What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-22 compared with 2020-02-24 · 369 added, 381 removed, 912 unchanged (45% of the section changed)

3 unchanged sentences

Year Ended December 31

2020 2019 2018

(thousands, except per-share data)

Sales $ 5,474,838 $ 4,643,404 $ 4,995,290

Costs and expenses

3 unchanged sentences

General and administrative expenses 78,636 71,072 68,811

Loss (gain) on sale and curtailment of facilities

Loss on sale and curtailment of facilities 1,707 — 38,314

Other (income) expense, net ( 33 ) ( 783 ) ( 1,442 )

5,139,809 4,506,945 4,923,252

Income from operations 335,029 136,459 72,038

4 unchanged sentences

Change in fair value of interest rate swaps ( 2,426 ) ( 2,963 ) 551

Loss on extinguishment of debt ( 13,968 ) — —

( 48,718 ) ( 28,228 ) ( 49,936 )

Income before income taxes 286,311 108,231 22,102

Income tax provision ( 111,332 ) ( 27,306 ) ( 1,625 )

Net income $ 174,979 $ 80,925 $ 20,477

Weighted average common shares outstanding:

Basic 39,277 39,039 38,932

Diluted 39,431 39,242 39,387

Net income per common share:

Basic $ 4.45 $ 2.07 $ 0.53

Diluted $ 4.44 $ 2.06 $ 0.52

Dividends declared per common share $ 2.00 $ 1.37 $ 1.30

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Year Ended December 31

2020 2019 2018

Net income $ 174,979 $ 80,925 $ 20,477

Other comprehensive income (loss), net of tax

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Actuarial gain (loss), net of tax of $ 1,728 , $( 1,176 ), and $ 3,598 , respectively

5,104 ( 3,466 ) 10,580

Amortization of actuarial (gain) loss, net of tax of $ 204 , $( 44 ), and $ 380 , respectively

603 ( 131 ) 1,117

Effects of settlements, net of tax of $ 1,581 , $ 341 , and $ 5,902 , respectively

4,669 1,001 17,353

Stranded tax effects of pension plan termination 38,794 — —

Other comprehensive income (loss), net of tax 49,170 ( 2,596 ) 29,050

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Trade, less allowances of $ 1,111 and $ 591

375,865 215,894

Related parties 201 568

Other 15,067 15,184

Inventories 503,480 497,596

Prepaid expenses and other 8,860 8,285

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Timber deposits 11,761 12,287

Goodwill 60,382 60,382

Intangible assets, net 16,574 17,797

Deferred income taxes 7,460 7,952

Other assets 7,260 9,194

Total assets $ 1,965,718 $ 1,693,351

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Accounts payable

Trade $ 307,653 $ 222,930

Related parties 1,199 1,624

1 unchanged sentence

Compensation and benefits 118,400 83,943

Income taxes payable 8,101 —

Interest payable 8,477 6,723

Other 80,172 69,772

Total current liabilities 524,002 384,992

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Other long-term liabilities 15,303 12,757

147,125 166,485

Commitments and contingent liabilities

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Treasury stock, 5,367 shares at cost

( 138,909 ) ( 138,909 )

Additional paid-in capital 538,006 533,345

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Year Ended December 31

2020 2019 2018

Cash provided by (used for) operations

Net income $ 174,979 $ 80,925 $ 20,477

Items in net income not using (providing) cash

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Loss on sale and curtailment of facilities (excluding severance) 1,476 — 37,331

Other 169 ( 353 ) ( 1,688 )

Loss on extinguishment of debt 13,968 — —

Decrease (increase) in working capital, net of acquisitions

Receivables ( 159,906 ) 2,160 37,561

Inventories ( 6,249 ) 40,176 ( 64,190 )

Prepaid expenses and other ( 1,133 ) ( 132 ) ( 500 )

2 unchanged sentences

Income taxes payable 9,022 19,387 ( 4,186 )

Other 409 ( 1,949 ) 4,373

Net cash provided by operations 294,516 245,647 163,611

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Payments of long-term debt, including revolving credit facility ( 405,774 ) ( 5,500 ) ( 7,500 )

Treasury stock purchased

Dividends paid on common stock ( 79,195 ) ( 53,954 ) ( 50,615 )

Tax withholding payments on stock-based awards ( 3,309 ) ( 3,574 ) ( 5,135 )

Payments of deferred financing costs ( 6,222 ) — —

Treasury stock purchased — — ( 4,930 )

Other ( 1,155 ) ( 488 ) 857

Net cash used for financing ( 95,655 ) ( 58,016 ) ( 59,823 )

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Consolidated Statements of Stockholders' Equity

Treasury Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings

Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total

Shares Amount Shares Amount

Balance at December 31, 2017 43,748 $ 437 5,167 $ ( 133,979 ) $ 523,550 $ ( 76,702 ) $ 361,243 $ 674,549

Net income 20,477 20,477

Other comprehensive income 29,050 29,050

Common stock issued 328 4 4

Treasury stock purchased 200 ( 4,930 ) ( 4,930 )

Stock-based compensation 8,831 8,831

Common stock dividends ($ 1.30 per share)

( 51,664 ) ( 51,664 )

Tax withholding payments on stock-based awards ( 5,135 ) ( 5,135 )

Proceeds from exercise of stock options 1,412 1,412

Other ( 4 ) — ( 4 )

Balance at December 31, 2018 44,076 $ 441 5,367 $ ( 138,909 ) $ 528,654 $ ( 47,652 ) $ 330,056 $ 672,590

Other comprehensive income

Net income 80,925 80,925

Other comprehensive loss ( 2,596 ) ( 2,596 )

Common stock issued 277 3 3

Treasury stock purchased

Stock-based compensation 7,973 7,973

Common stock dividends ($ 1.37 per share)

( 54,283 ) ( 54,283 )

Tax withholding payments on stock-based awards ( 3,574 ) ( 3,574 )

Proceeds from exercise of stock options 295 295

Other ( 3 ) ( 3 )

Balance at December 31, 2019 44,353 $ 444 5,367 $ ( 138,909 ) $ 533,345 $ ( 50,248 ) $ 356,698 $ 701,330

Other comprehensive loss

Net income 174,979 174,979

Other comprehensive income 49,170 49,170

Common stock issued 215 2 2

1 unchanged sentence

Common stock dividends ($ 2.00 per share)

( 79,343 ) ( 79,343 )

Tax withholding payments on stock-based awards ( 3,309 ) ( 3,309 )

Proceeds from exercise of stock options 152 152

Other ( 2 ) ( 2 )

Balance at December 31, 2020 44,568 $ 446 5,367 $ ( 138,909 ) $ 538,006 $ ( 1,078 ) $ 452,334 $ 850,799

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We operate our business using two reportable segments:

(1) Wood Products, which primarily manufactures EWP and plywood, and (2) Building Materials Distribution, which is a wholesale distributor of building materials.

(1) Wood Products, which primarily manufactures EWP and plywood, and (2) Building Materials Distribution (BMD), which is a wholesale distributor of building materials.

For more information, see Note 17, Segment Information.

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Trade accounts receivable do not bear interest.

We make ongoing estimates relating to the collectibility of our accounts receivable and maintain a reserve for estimated losses resulting from the inability of our customers to meet their financial obligations to us.

We make ongoing estimates relating to the collectability of our accounts receivable and maintain a reserve for estimated losses resulting from the inability of our customers to meet their financial obligations to us.

At December 31, 2020 and 2019, we had $ 1.1 million and $ 0.6 million, respectively, recorded as allowances for doubtful accounts.

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

In 2019 , our top ten customers represented approximately 40 % of sales, with no customer accounting for 10% or more of total sales.

In 2020, our top ten customers represented approximately 42 % of sales, with one customer accounting for approximately 11 % of total sales.

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

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Trade accounts receivable balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Although we have not experienced material credit losses in recent years, our actual future losses from uncollectible accounts may differ materially from our current estimates.

Although we have not experienced material credit losses in recent years, our actual future losses from uncollectable accounts may differ materially from our current estimates.

As additional information becomes known, we may change our estimates.

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The recorded values of accounts receivable and accounts payable approximate fair values based on their short-term nature.

At December 31, 2019 and 2018 , the book value of our fixed-rate debt for each period was $ 350.0 million , and the fair value was estimated to be $ 364.7 million and $ 328.1 million , respectively.

At December 31, 2020 and 2019, the book value of our fixed-rate debt was $ 400.0 million and $ 350.0 million, respectively, and the fair value was estimated to be $ 432.0 million and $ 364.7 million, respectively.

The difference between the book value and the fair value is derived from the difference between the period-end market interest rate and the stated rate of our fixed-rate, long-term debt.

We estimated the fair value of our fixed-rate debt using quoted market prices of our debt in inactive markets (Level 2 inputs).

The interest rate on our term loans is based on market conditions such as the London Interbank Offered Rate (LIBOR) or a base rate.

Because the interest rate on the term loans is based on current market conditions, we believe that the estimated fair value of the outstanding balance on our term loans approximates book value.

The interest rate on our variable-rate debt is based on market conditions such as the London Interbank Offered Rate (LIBOR) or a base rate.

Because the interest rate on the variable-rate debt is based on current market conditions, we believe that the estimated fair value of the outstanding balance on our variable-rate debt approximates book value.

We are exposed to financial risks such as changes in commodity prices, interest rates, and foreign currency exchange rates.

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dollars using an average exchange rate prevailing during the year.

Our lease accounting policies are described in Note 11, Leases .

We primarily lease land, building, and equipment under operating and finance leases.

We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or upon modification.

Substantially all of our leases with initial terms greater than one year are for real estate, including distribution centers, corporate headquarters, land, and other office space.

Substantially all of these lease agreements have fixed payment terms based on the passage of time and are recorded in our Building Materials Distribution segment.

Many of our leases include fixed escalation clauses, renewal options and/or termination options that are factored into our determination of lease term and lease payments when appropriate.

Renewal options generally range from one to ten years with fixed payment terms similar to those in the original lease agreements.

Some lease agreements provide us with the option to purchase the leased property at market value.

Our lease agreements do not contain any residual value guarantees.

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term.

The current portion of our operating and finance lease liabilities are recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

We use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.

In determining our incremental borrowing rates, we give consideration to publicly available interest rates for instruments with similar characteristics, including credit rating, term, and collateralization.

For purposes of determining straight-line rent expense, the lease term is calculated from the date we first take possession of the facility, including any periods of free rent and any renewal option periods we are reasonably certain of exercising.

Variable lease expense generally includes reimbursement of actual costs for common area maintenance, property taxes, and insurance on leased real estate and are recorded as incurred.

Most of our operating lease expense was recorded in "Selling and distribution expenses" in our Consolidated Statements of Operations.

In addition, we do not separate lease and non-lease components for all of our leases.

Our short-term leases primarily include equipment rentals with lease terms on a month-to-month basis, which provide for our seasonal needs and flexibility in the use of equipment.

Our short-term leases also include certain real estate for which either party has the right to cancel upon providing notice of 30 to 90 days.

We do not recognize ROU assets or lease liabilities for short-term leases.

We account for income taxes under the asset and liability method.

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Inventories included the following (work in process is not material):

2020 December 31,

Finished goods and work in process $ 431,663 $ 413,020

Logs 35,622 45,574

Other raw materials and supplies 36,195 39,002

$ 503,480 $ 497,596

Property and Equipment

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Property and equipment consisted of the following asset classes with the following general range of estimated useful lives:

2020 December 31,

2019 General Range of Estimated Useful Lives in Years

Buildings (a)

Land $ 47,099 $ 39,304

Buildings 151,718 140,008 20 - 40

Improvements 64,178 61,187 10 - 15

Mobile equipment, information technology, and office furniture 178,271 165,445 3 - 7

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Construction in progress 40,606 34,846

1,169,640 1,107,257

Less accumulated depreciation ( 708,184 ) ( 630,308 )

$ 461,456 $ 476,949

As of December 31, 2018, capital lease assets were included in the "Buildings" asset class.

For additional information related to leases, see Note 11, Leases .

Long-Lived Asset Impairment

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An impairment of long-lived assets exists when the carrying value is not recoverable through future undiscounted cash flows from operations and when the carrying value of an asset or asset group exceeds its fair value.

No triggering event was identified during the year ended December 31, 2019.

No triggering event was identified during the years ended December 31, 2020 and 2019.

For a description of the impairment losses recorded during the year ended December 31, 2018, see Note 7, Sale of Manufacturing Facilities.

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The qualitative goodwill impairment assessment requires evaluating factors, based on the weight of evidence, to determine whether a reporting unit's carrying value would more likely than not exceed its fair value.

As part of our goodwill qualitative testing process for each reporting unit, we evaluate various factors that are specific to the reporting unit as well as industry and macroeconomic factors in order to determine whether it is reasonably likely to have a material impact on the fair value of our reporting units.

Based on the qualitative analysis performed in 2019 , we concluded that there were no changes that were reasonably likely to cause the fair value of the reporting units to be less than the reporting units' carrying value and determined that there was no

impairment of our goodwill.

As part of our goodwill qualitative testing process for each reporting unit, we evaluate various factors that are specific to the reporting unit as well as industry and macroeconomic factors in order to determine whether they are reasonably likely to have a material impact on the fair value of our reporting units.

Based on the qualitative analysis performed in 2020, we concluded that there were no changes that were reasonably likely to cause the fair value of the reporting units to be less than the reporting units' carrying value and determined that there was no impairment of our goodwill.

In the event we were to determine that a reporting unit's carrying value would more likely than not exceed its fair value, quantitative testing would be performed comparing carrying values to estimated fair values.

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At December 31, 2020 and 2019, we had $ 2.3 million and $ 2.2 million, respectively, of asset retirement obligations recorded in "Other long-term liabilities" on our Consolidated Balance Sheets.

At December 31, 2019 , these liabilities related primarily to landfill closure costs.

These liabilities related primarily to landfill closure costs.

The liabilities are based on the best estimate of current costs and are updated periodically to reflect current technology, laws and regulations, inflation, and other economic factors.

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See Note 12, Retirement and Benefit Plans, for additional information related to our pension plan.

While we believe that the assumptions used to measure our pension obligations are reasonable, differences in actual experience or changes in assumptions may materially affect our pension obligations and future expense.

Deferred Software Costs

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These costs are amortized using the straight-line method over the expected life of the software, typically three to five years.

"Other assets" in the Consolidated Balance Sheets includes $ 4.6 million of deferred software costs at each December 31, 2019 and 2018 .

For each of the years ended December 31, 2019 , 2018 , and 2017 , we amortized $ 2.0 million of deferred software costs.

"Other assets" in the Consolidated Balance Sheets includes $ 4.1 million and $ 4.6 million, respectively, of deferred software costs at December 31, 2020 and 2019.

During the year ended December 31, 2020, we amortized $ 1.9 million of deferred software costs.

We amortized $ 2.0 million of deferred software costs for both of the years ended December 31, 2019 and 2018.

Labor Concentration and Unions

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As of December 31, 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.

During the course of negotiations, 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, which could prevent us from meeting customer demand or reduce our sales and profitability.

Two agreements covering approximately 740 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.

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

Self-Insurance

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New and Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740):

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

Our current contracts that reference LIBOR include certain debt instruments and interest rate swaps.

The amendments are effective for eligible contract modifications subsequent to March 12, 2020, and through December 31, 2022.

The adoption of this standard did not have a material effect on our financial statements, but we will assess any eligible contract modifications in the future.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which is intended to reduce complexity in accounting for income taxes.

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The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted.

We are currently evaluating the effects of this ASU on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

This ASU provides guidance on implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract.

The guidance aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

Specifically, the ASU amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in such a CCA.

The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019.

We do not expect this guidance to have a material effect on our consolidated financial statements.

We adopted this standard in first quarter of 2021 and it did not have a material effect on our financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans .

This ASU amends ASC 715 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant related to defined benefit pension and other postretirement plans.

This ASU amends ASC 715 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of

disclosures, and adds disclosure requirements identified as relevant related to defined benefit pension and other postretirement plans.

The ASU's changes related to disclosures are part of the FASB's disclosure framework project.

The updated guidance is effective retrospectively for annual reporting periods ending after December 15, 2020, with early adoption permitted.

We are currently evaluating the effects of this ASU on our disclosures in the notes to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU amends ASC 820 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant related to recurring and nonrecurring fair value measurements.

The ASU's changes related to disclosures are part of the FASB's disclosure framework project.

The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019.

We do not expect this guidance to have a material effect on our disclosures in the notes to our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) .

This ASU sets forth a "current expected credit loss" (CECL) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g.

trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures.

ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and

judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio.

This ASU is effective for annual reporting periods ending after December 15, 2019, using a modified retrospective approach.

The adoption of this standard in fourth quarter of 2019 did not have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

This amendment requires a lessee to recognize a right-of-use (ROU) asset and an associated lease liability on the balance sheet for all leases (whether operating or finance

leases) with a term longer than 12 months.

For leases defined as finance leases under the new standard, the lessee subsequently recognizes interest expense and amortization of the ROU asset, similar to accounting for capital leases under the previous lease standard.

For leases defined as operating leases under the new standard, the lessee subsequently recognizes straight-line lease expense over the life of the lease.

We adopted this standard effective January 1, 2019.

The new lease standard had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of operations or cash flows.

The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

See Note 11, Leases , for additional information on the impact of this standard on our accounting for leases and additional required qualitative disclosures of our lease policies.

We adopted this standard in fourth quarter of 2020 and it did not have a material effect on our financial statement disclosures.

There were no other accounting standards recently issued that had or are expected to have a material impact on our consolidated financial statements and associated disclosures.

Reclassifications

Certain amounts in prior year's consolidated financial statements have been reclassified to conform with current year's presentation, none of which were considered material.

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2018, upon adoption of Topic 606.

However, the new revenue standard provided new guidance that resulted in reclassifications between "Sales" and "Materials, labor, and other operating expenses (excluding depreciation)" and "Selling and distribution expenses" for certain byproduct sales and restocking fees previously netted against these costs.

The impact of the reclassifications to revenues and expenses for the year ended December 31, 2018 was an increase of $ 26.5 million as a result of applying Topic 606.

Wood Products Segment

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LVL is also used in the manufacture of I-joists, which are assembled by combining a vertical web of oriented strand board (OSB) with top and bottom LVL or solid wood flanges.

In addition, we manufacture structural, appearance, and industrial plywood panels.

In addition, we manufacture structural, appearance, and industrial plywood panels, and ponderosa pine lumber.

Our wood products are used primarily in new residential construction, residential repair-and-remodeling markets, and light commercial construction.

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general line items such as siding, composite decking, doors, metal products, insulation, and roofing;

Except for EWP, we purchase most of these building materials from third-party suppliers and market them primarily to retail lumberyards, home improvement centers, and specialty distributors that then sell the products to the final end customers, who are typically

professional builders, independent contractors, and homeowners engaged in residential construction projects.

Substantially all of Building Materials Distribution's EWP is sourced from our Wood Products segment.

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See "Rebates and Cash Discounts" below.

Rebates and Cash Discounts

Rebates an d Cash Discounts

Rebates are provided to our customers and our customers' customers based on the volume of their purchases, among other factors such as customer loyalty, conversion, and commitment.

We provide the rebates to increase the sell-through of our products.

Rebates are generally estimated based on the expected amount to be paid and recorded as a decrease in "Sales." At December 31, 2019 and 2018 , we had $ 49.4 million and $ 52.1 million , respectively, of rebates payable to our customers recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

We estimate the expected cash discounts based on an analysis of historical experience and record cash discounts as a decrease in "Sales." We adjust our estimate of revenue at the earlier of when the probability of rebates paid and cash discounts provided changes or when the amounts become fixed.

There have not been and we believe that there will not be significant changes to our estimates of variable consideration.

Rebates are generally estimated based on the expected amount to be paid and recorded as a decrease in "Sales." At December 31, 2020 and 2019, we had $ 56.3 million and $ 49.4 million, respectively, of rebates payable to our customers

recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets .

We also estimate expected cash discounts on trade accounts receivable based on an analysis of historical experience and record cash discounts as a decrease in "Sales." We adjust our estimate of revenue at the earlier of when the probability of rebates paid and cash discounts provided ch anges or when the amounts become fixed.

There have not been significant changes to our estimates of rebates, although it is reasonably possible that a change in the estimate may occur.

Shipping and Handling

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Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

We expense sales commissions when incurred as they are earned when the product is shipped.

We expense sales commissions when incurred as they are earned.

These costs are recorded within "Selling and distribution expenses."

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Year Ended December 31

2020 2019 2018

Domestic $ 284,147 $ 105,341 $ 21,704

Foreign 2,164 2,890 398

Income before income taxes $ 286,311 $ 108,231 $ 22,102

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Year Ended December 31

Current income tax provision (benefit)

2020 2019 2018

Current income tax provision

Federal $ 66,401 $ 13,700 $ 6,459

State 17,434 4,574 3,126

Foreign — 7 5

Total current 83,835 18,281 9,590

Deferred income tax provision (benefit)

Federal 22,321 7,430 ( 5,987 )

State 4,529 925 ( 2,127 )

Foreign 647 670 149

Total deferred 27,497 9,025 ( 7,965 )

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Year Ended December 31

2020 2019 2018

(thousands, except percentages)

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Statutory U.S.

income tax rate (a)

income tax rate 21.0 % 21.0 % 21.0 %

Statutory tax provision $ 60,125 $ 22,728 $ 4,642

Domestic production activities deduction

State taxes 12,267 4,390 741

Stranded tax effects of Plan Termination (a) 38,794 — —

Unrecognized tax benefits 87 ( 178 ) ( 181 )

Benefit from enactment of the Tax Act (b) — — ( 3,806 )

Tax credits ( 712 ) ( 725 ) ( 272 )

Foreign rate differential 65 71 432

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Meals and entertainment 340 738 886

Other ( 31 ) ( 38 ) 535

Total $ 111,332 $ 27,306 $ 1,625

Effective income tax rate 38.9 % 25.2 % 7.4 %

______________________________________

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was enacted by the U.S.

The most significant impact to our financial statements was the reduction of the corporate federal income tax rate from 35 % to 21 % .

As of December 31, 2018, we completed our assessment of the effects of the Tax Act on our financial statements.

In connection with our analysis of the Tax Act, we recorded discrete tax benefits of $ 3.8 million and $ 8.1 million , respectively, during the years ended December 31, 2018 and 2017.

The $ 3.8 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21 % , which mostly relates to a $ 20.0 million discretionary pension contribution made during 2018, for which we received a tax deduction at the 2017 federal income tax rate.

The $ 8.1 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21 % .

During the year ended December 31, 2019 , refunds received, net of cash taxes paid was $ 1.4 million .

During the years ended December 31, 2018 and 2017 , cash paid for taxes, net of refunds received, was $ 14.5 million and $ 36.1 million , respectively.

(a) In December 2020, we eliminated our qualified defined benefit pension plan (Plan Termination), as discussed in Note 12, Retirement and Benefit Plans.

Prior to the Plan Termination, "Accumulated other comprehensive loss" on our Consolidated Balance Sheet included the stranded tax effects of our conversion from a limited liability company to a corporation in 2013 and the adoption of the Tax Cuts and Jobs Act (the "Tax Act") in 2017.

Upon Plan Termination, these stranded tax effects of $ 38.8 million were required to be released into income tax expense under GAAP.

(b) As of December 31, 2018, we completed our assessment of the effects of the Tax Act on our financial statements.

In connection with our analysis of the Tax Act, we recorded a discrete tax benefit of $ 3.8 million during the year ended December 31, 2018.

The $ 3.8 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory

rate of 21 %, which mostly related to a $ 20.0 million discretionary pension contribution made during 2018, for which we received a tax deduction at the 2017 federal income tax rate of 35 %.

During the year ended December 31, 2020, cash paid for taxes, net of refunds received, was $ 75.1 million.

During the year ended December 31, 2019, income tax refunds received, net of cash taxes paid, was $ 1.4 million.

During the year ended December 31, 2018, cash paid for taxes, net of refunds received, was $ 14.5 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

The components of our net deferred tax assets and liabilities at December 31, 2020 and 2019, are summarized as follows:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Deferred tax assets

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Lease liabilities 25,057 23,241

Capital leases

Inventories 3,711 3,358

Foreign net operating loss carryforward 1,279 1,514

Net deferred tax assets

Other 6,921 6,256

Deferred tax assets $ 66,226 $ 61,283

Deferred tax liabilities

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Intangible assets and other ( 6,823 ) ( 5,924 )

Other ( 1,298 ) ( 1,597 )

Deferred tax liabilities $ ( 77,029 ) $ ( 80,025 )

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The following table summarizes the changes related to our gross unrecognized tax benefits excluding interest and penalties:

2020 2019 2018

Balance as of January 1 $ 1,685 $ 1,850 $ 2,083

Increases related to prior years' tax positions 97 — 13

Increases related to current year tax positions

Increases related to current years' tax positions 89 53 —

Decreases related to prior years' tax positions — — ( 43 )

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As of December 31, 2020, 2019, and 2018, we had $ 1.8 million, $ 1.7 million, and $ 1.9 million, respectively, of unrecognized tax benefits recorded on our Consolidated Balance Sheets, excluding interest and penalties.

Of the total unrecognized tax benefits recorded, $ 1.7 million , $ 1.8 million , and $ 2.0 million (net of the federal benefit for state taxes), respectively, would impact the effective tax rate if recognized.

unrecognized tax benefits recorded, $ 1.8 million, $ 1.7 million, and $ 1.8 million (net of the federal benefit for state taxes), respectively, would impact the effective tax rate if recognized.

We recognize interest and penalties related to uncertain tax positions as income tax expense in our Consolidated Statements of Operations.

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Year Ended December 31

2020 2019 2018

(thousands, except per-share data)

Net income $ 174,979 $ 80,925 $ 20,477

Weighted average common shares outstanding during the period (for basic calculation) 39,277 39,039 38,932

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Net income per common share - Diluted $ 4.44 $ 2.06 $ 0.52

The computation of the dilutive effect of other potential common shares excludes stock awards representing 0.1 million shares in both the years ended December 31, 2019 and 2018 , and no shares of common stock in the year ended December 31, 2017 .

The computation of the dilutive effect of other potential common shares excludes stock awards representing no shares of common stock in the year ended December 31, 2020, and 0.1 million shares of common stock in both the years ended December 31, 2019 and 2018.

Under the treasury stock method, the inclusion of these stock awards would have been antidilutive.

Curtailment of Manufacturing Facilities

On February 20, 2020 , we decided to permanently curtail I-joist production at our Roxboro, North Carolina facility by March 31, 2020 .

As a result of the curtailment, we recorded $ 15.0 million of accelerated depreciation during first quarter 2020 to fully depreciate the curtailed I-joist assets.

In addition, we recorded $ 1.7 million of various closure-related costs in "Loss on sale and curtailment of facilities" in our Consolidated Statements of Operations.

On November 2, 2018 , we decided to permanently curtail LVL production at our Roxboro, North Carolina facility by December 31, 2018 .

After extended efforts to improve the throughput and cost position of LVL production at Roxboro, we concluded that we would be unable to reduce manufacturing costs to an acceptable level.

Roxboro will continue to produce I-joists.

As a result of the curtailment, we recorded $ 55.0 million of accelerated depreciation during fourth quarter 2018 to fully depreciate the curtailed LVL production assets.

In addition, we recorded $ 2.6 million of construction in progress and spare parts write-offs, as well as $ 0.2 million of severance-related expenses, recorded in "Loss on sale and curtailment of facilities" in our Consolidated Statements of Operations.

On February 20, 2020 , we made a decision to permanently curtail I-joist production at our Roxboro, North Carolina facility by March 31, 2020 .

Across our industry, I-joist consumption per housing start has trended 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.

Because Roxboro is a higher cost facility and we have additional available I-joist capacity at our Alexandria, Louisiana facility, we plan to permanently curtail Roxboro I-joist production.

We do not anticipate any impact on our customers.

We expect to record approximately $ 18 million of charges during first quarter 2020, substantially all of which will be to fully depreciate the curtailed I-joist production assets.

In addition, we recorded $ 2.6 million of construction in progress

and spare parts write-offs, as well as $ 0.2 million of severance-related expenses, recorded in "Loss on sale and curtailment of facilities" in our Consolidated Statements of Operations.

Sale of Manufacturing Facilities

In December 2018, we committed to sell a hardwood plywood facility located in Moncure, North Carolina, and subsequently entered into a definitive sale agreement in January 2019 (the Moncure Sale).

This facility generated net sales and operating loss of approximately $ 5.5 million and $ 1.4 million , respectively, during the year ended December 31, 2019 , net sales and operating loss of approximately $ 32.7 million and $ 7.0 million , respectively, during the year ended December 31, 2018 , and net sales and operating loss of approximately $ 28.2 million and $ 9.8 million , respectively, during the year ended December 31, 2017 .

This facility generated net sales and operating loss of approximately $ 5.5 million and $ 1.4 million, respectively, during the year ended December 31, 2019, and net sales and operating loss of approximately $ 32.7 million and $ 7.0 million, respectively, during the year ended December 31, 2018.

These results are included in the operating results of our Wood Products segment.

On March 1, 2019, we closed on the Moncure Sale and received proceeds of $ 2.5 million.

The disposal group met the criteria to be classified as held for sale in December 2018 and were recorded as assets held for sale in "Prepaid expenses and other" on our Consolidated Balance Sheet as of December 31, 2018.

The disposal group met the criteria to be classified as held for sale in December 2018.

Upon classification as held for sale, we discontinued depreciation of the long-lived assets, and performed an assessment of impairment to identify and expense any excess of carrying value over fair value less costs to sell.

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On September 10, 2018, we entered into an agreement to sell two lumber mills and a particleboard plant located in Northeast Oregon (the Sale).

These facilities generated net sales and operating loss of approximately $ 74.1 million and $ 0.2 million , respectively, for the year ended December 31, 2018 , and net sales and operating income of approximately $ 82.5 million and $ 0.9 million , respectively, for the year ended December 31, 2017 .

These facilities generated net sales and operating loss of approximately $ 74.1 million and $ 0.2 million, respectively, for the year ended December 31, 2018.

These results are included in the operating results of our Wood Products segment.

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The purchase price of the Acquisition was $ 15.7 million, including a post-closing adjustment of less than $ 0.1 million based upon a working capital target.

We funded the Acquisition with cash on hand.

The distribution location adds to our existing distribution business and strengthens our nationwide presence.

In addition, we believe we will be able to broaden our product and service offerings within this market following the Acquisition.

Goodwill represents the excess of the purchase price and related costs over the fair value of the net tangible and intangible assets of businesses acquired.

The goodwill and customer relationships recognized from the Acquisition are deductible for U.S.

income tax purposes.

The useful life for customer relationships is 10 years.

All of the goodwill and intangible assets were assigned to the Building Materials Distribution segment.

The following table summarizes the final allocations of the purchase price to the assets acquired and liabilities assumed, based on our estimates of the fair value at the acquisition date:

Acquisition Date Fair Value

Accounts receivable

Property and equipment

Lease right-of-use assets

Intangible assets:

Customer relationships

Assets acquired

Accounts payable

Lease liabilities

Liabilities assumed

Net assets acquired

During the year ended December 31, 2018, our wholly owned subsidiary, Boise Cascade Building Materials Distribution, L.L.C., completed the acquisition of wholesale building material distribution locations in Nashville, Tennessee, Medford, Oregon, and Cincinnati, Ohio (collectively, the 2018 Acquisitions).

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The carrying amount of our goodwill by segment is as follows:

Balance at December 31, 2018

Balance at December 31, 2019

______________________________________

Represents the acquisition of a wholesale building material distribution location.

For additional information, see Note 8, Acquisitions .

Balance at December 31, 2020 and 2019 $ 11,792 $ 48,590 $ 60,382

At December 31, 2020 and 2019, intangible assets represented the values assigned to trade names and trademarks and customer relationships.

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Gross Carrying

Amount Accumulated

Amortization Net Carrying

Trade names and trademarks $ 8,900 $ — $ 8,900

Customer relationships 12,450 ( 4,776 ) 7,674

$ 21,350 $ ( 4,776 ) $ 16,574

December 31, 2019

Gross Carrying

Amount Accumulated

Amortization Net Carrying

Trade names and trademarks $ 8,900 $ — $ 8,900

Customer relationships 12,450 ( 3,553 ) 8,897

$ 21,350 $ ( 3,553 ) $ 17,797

Long-term debt consisted of the following:

Asset-based revolving credit facility

2020 December 31,

Asset-based revolving credit facility due 2025 $ — $ —

Asset-based credit facility term loan due 2025 50,000 50,000

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4.875% senior notes due 2030 400,000 —

5.625% senior notes due 2024 — 350,000

Deferred financing costs ( 6,208 ) ( 4,456 )

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At December 31, 2020, the maturities for the aggregate amount of long-term debt outstanding were as follows (in thousands):

Thereafter 400,000

Asset-Based Credit Facility

On May 15, 2015, Boise Cascade and its principal operating subsidiaries, Boise Cascade Wood Products, L.L.C., and Boise Cascade Building Materials Distribution, L.L.C., as borrowers, and Boise Cascade Wood Products Holdings Corp., as guarantor, entered into an Amended and Restated Credit Agreement, as amended, (Amended Agreement) with Wells Fargo Capital Finance, LLC, as administrative agent, and the banks named therein as lenders.

The Amended Agreement includes a $ 370 million senior secured asset-based revolving credit facility (Revolving Credit Facility) and a $ 50.0 million term loan (ABL Term Loan) maturing on May 1, 2022.

Interest on borrowings under our Revolving Credit Facility and ABL Term Loan are payable monthly.

Borrowings under the Amended Agreement are constrained by a borrowing base formula dependent upon

levels of eligible receivables and inventory reduced by outstanding borrowings and letters of credit (Availability).

On March 13, 2020, we entered into the sixth amendment to the Amended Agreement to reduce the maximum amount available for revolving loans from $ 370 million to $ 350 million (Revolving Credit Facility) and to extend the maturity date of the Credit Agreement from May 1, 2022, to March 13, 2025.

The term loan within the Amended Agreement remains at $ 50.0 million (ABL Term Loan).

borrowings under our Revolving Credit Facility and ABL Term Loan are payable monthly.

Borrowings under the Amended Agreement are constrained by a borrowing base formula dependent upon levels of eligible receivables and inventory reduced by outstanding borrowings and letters of credit (Availability).

The Amended Agreement is secured by a first-priority security interest in substantially all of our assets, except for property and equipment.

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In addition, we are required to pay an unused commitment fee at a rate of 0.25 % per annum of the average unused portion of the lending commitments.

At both December 31, 2019 and 2018 , we had no borrowings outstanding under the Revolving Credit Facility and $ 4.6 million of letters of credit outstanding.

At both December 31, 2020 and 2019, we had no borrowings outstanding under the Revolving Credit Facility and $ 4.8 million and $ 4.6 million, respectively, of letters of credit outstanding.

These letters of credit and borrowings, if any, reduce Availability under the Revolving Credit Facility by an equivalent amount.

During the year ended December 31, 2019 , the maximum borrowings under the Revolving Credit Facility was $ 5.5 million and the average interest rate on borrowings was approximately 3.69 % .

ABL Term Loan

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On March 30, 2016 (Closing Date), Boise Cascade and its principal operating subsidiaries, Boise Cascade Wood Products, L.L.C., and Boise Cascade Building Materials Distribution, L.L.C., as borrowers, and the guarantors party thereto, entered into a term loan agreement, as amended, (Term Loan Agreement) with American AgCredit, PCA, as administrative agent and sole lead arranger, and other banks in the Farm Credit system named therein as lenders.

The Term Loan Agreement was for a $ 75.0 million secured term loan (Term Loan).

The outstanding principal balance of the Term Loan amortizes and is

payable in equal installments of $ 10 million per year on each of the sixth, seventh, eighth, and ninth anniversaries of the Closing Date, with the remaining principal balance due and payable on March 30, 2026.

Interest on our Term Loan is payable monthly.

In December 2016, we prepaid $ 30 million of the Term Loan, which became available to reborrow.

In November 2018, we terminated the ability to reborrow this prepaid Term Loan.

This prepayment of $ 30 million satisfied our principal obligations due on the sixth, seventh, and eighth anniversaries of the Closing Date.

Pursuant to the Term Loan Agreement, the borrowers are required to maintain, as of the end of any fiscal quarter, a Capitalization Ratio lower than 60 % , a Consolidated Net Worth greater than $ 350 million , and Available Liquidity greater than $ 100 million (each as defined in the Term Loan Agreement).

In addition, under the Term Loan Agreement, and subject to certain exceptions, the borrowers may not, among other things, (i) incur indebtedness, (ii) incur liens, (iii) make junior payments, (iv) make certain investments, and (v) under certain circumstances, make capital expenditures in excess of $ 50 million during four consecutive quarters.

The Term Loan Agreement also includes customary representations of the borrowers and provides for certain events of default customary for similar facilities.

The Term Loan Agreement permits us to pay dividends only if at the time of payment (i) no default has occurred or is continuing (or would result from such payment) under the Term Loan Agreement, and (ii) our interest coverage ratio is greater than or equal to 3 :1 at such time or (iii) our fixed-charge coverage ratio is greater than or equal to 1 :1.

Interest rates under the Term Loan Agreement are based, at our election, on either the LIBOR or a base rate, as defined in the Term Loan Agreement, plus a spread over the index.

The original Term Loan

Agreement was for a $ 75.0 million secured term loan (Term Loan).

In December 2016, we repaid $ 30 million of the Term Loan.

In July 2020, we paid off the remaining balance on the Term Loan of $ 45.0 million, thus satisfying and discharging our obligations under the Term Loan.

Interest rates under the Term Loan Agreement were based, at our election, on either the LIBOR or a base rate, as defined in the Term Loan Agreement, plus a spread over the index.

The applicable spread for the Term Loan ranges from 1.875 % to 2.125 % for LIBOR rate loans, and 0.875 % to 1.125 % for base rate loans, both dependent on our Interest Coverage Ratio (as defined in the Term Loan Agreement).

During the year ended December 31, 2020, the average interest rate on the Term Loan was approximately 2.82 %.

We have received and expect to continue receiving patronage credits under the Term Loan.

We have received and expect to receive patronage credits through the period in which the Term Loan was outstanding.

After giving effect to expected patronage distributions, the effective average net interest rate on the Term Loan was approximately 1.8 %.

The Term Loan is secured by a first priority mortgage on our Thorsby, Alabama, and Roxboro, North Carolina, EWP facilities and a first priority security interest on the equipment and certain tangible personal property located therein.

On August 29, 2016, Boise Cascade issued $ 350 million of 5.625 % senior notes due September 1, 2024 (2024 Notes), through a private placement that was exempt from the registration requirements of the Securities Act.

Interest on our 2024 Notes is payable semiannually in arrears on March 1 and September 1.

Interest on our 2024 Notes was payable semiannually in arrears on March 1 and September 1.

In connection with the issuance of the $ 400 million of 4.875 % senior notes due July 1, 2030 (2030 Notes) described below, we commenced a tender offer to purchase any and all of our $ 350 million aggregate principal amount of 2024 Notes then outstanding.

On July 27, 2020, we accepted for purchase an aggregate principal amount of $ 212.5 million of the 2024 Notes that were tendered.

On September 1, 2020, we redeemed the remaining $ 137.5 million in aggregate principal amount of the 2024 Notes outstanding and our obligations under the indenture, pursuant to which the 2024 Notes were issued, were satisfied and discharged.

In connection with these transactions, we recognized a pre-tax loss on the extinguishment of debt of $ 14.0 million during the year ended December 31, 2020.

The loss includes $ 10.8 million of debt extinguishment premium payments and $ 3.2 million for the write-off of unamortized deferred financing costs.

On July 27, 2020, we issued the 2030 Notes through a private placement that was exempt from the registration requirements of the Securities Act.

The 2030 Notes mature on July 1, 2030, with interest payable semiannually in arrears on January 1 and July 1, commencing on January 1, 2021.

The 2030 Notes are guaranteed by each of our existing and future direct or indirect domestic subsidiaries that is a guarantor under our Amended Agreement.

Following the sale of our 2030 Notes, as noted above, we used the net proceeds of the sale to repurchase or redeem any and all of our 2024 Notes, to pay off our Term Loan of $ 45.0 million, and to pay related financing fees and expenses related to the offering of the 2030 Notes and incurred in connection with the repurchase or redemption of the 2024 Notes.

The 2030 Notes are senior unsecured obligations and rank equally with all of the existing and future senior indebtedness of Boise Cascade Company and of the guarantors, senior to all of their existing and future subordinated indebtedness, effectively subordinated to all of their present and future senior secured indebtedness (including all borrowings with respect to our Amended Agreement to the extent of the value of the assets securing such indebtedness), and structurally subordinated to the indebtedness of any subsidiaries that do not guarantee the 2030 Notes.

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Consequently, leases for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840.

The new standard provides a number of optional practical expedients in transition.

We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs.

We did not elect the use-of-hindsight practical expedient.

We recorded additional lease liabilities for operating leases of $ 72.4 million , with an offsetting increase to ROU assets of approximately $ 69.2 million as of January 1, 2019, substantially all of which are real estate leases.

The difference between these amounts is related to the reclassification of accrued straight-line rent upon adoption.

Capital leases were also reclassified from "Property and equipment, net" to "Finance lease right-of-use assets" and from "Other long-term liabilities" to "Finance lease liabilities" on our Consolidated Balance Sheet.

The standard did not have a material impact on our consolidated net earnings and cash flows.

There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2019, upon adoption of Topic 842.

The effect of the changes made to our consolidated balance sheet as of January 1, 2019, for the adoption of the new lease standard was as follows:

Balance at December 31, 2018

Adjustments Due to ASC 842

January 1, 2019

Property and equipment, net

Operating lease right-of-use assets

Finance lease right-of-use assets

Prepaid expenses and other

Accrued liabilities, other

Operating lease liabilities, net of current portion

Finance lease liabilities, net of current portion

Other long-term liabilities

In accordance with the new lease standard requirements, the disclosure of the impact of adoption on our consolidated balance sheet was as follows:

December 31, 2019

Balances Without Adoption of

Effect of Change Higher/(Lower)