our products correlates to a significant degree to the level of residential construction activity in North America, which historically has been characterized by significant cyclicality.

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If we are unable to service our debt obligations or to fund our other liquidity needs, we could be forced to curtail our operations, reorganize our capital structure, or liquidate some or all of our assets.

Changes in the method for determining LIBOR and the potential replacement of LIBOR may affect interest rates on our credit facilities and interest rate swaps.

LIBOR, the London interbank offered rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally.

Interest rates under our Revolving Credit Facility and certain of our term loans are based, at our election, on either LIBOR or a base rate, plus a spread over the index elected.

Under the interest rate swaps, we also receive LIBOR-based variable interest rate payments and make fixed interest rate payments.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

If the method for calculation of LIBOR changes, if LIBOR is no longer available or if lenders have increased costs due to changes in LIBOR, Boise Cascade may suffer from potential increases in interest rates on any borrowings.

Further, Boise Cascade may need to renegotiate its credit facilities, term loans, and interest rate swaps that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

The terms of our debt agreements restrict, and covenants contained in agreements governing indebtedness in the future may impose, significant operating and financial restrictions on our company and our subsidiaries, which may prevent us from capitalizing on business opportunities.

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• changes in general conditions in the U.S.

and global economies or financial markets, including those resulting from war, incidents of terrorism, or responses to such events;

and global economies or financial markets, including those resulting from war, incidents of terrorism, pandemics, or responses to such events;

• sales of common stock by us or members of our management team;

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• changes in accounting standards, policies, guidance, interpretations, or principles;

the impact of the facts described elsewhere in "Item 1A.

• the impact of the factors described elsewhere in "Item 1A.

Risk Factors" of this Form 10-K.

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In November 2017, our board of directors approved a dividend policy pursuant to which we have paid quarterly cash dividends to holders of our common stock.

In addition to these quarterly dividends, we also paid supplemental dividends in September 2018 and December 2019.

In addition to these quarterly dividends, we also paid supplemental dividends in each of the last three years.

However, the future declaration and payment of dividends will continue to be at the discretion of our board of directors and the dividend policy may be suspended or canceled at its discretion at any time.

Declaration of future dividends will depend upon legal capital requirements and surplus, our future operations and earnings, general financial condition, contractual obligations, restrictions imposed by our asset-based credit facility, term loan, and the indenture governing our senior notes, applicable laws, and other factors that our board of directors may deem relevant.

Declaration of future dividends will depend upon legal capital requirements and surplus, our future operations and earnings, general financial condition, contractual obligations, restrictions imposed by our asset-based credit facility, the indenture governing our senior notes, applicable laws, and other factors that our board of directors may deem relevant.

Unless we continue to pay cash dividends on our common stock in the future, the success of an investment in our common stock will depend entirely upon its appreciation.

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The provisions in our certificate of incorporation and bylaws include, among other things, the following:

• a classified board of directors with three-year staggered terms;

• the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors