BOISE CASCADE Co 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Understanding Our Financial Information This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in "Item 1. Financial Statements" of this Form 10-Q, as well as our 2020 Form 10-K. The following discussion includes statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other nonhistorical statements in the discussion, are forward-looking. These forward-looking statements include, without limitation, any statement that may predict, indicate, or imply future results, performance, or achievements and may contain the words "may," "will," "expect," "believe," "should," "plan," "anticipate," and other similar expressions. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Item 1A. Risk Factors" in our 2020 Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume an obligation to update any forward-looking statement. Our future actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Background Boise Cascade Company is a building products company headquartered in Boise, Idaho. As used in this Form 10-Q, the terms "Boise Cascade," "we," and "our" refer to Boise Cascade Company and its consolidated subsidiaries. Boise Cascade is a large, vertically-integrated wood products manufacturer and building materials distributor. We have two reportable segments: (i) Wood Products, which primarily manufactures engineered wood products (EWP) and plywood; and (ii) Building Materials Distribution (BMD), which is a wholesale distributor of building materials. Demand for the products we manufacture, as well as the products we purchase and distribute, is closely correlated with new residential construction in the U.S. To a lesser extent, demand for our products correlates with residential repair-and-remodeling activity and light commercial construction. For more information, see Note 12, Segment Information, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q. Executive Overview We recorded income from operations of $409.8 million during the three months ended June 30, 2021, compared with income from operations of $51.8 million during the three months ended June 30, 2020. In our Wood Products segment, income increased $196.7 million to $213.8 million for the three months ended June 30, 2021, from $17.1 million for the three months ended June 30, 2020, due primarily to higher plywood, EWP, and lumber sales prices, as well as higher EWP sales volumes, offset partially by higher wood fiber costs. In our Building Materials Distribution segment, income increased $163.1 million to $206.3 million for the three months ended June 30, 2021, from $43.2 million for the three months ended June 30, 2020, driven by a gross margin increase of $187.9 million, resulting primarily from improved sales volumes and gross margins on substantially all products lines, particularly commodity products, compared with second quarter 2020. The margin improvement was offset partially by increased selling and distribution expenses of $25.9 million. These changes are discussed further in "Our Operating Results" below. We ended second quarter 2021 with $653.8 million of cash and cash equivalents and $345.3 million of undrawn committed bank line availability, for total available liquidity of $999.1 million. We had $444.2 million of outstanding debt at June 30, 2021. We generated $248.4 million of cash during the six months ended June 30, 2021, as cash provided by operations was offset partially by capital spending, dividends paid on our common stock, and tax withholding payments on stock-based awards. A further description of our cash sources and uses for the six month comparative periods are discussed in "Liquidity and Capital Resources" below. As both a manufacturer and a distributor, our second quarter 2021 financial results were favorably impacted by higher commodity wood products pricing compared to pricing in the same period last year, driven by continued robust construction activity during second quarter 2021. While not subject to the significant price fluctuations of commodity products, demand also exceeded supply for many of the general line and EWP products distributed by BMD. Lumber pricing peaked in May 2021, then dropped sharply driven by declining repair and remodel and "do-it-yourself" activity, causing hesitancy in the marketplace 22 Table of Contents because of expectations for potential price erosion. With COVID-19 vaccines and easing pandemic restrictions, people are spending less time at home on home improvement projects, resulting in reduced demand from our home center customers. In recent months, the effects of the COVID-19 vaccine and COVID-19 safety protocols have resulted in fewer pandemic-related disruptions to both our manufacturing and distribution locations. Although many restrictions related to COVID-19 have been lightened, we continue to conduct business with certain modifications to 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. In addition, we continue to actively monitor evolving developments, including the impact of COVID-19 variants, 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 employees, customers, suppliers, communities, and stockholders. Economic uncertainty due to the pandemic continues. However, low mortgage rates, continuation of work-from-home practices by many in the economy, and demographics in the U.S. have created a favorable demand environment for new residential construction, particularly single-family housing starts, which we expect to continue in 2021 and into next year. As of July 2021, the Blue Chip Economic Indicators consensus forecast for 2021 and 2022 single- and multi-family housing starts in the U.S. were 1.60 million and 1.58 million units, respectively, compared with actual housing starts of 1.38 million in 2020, as reported by the U.S. Census Bureau. Although we believe that current U.S. demographics support the higher level of forecasted housing starts, and many national home builders are reporting strong near-term backlogs, labor shortages and supply induced constraints on residential construction activity may continue to extend build times and limit activity. In addition, while the age of the U.S. housing stock and limited home inventory availability will continue to provide a favorable backdrop for repair and remodel spending, we expect the recent decline in home improvement demand to continue near-term as travel restrictions are rescinded and pent-up demand for leisure spending occurs. As a wholesale distributor of a broad mix of commodity products and a manufacturer of certain commodity products, we have sales and profitability exposure to declines in commodity product prices. Lumber pricing was very volatile during second quarter 2021, with rapidly rising prices in April and most of May followed by sharp price declines during the remainder of the quarter. Our BMD segment purchases and resells a broad mix of commodity products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability. Current composite panel and lumber prices have declined by approximately 53% and 48% from levels at the end of second quarter 2021. Future commodity product pricing and commodity input costs could be volatile in response to capacity restoration and industry operating rates, the impact of COVID-19 on residential construction, net import and export activity, transportation constraints or disruptions, inventory levels in various distribution channels, and seasonal demand patterns. Factors That Affect Our Operating Results and Trends Our results of operations and financial performance are influenced by a variety of factors, including the following: • the commodity nature of our products and their price movements, which are driven largely by industry capacity and operating rates, industry cycles that affect supply and demand, and net import and export activity; • general economic conditions, including but not limited to housing starts, repair-and-remodeling activity, light commercial construction, inventory levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, household formation rates, prospective home buyers' access to and cost of financing, and housing affordability, that ultimately affect demand for our products; • the duration and magnitude of impacts of the COVID-19 pandemic and related variants; • the highly competitive nature of our industry; • disruptions to information systems used to process and store customer, employee, and vendor information, as well as the technology that manages our operations and other business processes; • material disruptions and/or major equipment failure at our manufacturing facilities; • concentration of our sales among a relatively small group of customers, as well as the financial condition and creditworthiness of our customers; 23 Table of Contents • product shortages, loss of key suppliers, and our dependence on third-party suppliers and manufacturers; • labor disruptions, shortages of skilled and technical labor, or increased labor costs; • the need to successfully formulate and implement succession plans for key members of our management team; • impairment of our long-lived assets, goodwill, and/or intangible assets; • cost and availability of raw materials, including wood fiber and glues and resins; • cost of compliance with government regulations, in particular environmental regulations; • our ability to successfully and efficiently complete and integrate acquisitions; • declines in demand for our products due to competing technologies or materials, as well as changes in building code provisions; • substantial ongoing capital investment costs, including those associated with acquisitions, and the difficulty in offsetting fixed costs related to those investments; • the cost and availability of third-party transportation services used to deliver the goods we manufacture and distribute, as well as our raw materials; • exposure to product liability, product warranty, casualty, construction defect, and other claims; • our indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs; • restrictive covenants contained in our debt agreements; • fluctuations in the market for our equity; and • the other factors described in "Item 1A. Risk Factors" in our 2020 Form 10-K. 24 Table of Contents Our Operating Results The following tables set forth our operating results in dollars and as a percentage of sales for the three and six months ended June 30, 2021 and 2020: Three Months Ended June 30 Six Months Ended June 30 2021 2020 2021 2020 (millions) Sales $ 2,443.2 $ 1,242.8 $ 4,264.5 $ 2,413.3 Costs and expenses Materials, labor, and other operating expenses (excluding depreciation) 1,864.5 1,048.9 3,315.0 2,041.2 Depreciation and amortization 20.4 19.9 40.0 55.2 Selling and distribution expenses 130.7 103.6 251.7 203.0 General and administrative expenses 18.0 18.8 43.3 34.8 Loss on curtailment of facility — — — 1.7 Other (income) expense, net (0.3) (0.2) (0.4) — 2,033.4 1,191.0 3,649.4 2,336.0 Income from operations $ 409.8 $ 51.8 $ 615.0 $ 77.3 (percentage of sales) Sales 100.0 % 100.0 % 100.0 % 100.0 % Costs and expenses Materials, labor, and other operating expenses (excluding depreciation) 76.3 % 84.4 % 77.7 % 84.6 % Depreciation and amortization 0.8 1.6 0.9 2.3 Selling and distribution expenses 5.4 8.3 5.9 8.4 General and administrative expenses 0.7 1.5 1.0 1.4 Loss on curtailment of facility — — — 0.1 Other (income) expense, net — — — — 83.2 % 95.8 % 85.6 % 96.8 % Income from operations 16.8 % 4.2 % 14.4 % 3.2 % 25 Table of Contents Sales Volumes and Prices Set forth below are historical U.S. housing starts data, segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment, and sales mix and gross margin information for our Building Materials Distribution segment for the three and six months ended June 30, 2021 and 2020. Three Months Ended June 30 Six Months Ended June 30 2021 2020 2021 2020 (thousands) U.S. Housing Starts (a) Single-family 308.1 217.4 563.4 431.8 Multi-family 120.4 81.4 223.0 196.2 428.5 298.8 786.4 628.0 (thousands) Segment Sales Wood Products $ 594,569 $ 281,505 $ 1,026,904 $ 601,566 Building Materials Distribution 2,172,744 1,134,260 3,807,521 2,184,257 Intersegment eliminations (324,152) (173,005) (569,948) (372,529) Total sales $ 2,443,161 $ 1,242,760 $ 4,264,477 $ 2,413,294 Wood Products (millions) Sales Volumes Laminated veneer lumber (LVL) (cubic feet) 4.7 3.8 9.1 8.5 I-joists (equivalent lineal feet) 76 50 147 109 Plywood (sq. ft.) (3/8" basis) 338 314 641 632 Wood Products (dollars per unit) Average Net Selling Prices Laminated veneer lumber (LVL) (cubic foot) $ 19.63 $ 18.36 $ 19.33 $ 18.44 I-joists (1,000 equivalent lineal feet) 1,363 1,260 1,342 1,268 Plywood (1,000 sq. ft.) (3/8" basis) 878 287 726 277 (percentage of Building Materials Distribution sales) Building Materials Distribution Product Line Sales Commodity 60.2 % 43.2 % 58.2 % 42.6 % General line 26.1 % 39.5 % 27.3 % 38.7 % Engineered wood 13.7 % 17.3 % 14.5 % 18.7 % Gross margin percentage (b) 15.6 % 13.4 % 15.4 % 13.0 % _______________________________________ (a) Actual U.S. housing starts data reported by the U.S. Census Bureau. (b) We define gross margin as "Sales" less "Materials, labor, and other operating expenses (excluding depreciation)." Substantially all costs included in "Materials, labor, and other operating expenses (excluding depreciation)" for our Building Materials Distribution segment are for inventory purchased for resale. Gross margin percentage is gross margin as a percentage of segment sales. 26 Table of Contents Sales For the three months ended June 30, 2021, total sales increased $1,200.4 million, or 97%, to $2,443.2 million from $1,242.8 million during the three months ended June 30, 2020. For the six months ended June 30, 2021, total sales increased by $1,851.2 million, or 77%, to $4,264.5 million from $2,413.3 million for the same period in the prior year. As described below, the increase in sales was driven by the changes in sales prices and volumes for the products we manufacture and distribute with single-family residential construction activity being the key demand driver of our sales. In second quarter 2021, U.S. housing starts increased 43%, with single-family starts up 42% from the same period in 2020. On a year-to-date basis through June 2021, total and single-family housing starts increased 25% and 30%, respectively, compared with the same period in 2020. Average composite panel and average composite lumber prices for the three months ended June 30, 2021, were 280% and 210% higher, respectively, than in the same period in the prior year, as reflected by Random Lengths composite panel and lumber pricing. For the six months ended June 30, 2021, average composite panel and average composite lumber prices were 217% and 177% higher, respectively, compared with the same period in the prior year. Wood Products. Sales, including sales to our BMD segment, increased $313.1 million, or 111%, to $594.6 million for the three months ended June 30, 2021, from $281.5 million for the three months ended June 30, 2020. The increase in sales was driven primarily by higher plywood prices of 206%, resulting in increased sales of $199.5 million. Plywood demand in the second quarter outpaced industry production levels, driving the favorable pricing. Higher sales volumes for I-joists and LVL of 53% and 22%, respectively, resulted in increased sales of $33.0 million and $15.7 million, respectively. In addition, sales prices for I-joists and LVL increased 8% and 7%, respectively, resulting in increased sales of $7.8 million and $5.9 million, respectively. Improved lumber sales prices and plywood sales volumes of 124% and 8%, respectively, contributed $14.0 million and $6.8 million, respectively, to the increase in sales. For the six months ended June 30, 2021, sales, including sales to our BMD segment, increased $425.3 million, or 71%, to $1,026.9 million from $601.6 million for the same period in the prior year. The increase in sales was driven primarily by higher plywood prices of 162%, resulting in increased sales of $287.5 million. Higher sales volumes for I-joists and LVL of 35% and 6%, respectively, resulted in increased sales of $48.6 million and $10.0 million, respectively. In addition, sales prices for I-joists and LVL increased 6% and 5%, respectively, resulting in increased sales of $10.8 million and $8.0 million, respectively. Improved lumber sales prices and plywood sales volumes of 107% and 1%, respectively, contributed $22.8 million and $2.5 million, respectively, to the increase in sales. Building Materials Distribution. Sales increased $1,038.5 million, or 92%, to $2,172.7 million for the three months ended June 30, 2021, from $1,134.3 million for the three months ended June 30, 2020. Compared with the same quarter in the prior year, the overall increase in sales was driven by sales price and volume increases of 83% and 9%, respectively. By product line, commodity sales increased 167%, or $818.8 million; general line product sales increased 26%, or $118.5 million; and sales of EWP (substantially all of which are sourced through our Wood Products segment) increased 52%, or $101.2 million. During the six months ended June 30, 2021, sales increased $1,623.3 million, or 74%, to $3,807.5 million from $2,184.3 million for the same period in the prior year. Compared with the same period in the prior year, the overall increase in sales was driven by sales price and volume increases of 67% and 7%, respectively. By product line, commodity sales increased 138%, or $1,285.0 million; general line product sales increased 23%, or $193.6 million; and sales of EWP increased 35%, or $144.7 million. Costs and Expenses Materials, labor, and other operating expenses (excluding depreciation) increased $815.6 million, or 78%, to $1,864.5 million for the three months ended June 30, 2021, compared with $1,048.9 million during the same period in the prior year. In our Wood Products segment, materials, labor, and other operating expenses increased, due to higher sales volumes, as well as higher per-unit costs of OSB (used in the manufacture of I-joists) and logs of approximately 28% and 17%, compared with second quarter 2020. However, materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment decreased by 2,560 basis points, which was primarily due to higher plywood, EWP, and lumber sales prices, resulting in improved leveraging of labor costs, wood fiber costs, and other manufacturing costs. In BMD, materials, labor, and other operating expenses increased, driven by higher purchased materials costs as a result of higher sales volumes and higher commodity prices, compared with second quarter 2020. However, the BMD segment MLO rate improved 220 basis points compared with second quarter 2020 due primarily to improved sales volumes and gross margin percentages for commodity products, driven by an increasing commodity price environment during most of second quarter 2021. In addition, higher sales volumes and gross margin percentages for EWP contributed to the improved MLO rate. 27 Table of Contents For the six months ended June 30, 2021, materials, labor, and other operating expenses (excluding depreciation), increased $1,273.8 million or 62%, to $3,315.0 million, compared with $2,041.2 million in the same period in the prior year. In our Wood Products segment, materials, labor, and other operating expenses increased, due to higher sales volumes, as well as higher per-unit costs of OSB and logs of approximately 36% and 15%, compared with the first half of 2020. However, the MLO rate in our Wood Products segment decreased by 2,090 basis points, which was primarily due to higher plywood, EWP, and lumber sales prices, resulting in improved leveraging of labor costs, wood fiber costs, and other manufacturing costs. In BMD, the increase in materials, labor, and other operating expenses was driven by higher purchased materials costs as a result of higher sales volumes and higher commodity prices, compared with the first half of 2020. However, the BMD segment MLO rate improved 240 basis points compared with the first half of 2020 due primarily to improved sales volumes and gross margin percentages for our commodity products, driven by an increasing commodity price environment during most of the first half of 2021. In addition, higher sales volumes and gross margin percentages for EWP contributed to the improved MLO rate. Depreciation and amortization expenses increased $0.5 million, or 3%, to $20.4 million for the three months ended June 30, 2021, compared with $19.9 million during the same period in the prior year. For the six months ended June 30, 2021. these expenses decreased $15.3 million, or 28%, to $40.0 million, compared with $55.2 million in the same period in the prior year, due primarily to recording accelerated depreciation of $15.0 million in first quarter 2020 to fully depreciate the curtailed I-joist production assets at our Roxboro, North Carolina facility. For additional information, see Note 5, Curtailment of Manufacturing Facility, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q. Selling and distribution expenses increased $27.2 million, or 26%, to $130.7 million for the three months ended June 30, 2021, compared with $103.6 million during the same period in the prior year, due primarily to higher employee-related expenses of $19.7 million, most of which relates to incentive compensation. In addition, the increase in selling and distribution expenses was driven by an increase in shipping and handling costs of $2.8 million, as well increased other costs associated with higher sales volumes. For the six months ended June 30, 2021, selling and distribution expenses increased $48.6 million, or 24%, to $251.7 million, compared with $203.0 million during the same period in 2020, due primarily to higher employee-related expenses of $41.3 million, most of which relates to incentive compensation, as well as higher shipping and handling costs of $5.0 million. General and administrative expenses decreased $0.8 million, or 4%, to $18.0 million for the three months ended June 30, 2021, compared with $18.8 million for the same period in the prior year, due primarily to lower incentive compensation expenses driven by the departure of two officers and related forfeiture of accrued incentive compensation. For the six months ended June 30, 2021, general and administrative expenses increased $8.4 million, or 24%, to $43.3 million, compared with $34.8 million during the same period in 2020. The increase was primarily a result of higher employee-related expenses of $9.0 million, most of which relates to incentive compensation. For the six months ended June 30, 2020, loss on curtailment of facility was $1.7 million, representing various closure-related costs from the permanent curtailment of I-joist production at our Roxboro, North Carolina facility. For additional information, see Note 5, Curtailment of Manufacturing Facility, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q. Income From Operations Income from operations increased $358.0 million to $409.8 million for the three months ended June 30, 2021, compared with $51.8 million for the three months ended June 30, 2020. Income from operations increased $537.7 million to $615.0 million for the six months ended June 30, 2021, compared with $77.3 million for the six months ended June 30, 2020. Wood Products. Segment income increased $196.7 million to $213.8 million for the three months ended June 30, 2021, compared with $17.1 million for the three months ended June 30, 2020. The increase in segment income was due primarily to higher plywood, EWP, and lumber sales prices, as well as higher EWP sales volumes. These increases in segment income were offset partially by higher wood fiber costs, as well as increased selling and distribution expenses of $1.3 million. For the six months ended June 30, 2021, segment income increased $290.0 million to $310.8 million from $20.8 million for the six months ended June 30, 2020. The increase in segment income was due primarily to higher plywood, EWP, and lumber sales prices, as well as higher EWP sales volumes. In addition, first quarter 2020 results included accelerated depreciation and amortization expense and loss on curtailment of facility of $15.0 million and $1.7 million, respectively, related to the permanent curtailment of I-joist production at our Roxboro, North Carolina facility. These increases were offset partially by higher wood fiber and other manufacturing costs. In addition, selling and distribution expenses and general and administrative expenses increased $2.3 million and $1.7 million, respectively. 28 Table of Contents Building Materials Distribution. Segment income increased $163.1 million to $206.3 million for the three months ended June 30, 2021, from $43.2 million for the three months ended June 30, 2020. The increase in segment income was driven by a gross margin increase of $187.9 million, resulting from improved sales volumes and gross margins on substantially all product lines, particularly commodity products, compared with second quarter 2020. The margin improvement was offset partially by increased selling and distribution expenses of $25.9 million. For the six months ended June 30, 2021, segment income increased $254.0 million to $326.6 million from $72.5 million for the six months ended June 30, 2020. The increase in segment income was driven by a gross margin increase of $303.2 million, resulting from improved sales volumes and gross margins on substantially all product lines, particularly commodity products, compared with the first half of 2020. This improvement was offset partially by increased selling and distribution expenses and general and administrative expenses of $46.4 million and $3.5 million, respectively. Corporate. Unallocated corporate expenses increased $1.8 million to $10.3 million for the three months ended June 30, 2021, from $8.5 million for the same period in the prior year. As part of our self-insured risk retention program, corporate absorbed approximately $3.4 million of estimated insurance losses resulting from a fire at our BMD Phoenix location. These losses were offset partially by lower incentive compensation driven by the departure of an officer and related forfeiture of accrued incentive compensation. For the six months ended June 30, 2021, unallocated corporate expenses increased $6.3 million to $22.3 million from $16.0 million for the six months ended June 30, 2020. The increase was due primarily to higher incentive compensation and $3.4 million of estimated insurance losses absorbed by corporate, as discussed above. Other Change in fair value of interest rate swaps. For information related to our interest rate swaps, see the discussion under "Interest Rate Risk and Interest Rate Swaps" of Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q. Income Tax Provision For the three and six months ended June 30, 2021, we recorded $101.0 million and $152.5 million, respectively, of income tax expense and had an effective rate of 25.0% and 25.2%, respectively. During the three and six months ended June 30, 2021, the primary reason for the difference between the federal statutory income tax rate of 21% and the effective tax rate was the effect of state taxes. For the three and six months ended June 30, 2020, we recorded $11.3 million and $15.3 million, respectively, of income tax expense and had an effective rate of 25.2% and 25.1%, respectively. During the three and six months ended June 30, 2020, the primary reason for the difference between the federal statutory income tax rate of 21% and the effective tax rate was the effect of state taxes. Industry Mergers and Acquisitions On August 27, 2020, Builders FirstSource, Inc. (BFS) and BMC Stock Holdings (BMC) announced a definitive merger agreement. The merger closed in early January 2021. Prior to the merger, BFS and BMC were both customers of ours. We believe we have a good relationship with the combined company and we do not expect the transaction to have a material impact on our future results of operations. The merger resulted in the combined company accounting for 18 % of total receivables as of June 30, 2021. Liquidity and Capital Resources We ended second quarter 2021 with $653.8 million of cash and cash equivalents and $444.2 million of debt. At June 30, 2021, we had $999.1 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability). We generated $248.4 million of cash during the six months ended June 30, 2021, as cash provided by operations was offset partially by capital spending, dividends paid on our common stock, and tax withholding payments on stock-based awards. Further descriptions of our cash sources and uses for the six month comparative periods are noted below. We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations, working capital, income tax payments, and to pay cash dividends to holders of our common stock over the next 12 months. We expect to fund our seasonal and intra-month working capital requirements in the remainder of 2021 from cash on hand and, if necessary, borrowings under our revolving credit facility. 29 Table of Contents Sources and Uses of Cash We generate cash primarily from sales of our products, as well as short-term and long-term borrowings. Our primary uses of cash are for expenses related to the manufacture and distribution of building products, including inventory purchased for resale, wood fiber, labor, energy, and glues and resins. In addition to paying for ongoing operating costs, we use cash to invest in our business, service our debt, pay dividends, repurchase our common stock, and meet our contractual obligations and commercial commitments. Below is a discussion of our sources and uses of cash for operating activities, investing activities, and financing activities. Six Months Ended June 30 2021 2020 (thousands) Net cash provided by operations $ 291,179 $ 118,276 Net cash used for investment (31,002) (28,443) Net cash used for financing (11,792) (13,634) Operating Activities For the six months ended June 30, 2021, our operating activities generated $291.2 million of cash, compared with $118.3 million of cash generated in the same period in 2020. The $172.9 million increase in cash provided by operations was due primarily to an improvement in income from operations. See "Our Operating Results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations for more information related to factors affecting our operating results. These increases in cash were offset partially by an increase in working capital of $203.4 million during the six months ended June 30, 2021, compared with a $0.1 million decrease for the same period in the prior year. In addition, cash paid for taxes, net of refunds received, increased $146.6 million, compared to the prior year, resulting from the significant improvement in income from operations during the first half of 2021. The increase in working capital during the six months ended June 30, 2021 was primarily attributable to higher receivables and inventories, offset by an increase in accounts payable and accrued liabilities. The changes in working capital during the six months ended June 30, 2020 included an increase in receivables, offset by an increase in accounts payable and accrued liabilities and lower inventories. The increases in receivables in both periods primarily reflect increased sales of approximately 69% and 47%, comparing sales for the months of June 2021 and 2020 with sales for the months of December 2020 and 2019, respectively. Inventories increased during the six months ended June 30, 2021 primarily due to the growth of inventory for the building season, as well as elevated commodity prices. During the six months ended June 30, 2020, distribution inventories decreased due to stronger than expected demand and higher inventory turns, while manufacturing inventories decreased due to reduced production levels in response to lower market demand. The increase in accounts payable and accrued liabilities provided $248.1 million of cash during the six months ended June 30, 2021, compared with $95.5 million in the same period a year ago. During both periods, seasonally higher purchasing activity and extended terms offered by major vendors to our Building Materials Distribution segment led to the increase in accounts payable. During the six months ended June 30, 2021, an increase in accrued rebates contributed to the increase in accrued liabilities. During the six months ended June 30, 2020, the increase in accounts payable was offset partially by a decrease in accrued liabilities, most notably annual employee incentive compensation payouts. Investment Activities During the six months ended June 30, 2021 and 2020, we used $31.5 million and $28.8 million, respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance. We expect capital expenditures in 2021 to total approximately $90 million to $100 million. We expect our capital spending in 2021 will be for business improvement and quality/efficiency projects, replacement projects, and ongoing environmental compliance. Included in our capital spending range is the completion of a log utilization center project at our Florien plywood and veneer plant, a new door assembly operation in Houston, and expansion of our distribution capabilities in the Nashville market. This level of capital expenditures could increase or decrease as a result of a number of factors, including acquisitions, efforts to accelerate organic growth, exercise of lease purchase options, our financial results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases. 30 Table of Contents Financing Activities During the six months ended June 30, 2021, our financing activities used $11.8 million of cash, including $8.4 million for common stock dividend payments and $2.7 million of tax withholding payments on stock-based awards. During the six months ended June 30, 2021, we also borrowed $28.0 million under our revolving credit facility, which were subsequently repaid during the same period with cash on hand. During the six months ended June 30, 2020, our financing activities used $13.6 million of cash, including $8.6 million for common stock dividend payments and $3.3 million of tax withholding payments on stock-based awards. During the six months ended June 30, 2020, we did not borrow under our revolving credit facility. Future dividend declarations, including amount per share, record date and payment date, will be made at the discretion of our board of directors and will depend upon, among other things, legal capital requirements and surplus, our future operations and earnings, general financial condition, contractual obligations, restrictions imposed by our asset-based credit facility and the indenture governing our senior notes, applicable laws, and other factors that our board of directors may deem relevant. For more information related to our debt transactions and structure, and our dividend policy, see the discussion in Note 6, Debt, and Note 10, Stockholders' Equity, respectively, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q. Contractual Obligations For information about contractual obligations, see Contractual Obligations in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K. As of June 30, 2021, there have been no material changes in contractual obligations outside the ordinary course of business since December 31, 2020. Off-Balance-Sheet Activities At June 30, 2021, and December 31, 2020, we had no material off-balance-sheet arrangements with unconsolidated entities. Guarantees Note 10, Debt, and Note 18, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2020 Form 10-K describe the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make. As of June 30, 2021, there have been no material changes to the guarantees disclosed in our 2020 Form 10-K. Seasonal Influences We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products industry. Seasonal changes in levels of building activity affect our building products businesses, which are dependent on housing starts, repair-and-remodeling activities, and light commercial construction activities. We typically report lower sales volumes in the first and fourth quarters due to the impact of poor weather on the construction market, and we generally have higher sales volumes in the second and third quarters, reflecting an increase in construction due to more favorable weather conditions. We typically have higher working capital in the first and second quarters in preparation and response to the building season. Seasonally cold weather increases costs, especially energy consumption costs, at most of our manufacturing facilities. 31 Table of Contents Employees As of July 25, 2021, we had approximately 6,130 employees. Approximately 23% of these employees work pursuant to collective bargaining agreements. As of July 25, 2021, we had ten collective bargaining agreements. Two agreements covering approximately 780 employees at our Oakdale and Florien plywood plants expired on July 15, 2021, but the terms and conditions of these agreements remain in effect pending negotiation of new agreements. We may not be able to renew these agreements or may renew them on terms that are less favorable to us than the current agreements. 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. Disclosures of Financial Market Risks In the normal course of business, we are exposed to financial risks such as changes in commodity prices, interest rates, and foreign currency exchange rates. As of June 30, 2021, there have been no material changes to financial market risks disclosed in our 2020 Form 10-K. Environmental As of June 30, 2021, there have been no material changes to environmental issues disclosed in our 2020 Form 10-K. For additional information, see Environmental in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K. Critical Accounting Estimates Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments, often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our board of directors. For information about critical accounting estimates, see Critical Accounting Estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K. At June 30, 2021, there have been no material changes to our critical accounting estimates from those disclosed in our 2020 Form 10-K. New and Recently Adopted Accounting Standards For information related to new and recently adopted accounting standards, see "New and Recently Adopted Accounting Standards" in Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" in this Form 10-Q.