What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-31 compared with 2023-05-04 · 131 added, 76 removed, 192 unchanged (52% of the section changed)

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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.

Such statements, along with any other non-historical 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.

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Executive Overview

We recorded income from operations of $127.6 million during the three months ended March 31, 2023, compared with income from operations of $405.6 million during the three months ended March 31, 2022.

In our Wood Products segment, income decreased $120.7 million to $69.4 million for the three months ended March 31, 2023, from $190.1 million for the three months ended March 31, 2022, due primarily to lower plywood sales prices, lower EWP sales volumes, higher per-unit conversion costs, and an increase in depreciation and amortization expense due to the acquisition of two plywood facilities located in Havana, Florida, and Chapman, Alabama, on July 25, 2022 (the Acquisition).

These decreases were offset partially by higher EWP sales prices and higher plywood sales volumes, as well as lower OSB costs (used in the manufacture of I-joists).

In our BMD segment, income decreased $156.2 million to $69.7 million for the three months ended March 31, 2023, from $225.9 million for the three months ended March 31, 2022, driven by a gross margin decrease of $177.3 million, resulting primarily from lower margins on commodity products and lower sales volumes, offset partially by decreased selling and distribution expenses of $20.3 million.

We recorded income from operations of $190.0 million during the three months ended June 30, 2023, compared with income from operations of $297.1 million during the three months ended June 30, 2022.

In our Wood Products segment, income decreased $50.1 million to $104.0 million for the three months ended June 30, 2023, from $154.1 million for the three months ended June 30, 2022, due primarily to lower plywood sales prices and an increase in depreciation and amortization expense due to the acquisition of two plywood facilities located in Havana, Florida, and Chapman, Alabama, on July 25, 2022 (the Acquisition).

These decreases were offset partially by higher plywood sales volumes, higher EWP sales prices, as well as lower wood fiber costs.

In our BMD segment, income decreased $55.7 million to $98.6 million for the three months ended June 30, 2023, from $154.3 million for the three months ended June 30, 2022, driven by a gross margin decrease of $49.8 million, resulting from lower margins on EWP and general line products, offset partially by margin improvements on commodity products.

In addition, selling and distribution expenses increased $3.9 million.

These changes are discussed further in "Our Operating Results" below.

We ended first quarter 2023 with $1,000.7 million of cash and cash equivalents and $395.9 million of undrawn committed bank line availability, for total available liquidity of $1,396.7 million.

We had $444.6 million of outstanding debt at March 31, 2023.

We generated $2.4 million of cash during the three months ended March 31, 2023, 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 three-month comparative periods are discussed in "Liquidity and Capital Resources" below.

We ended second quarter 2023 with $1,080.9 million of cash and cash equivalents and $395.9 million of undrawn committed bank line availability, for total available liquidity of $1,476.8 million.

We had $444.8 million of outstanding debt at June 30, 2023.

We generated $82.5 million of cash during the six months ended June 30, 2023, 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.

Demand for the products we manufacture, as well as the products we purchase and distribute, is correlated with new residential construction, residential repair-and-remodeling activity and light commercial construction.

housing starts in March 2023 were approximately 1.42 million on a seasonally adjusted annual rate basis, as reported by the U.S.

housing starts in June 2023 were approximately 1.4 million on a seasonally adjusted annual rate basis, as reported by the U.S.

Census Bureau.

In addition, mortgage rates have declined from peak levels in late 2022, and measures of builder sentiment have improved from fourth quarter 2022 levels.

However, home affordability remains a challenge for consumers, and the Federal Reserve's ongoing actions in response to inflationary data and what impacts these actions have on future mortgage rates and the broader economy

will influence the near-term demand environment.

As such, the full year outlook for 2023 is uncertain and is reflected in various industry forecasts for 2023 U.S.

As such, the outlook for the back half of 2023 remains uncertain and is reflected in various industry

forecasts for 2023 U.S.

housing starts that generally range from 1.3 million to 1.4 million units, compared with actual housing starts of 1.55 million in 2022, as reported by the U.S.

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Future commodity product pricing and commodity input costs may be volatile in response to economic uncertainties, industry operating rates, transportation constraints or disruptions, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns.

In addition, EWP volumes will continue to be influenced by demand for new residential construction, particularly single-family housing starts and we expect further EWP price erosion in the second quarter.

In addition, EWP volumes will continue to be influenced by demand for new residential construction, particularly single-family housing starts, and we expect modest EWP price erosion in the third quarter.

Factors That Affect Our Operating Results and Trends

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Our Operating Results

The following tables set forth our operating results in dollars and as a percentage of sales for the three months ended March 31, 2023 and 2022:

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, 2023 and 2022:

Three Months Ended

June 30 Six Months Ended

2023 2022 2023 2022

Sales $ 1,815.2 $ 2,278.1 $ 3,359.5 $ 4,604.4

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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 BMD segment for the three months ended March 31, 2023 and 2022.

Three Months Ended

June 30 Six Months Ended

2023 2022 2023 2022

Housing Starts (a)

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Multi-family 137.6 146.5 264.1 269.4

399.0 449.8 713.8 839.5

Segment Sales

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Gross margin percentage is gross margin as a percentage of segment sales.

For the three months ended March 31, 2023, total sales decreased $782.0 million, or 34%, to $1,544.3 million from $2,326.3 million during the three months ended March 31, 2022.

For the three months ended June 30, 2023, total sales decreased $462.9 million, or 20%, to $1,815.2 million from $2,278.1 million during the three months ended June 30, 2022.

For the six months ended June 30, 2023, total sales decreased $1,244.9 million, or 27%, to $3,359.5 million from $4,604.4 million for the same period in the prior year.

As described below, the decrease 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 first quarter 2023, total U.S.

housing starts decreased 18%, driven by a decrease in single-family housing starts of 29% compared with the same period in 2022.

Average composite lumber and average composite panel prices for the three months ended March 31, 2023 were 67% and 59% lower, respectively, than in the same period in the prior year, as reflected by Random Lengths composite lumber and panel pricing.

In second quarter 2023, total U.S.

housing starts and single-family housing starts decreased 11% and 14%, respectively, compared with the same period in 2022.

On a year-to-date basis through June 2023, total housing starts decreased 15%, driven by a decrease in single-family housing starts of 21% compared with the same period in 2022.

Average composite lumber and average composite panel prices for the three months ended June 30, 2023 were 50% and 40% lower, respectively, than in the same period in the prior year, as reflected by Random Lengths composite lumber and panel pricing.

For the six months ended June 30, 2023, average composite lumber and average composite panel prices were 60% and 51% lower, respectively, compared with the same period in the prior year.

Wood Products.

Sales, including sales to our BMD segment, decreased $121.5 million, or 22%, to $437.4 million for the three months ended March 31, 2023, from $558.9 million for the three months ended March 31, 2022.

Sales, including sales to our BMD segment, decreased $5.7 million, or 1%, to $530.3 million for the three months ended June 30, 2023, from $536.0 million for the three months ended June 30, 2022.

The decrease in sales was driven by lower plywood sales prices of 36%, resulting in decreased sales of $89.8 million.

In addition, lower sales volumes of I-joists of 9% resulted in decreased sales of $13.5 million.

The decrease in I-joists sales volumes was due to a decline in housing starts, as well as the availability of product substitutes and construction methods in certain geographies that reduce the wood floor opportunity.

These decreases were offset partially by higher sales volumes for plywood of 57%, resulting in increased sales of $90.7 million.

Plywood sales volumes increased during the quarter as we shifted a higher proportion of our internally produced veneer into plywood production, given the change in demand for EWP.

Plywood sales volumes increased from the prior year quarter due to the Acquisition, as well as downtime taken in 2022 to replace an existing dryer at our Chester, South Carolina, plywood facility.

In addition, higher sales prices for LVL and I-joists (collectively referred to as EWP) of 6% and 1%, respectively, resulted in increased sales of $7.8 million and $1.4 million, respectively.

The increase in EWP pricing was due to realizations of previously announced price increases and the expiration of certain temporary price protection arrangements.

Higher sales volumes for LVL of 2% resulted in increased sales of $2.7 million.

For the six months ended June 30, 2023, sales, including sales to our BMD segment, decreased $127.3 million, or 12% to $967.7 million from $1,095.0 million for the same period in the prior year.

The decrease in sales was driven by lower plywood sales prices of 42%, resulting in decreased sales of $225.6 million.

In addition, lower sales volumes of I-joists and LVL (collectively referred to as EWP) of 25% and 10%, respectively, resulted in decreased sales of $65.5 million and $24.8 million, respectively.

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These decreases were offset partially by higher sales volumes for plywood of 42%, resulting in increased sales of $157.1 million.

Plywood sales volumes increased from the prior year as we shifted a higher proportion of our internally produced veneer into plywood production, given the change in demand for EWP.

The Acquisition also increased plywood sales volumes during 2023.

In addition, higher sales prices for LVL and I-joists of 12% and 7%, respectively, resulted in increased sales of $26.4 million and $14.7 million, respectively.

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Building Materials Distribution.

Sales decreased $732.6 million, or 35%, to $1,379.2 million for the three months ended March 31, 2023, from $2,111.8 million for the three months ended March 31, 2022.

Sales decreased $494.7 million, or 23%, to $1,636.5 million for the three months ended June 30, 2023, from $2,131.2 million for the three months ended June 30, 2022.

Compared with the same quarter in the prior year, the overall decrease in sales was driven by sales price and sales volume decreases of 22% and 1%, respectively.

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general line product sales decreased 8%, or $53.0 million;

and EWP sales (substantially all of which are sourced through our Wood Products segment) decreased 21%, or $99.0 million.

During the six months ended June 30, 2023, sales decreased $1,227.2 million, or 29%, to $3,015.8 million from $4,243.0 million for the same period in the prior year.

The overall decrease in sales was driven by sales price and sales volume decreases of 21% and 8%, respectively.

By product line, commodity sales decreased 44%, or $897.0 million;

general line product sales decreased 10%, or $134.6 million;

and sales of EWP (substantially all of which are sourced through our Wood Products segment) decreased 23%, or $195.6 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) decreased $499.3 million, or 29%, to $1,230.6 million for the three months ended March 31, 2023, compared with $1,729.9 million during the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses decreased due to lower EWP sales volumes, as well as lower per-unit costs of OSB (used in the manufacture of I-joists) of approximately 19%, compared with first quarter 2022, as well as decreased other manufacturing costs, offset partially by increased labor costs.

However, materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 1,340 basis points.

The increase in the MLO rate was primarily the result of lower plywood sales prices, resulting in decreased leveraging of labor, wood fiber, and other manufacturing costs.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of lower sales volumes and lower commodity prices, compared with first quarter 2022.

However, the BMD segment MLO rate increased by 330 basis points compared with first quarter 2022, driven primarily by lower margin percentages on our commodity product sales.

Materials, labor, and other operating expenses (excluding depreciation) decreased $371.5 million, or 21%, to $1,426.4 million for the three months ended June 30, 2023, compared with $1,797.9 million during the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs, as well as the Acquisition.

These increases were offset partially by lower per-unit costs of OSB (used in

the manufacture of I-joists) and logs of approximately 18% and 6%, respectively, compared with second quarter 2022.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 750 basis points.

The increase in the MLO rate was primarily the result of lower plywood sales prices, resulting in decreased leveraging of labor and other manufacturing costs.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs primarily as a result of lower commodity prices compared with second quarter 2022.

The BMD segment MLO rate decreased 110 basis points compared with second quarter 2022, driven primarily by improved margin percentages on commodity product sales as commodity prices were generally stable during 2023 compared with a declining price environment during 2022.

In our BMD segment, periods of increasing prices provide the opportunity for higher sales and increased margins, while declining price environments generally result in declines in sales and profitability.

Depreciation and amortization expenses increased $10.7 million, or 52%, to $31.2 million for the three months ended March 31, 2023, compared with $20.5 million during the same period in the prior year.

The increase was due primarily to the Acquisition on July 25, 2022, and other capital expenditures.

Selling and distribution expenses decreased $17.9 million, or 12%, to $128.8 million for the three months ended March 31, 2023, compared with $146.7 million during the same period in the prior year, primarily as a result of lower incentive compensation expenses of $20.0 million, offset partially by an increase in shipping and handling costs and discretionary expenses during the three months ended March 31, 2023 compared with the same period in the prior year.

General and administrative expenses increased $0.4 million, or 2%, to $26.5 million for the three months ended March 31, 2023, compared with $26.1 million for the same period in the prior year, primarily due to an increase in professional fees and employee-related expenses, offset partially by lower incentive compensation expenses during the three months ended March 31, 2023 compared with the same period in the prior year.

For the three months ended March 31, 2023, other income (expense), net, was $0.3 million of income, compared with $2.5 million of income for the three months ended March 31, 2022.

Other income for the three months ended March 31, 2022 primarily included earn-out income related to a previous asset sale in our Wood Products segment.

For the six months ended June 30, 2023, materials, labor, and other operating expenses (excluding depreciation) decreased $870.7 million or 25%, to $2,657.1 million, compared with $3,527.8 million in the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs, as well as the Acquisition.

These increases were offset partially by lower per-unit costs of OSB (used in the manufacture of I-joists) and logs of approximately 19% and 2%, respectively, compared with the first six months of 2022.

The MLO rate in our Wood Products segment increased by 1,040 basis points, which was primarily due to lower plywood sales prices, resulting in decreased leveraging of labor and other manufacturing costs.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of a decrease in product prices and lower sales volumes, compared with the first six months of 2022.

However, the BMD segment MLO rate increased 100 basis points due to lower margin percentages on commodity products and EWP compared with the first six months of 2022.

Depreciation and amortization expenses increased $10.0 million, or 48%, to $30.7 million for the three months ended June 30, 2023, compared with $20.7 million during the same period in the prior year.

For the six months ended June 30, 2023, these expenses increased $20.7 million, or 50%, to $61.9 million, compared with $41.2 million in the same period in the prior year.

The increase in both periods was due primarily to the Acquisition on July 25, 2022, and other capital expenditures.

Selling and distribution expenses increased $4.9 million, or 4%, to $139.2 million for the three months ended June 30, 2023, compared with $134.3 million during the same period in the prior year, primarily due to higher base salaries and incentive compensation expenses of $6.3 million, offset partially by a decrease in sales commissions of $3.0 million.

In addition, shipping and handling costs increased $1.8 million during the three months ended June 30, 2023 compared with the same period in the prior year.

For the six months ended June 30, 2023, selling and distribution expenses decreased $12.9 million, or 5%, to $268.0 million, compared with $280.9 million during the same period in 2022, primarily as a result of lower sales commissions and incentive compensation expenses of $21.1 million, offset partially by increased shipping and handling costs of $2.8 million and higher employee-related expenses of $2.1 million.

In addition, discretionary expenses related to travel and entertainment and advertising increased $1.4 million.

General and administrative expenses increased $2.4 million, or 9%, to $30.1 million for the three months ended June 30, 2023, compared with $27.7 million for the same period in the prior year, primarily due to an increase in employee-related expenses, most of which relates to incentive compensation.

This increase was offset partially by a decrease in professional fees during the three months ended June 30, 2023 compared with the same period in the prior year.

For the six months ended June 30, 2023, general and administrative expenses increased $2.8 million, or 5%, to $56.6 million, compared with $53.8 million during the same period in 2022.

The increase was primarily the result of higher employee-related expenses and professional fees.

For the three months ended June 30, 2023, other (income) expense, net, was $1.3 million of income.

For the three months ended June 30, 2022, other (income) expense was insignificant.

For the six months ended June 30, 2023 and 2022, other (income) expense, net, was $1.6 million and $2.1 million of income, respectively.

Other income for the three months ended June 30, 2023, as well as for the six months ended June 30, 2023 and 2022, was primarily comprised of earn-out income related to a previous asset sale in our Wood Products segment.

Income From Operations

Income from operations decreased $278.0 million to $127.6 million for the three months ended March 31, 2023, compared with $405.6 million for the three months ended March 31, 2022.

Income from operations decreased $107.1 million to $190.0 million for the three months ended June 30, 2023, compared with $297.1 million for the three months ended June 30, 2022.

Income from operations decreased $385.1 million to $317.6 million for the six months ended June 30, 2023, compared with $702.7 million for the six months ended June 30, 2022.

Wood Products.

Segment income decreased $120.7 million to $69.4 million for the three months ended March 31, 2023, compared with $190.1 million for the three months ended March 31, 2022.

Segment income decreased $50.1 million to $104.0 million for the three months ended June 30, 2023, compared with $154.1 million for the three months ended June 30, 2022.

The decrease in segment income was due primarily to lower plywood sales prices.

In addition, segment income was negatively impacted by an increase in depreciation and

amortization expense related to the Acquisition.

These decreases in segment income were offset partially by higher plywood sales volumes and higher EWP sales prices, as well as lower wood fiber costs.

For the six months ended June 30, 2023, segment income decreased $170.8 million to $173.4 million from $344.2 million for the six months ended June 30, 2022.

The decrease in segment income was due primarily to lower plywood sales prices and lower EWP sales volumes.

In addition, segment income was negatively impacted by higher per-unit conversion costs and an increase in depreciation and amortization expense of $10.7 million related to the Acquisition.

These decreases in segment income were offset partially by higher EWP sales prices and higher plywood sales volumes, as well as lower OSB costs (used in the manufacture of I-joists).

In addition, segment income was negatively impacted by an increase in depreciation and amortization expense related to the Acquisition.

These decreases in segment income were offset partially by higher EWP sales prices and higher plywood sales volumes, as well as lower wood fiber costs.

Building Materials Distribution.

Segment income decreased $156.2 million to $69.7 million for the three months ended March 31, 2023, from $225.9 million for the three months ended March 31, 2022.

The decline in segment income was driven by a gross margin decrease of $177.3 million, resulting primarily from lower margins on commodity products and lower sales volumes, offset partially by decreased selling and distribution expenses of $20.3 million.

Unallocated corporate expenses increased $1.1 million to $11.5 million for the three months ended March 31, 2023, from $10.4 million for the same period in the prior year.

The increase was due primarily to an increase in professional fees.

Segment income decreased $55.7 million to $98.6 million for the three months ended June 30, 2023, from $154.3 million for the three months ended June 30, 2022.

The decline in segment income was driven by a gross margin decrease of $49.8 million, resulting from lower margins on EWP and general line products, offset partially by margin improvements on commodity products.

In addition, selling and distribution expenses increased $3.9 million.

For the six months ended June 30, 2023, segment income decreased $212.0 million to $168.2 million from $380.2 million for the six months ended June 30, 2022.

The decline in segment income was driven by a gross margin decrease of $227.2 million, resulting primarily from gross margin declines on commodity and EWP products and lower sales volumes across all product lines, offset partially by decreased selling and distribution expenses of $16.5 million.

Unallocated corporate expenses increased $1.3 million to $12.6 million for the three months ended June 30, 2023, from $11.3 million for the same period in the prior year.

The increase was primarily due to higher employee-related expenses, most of which relate to incentive compensation.

For the six months ended June 30, 2023, unallocated corporate expenses increased $2.4 million to $24.1 million from $21.7 million for the six months ended June 30, 2022.

The increase was primarily due to higher employee-related expenses.

Interest Income.

Interest income increased $9.6 million to $9.7 million for the three months ended March 31, 2023, from $0.1 million for the three months ended March 31, 2022.

The increase was due primarily to higher interest rates on cash equivalents and increases in the average balances of cash equivalents.

Interest income increased $10.1 million to $11.5 million for the three months ended June 30, 2023, from $1.4 million for the three months ended June 30, 2022.

For the six months ended June 30, 2023, interest income increased $19.7 million to $21.2 million from $1.5 million for the six months ended June 30, 2022.

The increase in both periods was due primarily to higher interest rates on cash equivalents and increases in the average balances of cash equivalents.

Change in fair value of interest rate swaps.

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Income Tax Provision

For the three months ended March 31, 2023 and 2022, we recorded $33.3 million and $98.9 million, respectively, of income tax expense and had an effective rate of 25.6% and 24.6%, respectively.

For both periods, 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, 2023, we recorded $49.4 million and $82.7 million, respectively, of income tax expense and had an effective rate of 25.3% and 25.4%, respectively.

For the three and six months ended June 30, 2022, we recorded $73.9 million and $172.8 million, respectively, of income tax expense and had an effective rate of 25.3% and 24.9%, respectively.

For all periods, the primary reason for the difference between the federal and statutory income tax rate of 21% and the effective tax rate was the effect of state taxes.

Liquidity and Capital Resources

We ended first quarter 2023 with $1,000.7 million of cash and cash equivalents and $444.6 million of debt.

At March 31, 2023, we had $1,396.7 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

Further descriptions of our cash sources and uses for the three month comparative periods are noted below.

We ended second quarter 2023 with $1,080.9 million of cash and cash equivalents and $444.8 million of debt.

At June 30, 2023, we had $1,476.8 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

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 2023 from cash on hand and, if necessary, borrowings under our revolving credit facility.

We expect to fund our seasonal and intra-month working capital requirements in the remainder of 2023 from cash on hand and, if necessary, borrowings under our revolving credit facility.

Sources and Uses of Cash

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Below is a discussion of our sources and uses of cash for operating activities, investing activities, and financing activities.

Three Months Ended

Six Months Ended

Net cash provided by operations $ 290,218 $ 436,056

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Operating Activities

For the three months ended March 31, 2023, our operating activities generated $48.0 million of cash, compared with $198.9 million of cash generated in the same period in 2022.

For the six months ended June 30, 2023, our operating activities generated $290.2 million of cash, compared with $436.1 million of cash generated in the same period in 2022.

The $145.8 million decrease in cash provided by operations was due primarily to a decrease in income from operations, offset partially by a lesser year-over-year increase in working capital and a decrease in cash paid for taxes, net of refunds, of $102.5 million.

Working capital increased $117.7 million during the three months ended March 31, 2023, compared with a $217.8 million increase for the same period in the prior year.

Working capital increased $60.2 million during the six months ended June 30, 2023, compared with a $152.6 million increase for the same period in the prior year.

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.

The increase in working capital during both periods was primarily attributable to higher receivables and inventories, offset by an increase in accounts payable and accrued liabilities.

The increases in receivables in both periods primarily reflect increased sales of approximately 26% and 49%, comparing sales for the months of March 2023 and 2022 with sales for the months of December 2022 and 2021, respectively.

Inventories increased during the three months ended March 31, 2023 in preparation for the spring building season.

During the three months ended March 31, 2022 inventories increased primarily due to increased cost of inventory purchased for resale and higher production costs for our manufactured products.

The increase in accounts payable and accrued liabilities as of March 31, 2023 was related to the increase in inventories, offset partially by employee incentive compensation payouts made during the quarter and lower accrued rebates.

The increase in accounts payable and accrued liabilities as of March 31, 2022 was related to the increase in inventories and higher accrued rebates, offset partially by employee incentive compensation payouts made during first quarter 2022.

The increases in receivables in both periods primarily reflect increased sales of approximately 41% and 25%, comparing sales for the months of June 2023 and 2022 with sales for the months of December 2022 and 2021, respectively.

Inventories increased during the six months ended June 30, 2023 due to seasonally higher inventory purchases in our BMD segment in preparation for the summer building season.

However, our Wood Products segment inventories decreased during the six months ended June 30, 2023 due to improved demand compared to fourth quarter 2022.

During the six months ended June 30, 2022 inventories increased primarily due to increased cost of inventory purchased for resale on EWP and general line products and higher production costs for our manufactured products, offset partially by decreased costs for commodity products.

The increase in accounts payable and accrued liabilities as of June 30, 2023 was related to the increase in inventories in our BMD segment and extended terms offered by certain BMD vendors, offset partially by employee incentive compensation payouts made during the period.

The increase in accounts payable and accrued liabilities as of June 30, 2022 was related to the increase in inventories and higher accrued rebates.

Investment Activities

During the three months ended March 31, 2023 and 2022, we used $30.1 million and $17.4 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.

During the three months ended March 31, 2022, we received $2.5 million of earn-out income related to a previous asset sale in our Wood Products segment.

During the six months ended June 30, 2023 and 2022, we used $68.3 million and $40.8 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.

During the six months ended June 30, 2023 and 2022, we received $1.0 million and $2.5 million, respectively, of earn-out income related to a previous asset sale in our Wood Products segment.

We expect capital expenditures in 2023 to total approximately $120 million to $140 million.

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Financing Activities

During the three months ended March 31, 2023, our financing activities used $16.1 million of cash, including $8.3 million for common stock dividend payments, $5.9 million of tax withholding payments on stock-based awards, and $1.5

million for the repurchase of 24,727 shares of our common stock.

During the three months ended March 31, 2023, we did not borrow under our revolving credit facility, and therefore have no borrowings outstanding on the facility as of March 31, 2023.

During the three months ended March 31, 2022, our financing activities used $10.3 million of cash, including $5.9 million for common stock dividend payments and $3.9 million of tax withholding payments on stock-based awards.

During the three months ended March 31, 2022, we did not borrow under our revolving credit facility.

During the six months ended June 30, 2023, our financing activities used $141.3 million of cash, including $133.0 million for common stock dividend payments, $5.9 million of tax withholding payments on stock-based awards, and $1.5 million for the repurchase of 25,678 shares of our common stock.

During the six months ended June 30, 2023, we did not borrow under our revolving credit facility and therefore have no borrowings outstanding on the facility as of June 30, 2023.

During the six months ended June 30, 2022, our financing activities used $114.0 million of cash, including $109.3 million for common stock dividend payments and $3.9 million of tax withholding payments on stock-based awards.

During the six months ended June 30, 2022, 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, material cash requirements, 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.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Form 10-K.

As of March 31, 2023, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2022.

As of June 30, 2023, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2022.

Note 9, Debt, and Note 17, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8.

Financial Statements and Supplementary Data" in our 2022 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 March 31, 2023, there have been no material changes to the guarantees disclosed in our 2022 Form 10-K.

As of June 30, 2023, there have been no material changes to the guarantees disclosed in our 2022 Form 10-K.

Seasonal Influences

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Seasonally cold weather increases costs, especially energy consumption costs, at most of our manufacturing facilities.

As of April 30, 2023, we had approximately 6,660 employees.

As of July 23, 2023, we had approximately 6,820 employees.

Approximately 20% of these employees work pursuant to collective bargaining agreements.

As of April 30, 2023, we had ten collective bargaining agreements.

One agreement covering approximately 80 employees at our Canadian EWP facility expired on December 31, 2022, but the terms and conditions of this agreement remain in effect pending negotiation of a new agreement.

We may not be able to renew this agreement or may renew it on terms that are less favorable to us than the current agreement.

As of July 23, 2023, we had ten collective bargaining agreements.

Five agreements covering approximately 470 employees at our Elgin plywood plant, Kettle Falls plywood plant, and Woodinville BMD facility are set to expire on May 31, 2024, but the terms and conditions of these agreements will remain in effect after expiration 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.

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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 March 31, 2023, there have been no material changes to financial market risks disclosed in our 2022 Form 10-K.

As of June 30, 2023, there have been no material changes to financial market risks disclosed in our 2022 Form 10-K.

Environmental

As of March 31, 2023, there have been no material changes to environmental issues disclosed in our 2022 Form 10-K.

As of June 30, 2023, there have been no material changes to environmental issues disclosed in our 2022 Form 10-K.

For additional information, see Environmental in "Item 7.

6 unchanged sentences

Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Form 10-K.

At March 31, 2023, there have been no material changes to our critical accounting estimates from those disclosed in our 2022 Form 10-K.

At June 30, 2023, there have been no material changes to our critical accounting estimates from those disclosed in our 2022 Form 10-K.

New and Recently Adopted Accounting Standards

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis