What changed in this filing

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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-21 · 67 added, 48 removed, 230 unchanged (33% of the section changed)

7 unchanged sentences

Therefore, our profitability with respect to these commodity products depends, in significant part, on effective facilities maintenance programs, and on managing our cost structure, particularly raw materials and labor, which represent the largest components of our operating costs.

Commodity wood product prices have historically been 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.

Commodity wood product prices have historically been volatile in response to economic uncertainties, industry operating rates, supply-related disruptions, transportation constraints or disruptions, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns.

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 in the U.S.

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

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

Our wood chips are primarily sold to paper mills in close proximity to our operations which convert the chips into wood pulp.

Periods of high output from wood-based operations, closure of paper mills in the regions that we operate, declines in demand for paper grades that utilize our chips, or substitution of our chips with other recycled fiber sources, can negatively affect the balance of supply and demand for chips.

An oversupply of chips has a negative impact on our chip price realizations and profitability.

We have very limited control of the foregoing, and as a result, our profitability and cash flow may fluctuate materially in response to changes in the supply and demand balance for our primary products.

We have very limited control of the preceding, and as a result, our profitability and cash flow may fluctuate materially in response to changes in the supply and demand balance for our primary products.

Our industry is highly competitive.

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

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

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

Competitive factors in our industry include pricing and availability of product, service and delivery capabilities, ability to assist customers with problem-solving, extension of credit terms, customer relationships, geographic coverage, and breadth of product offerings.

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In addition, certain suppliers to our distribution business also sell and distribute their products directly to our customers.

Additional manufacturers of products distributed by us may elect to sell and distribute directly to our retail customers in the future or enter into exclusive supply arrangements with other distributors.

Additional manufacturers of products distributed by us may elect to sell and distribute directly to our dealer or retail customers in the future or enter into exclusive supply arrangements with other distributors.

Finally, we may not be able to maintain our costs at a level sufficiently low for us to compete effectively.

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As the use of these alternatives grows, demand for our products may decline.

Our principal manufactured products are also subject to substitution from other wood-based products, such as EWP facing competition from numerous dimension lumber producers and other strand-based EWP that we do not produce, or plywood losing further market share to OSB in residential and non-residential applications.

In addition, we have seen an increase in floor truss capacity by a number of our dealer customers, partially due to the limited supply of I-joists over the last two years.

plywood losing further market share to OSB in residential and non-residential applications.

In addition, we have seen an increase in floor truss capacity by some of our dealer customers, partially due to the limited supply of I-joists over the last few years.

The expansion of truss manufacturing could negatively impact our I-joist market share and net sales prices.

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Operational Risks

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

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

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

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

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

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

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

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

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

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

For additional information on our cybersecurity risk management, strategy, and governance, see "Item 1C.

Cybersecurity" of this Form 10-K.

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

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

• fires, floods, earthquakes, hurricanes, or other catastrophes, which may increase in frequency, severity and duration due to the physical impacts of climate change;

• unscheduled maintenance outages;

• fires, floods, earthquakes, hurricanes, extreme weather, or other catastrophes, which may increase in frequency, severity and duration due to the physical impacts of climate change;

• unscheduled maintenance outages, including the inability to obtain equipment, parts, and supplies necessary to complete repairs;

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

• other operational problems;

• ecoterrorism or threats of ecoterrorism.

• internal or external security threats.

Any downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures.

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Because approximately 66% of our Wood Products sales in 2023 were to our BMD business, a material disruption at our Wood Products facilities would also negatively affect our BMD business.

We are therefore exposed to a larger extent to the risk of disruption to our Wood Products manufacturing facilities due to our vertical integration and the resulting impact on our BMD business.

We are, therefore, exposed to a larger extent to the risk of disruption to our Wood Products manufacturing facilities due to our integration and the resulting impact on our BMD business.

In addition, a number of our suppliers are subject to the manufacturing facility disruption risks noted above.

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

Declining demand for residual byproducts could negatively affect our financial results and operations.

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

Our wood chips are primarily sold to paper mills in close proximity to our operations which convert the chips into wood pulp.

An oversupply of chips has a negative impact on our chip price realizations and profitability, which impacts the financial results of our mills.

In addition, if declines in demand for our chips continue and we cannot find alternative consumers for our chips, we may be forced to curtail any impacted mills.

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

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As of February 4, 2024, we had ten collective bargaining agreements.

One agreement covering approximately 90 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.

Five agreements covering approximately 460 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.

One agreement covering approximately 40 employees at our Vancouver BMD facility is set to expire on December 31, 2024, but the terms and conditions of this agreement will remain in effect after expiration, pending negotiation of a new agreement.

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

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

Supply chains, including key products purchased from our suppliers, may be disrupted during a global health pandemic.

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

Supply chains, including key products purchased from our suppliers, may be disrupted due to labor shortages during elevated housing demand or a global health pandemic.

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

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

1 unchanged sentence

Our business depends on the transportation of a large number of products via rail or truck.

In Wood Products, we rely on third parties for inbound receipt of raw materials and outbound movements of finished goods.

In Wood Products, we rely on third parties for inbound receipt of raw materials and outbound movement of finished goods.

In BMD, we rely primarily on third parties for inbound receipt of the products we resell and manage the outbound movement of products to our customers with a combination of internal and external resources.

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Our primary source of wood fiber is logs.

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

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

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

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Lumber input costs are subject to similar commodity-based volatility characteristics noted above for OSB.

Our strategy includes pursuing acquisitions.

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

We may not be able to integrate the operations of acquired businesses, including those of Coastal Plywood, which we acquired in July 2022 and which include mill operations in Havana, Florida, and Chapman, Alabama, in an efficient and cost-effective manner or without disruption to our existing operations or may not be able to realize expected benefits.

Our strategy includes both organic growth and pursuing acquisitions, which we may be unable to execute efficiently and effectively.

Organic growth, such as greenfield investments, involves higher fixed costs and significant risks and uncertainties, including some that may not be identifiable or resolvable in due diligence.

Subsequent to making the investment, the performance of the new assets is subject to economic uncertainties, as described in our other risk factors, as well as difficulties obtaining labor, customers, or suppliers.

In addition, organic growth investments may divert management's attention and

resources from existing operations.

Our failure to effectively expand our product and service offerings in our recently announced greenfield distribution centers in Texas and South Carolina or future projects, realize expected benefits, or manage other consequences of our organic growth could adversely affect our financial condition, operating results, and cash flows.

In addition, we may not be able to integrate the operations of our recently acquired businesses, which include Brockway-Smith Company (BROSCO) and Coastal Plywood, in an efficient and cost-effective manner or without disruption to our existing operations or may not be able to realize expected benefits.

Acquisitions involve significant risks and uncertainties, including some that may not be identifiable or resolvable in due diligence.

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

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

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

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

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

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

We invest resources to update and improve our information technology systems and software platforms.

Should our investments not succeed, or if delays or other issues with new or existing technology systems and software platforms disrupt our operations, our business could be harmed.

We rely on our network infrastructure, enterprise resource planning (ERP) system, data hosting, public cloud and software-as-a-service providers, and technology systems for many of our development, marketing, operational, support, sales, accounting and financial reporting activities.

We are continually investing resources to update and improve these systems and environments in order to meet existing needs, as well as the growing and changing requirements of our business and customers.

If we experience prolonged delays or unforeseen difficulties in updating and upgrading our systems and architecture, we may experience outages and may not be able to deliver certain offerings or develop new offerings and enhancements that we need to remain competitive.

Improvements, upgrades, and, to a greater extent, system conversions, are often complex, costly and time-consuming.

In addition, such improvements can be challenging to integrate with our existing technology systems or may uncover problems with our existing technology systems.

Unsuccessful implementation of hardware or software updates and improvements could result in outages, disruption in our business operations, loss of revenue or damage to our reputation.

We may be unable to successfully pursue our long-term growth strategy related to innovation and digital technology.

We are committed to pursuing innovation with technology to search out revenue-generating, cost-reducing, and risk-mitigating opportunities.

New technological developments, including the development of artificial intelligence, are rapidly evolving.

Our long-term strategy depends, in part, on our ability to identify and adapt to evolving technological trends in order to leverage potential benefits for us and our vendor and customer partners.

Slow-moving initiatives may cause us to fall behind competitors in identifying value in new markets, creating relevant business insights, and identifying cost-cutting capabilities.

There is also a risk that changes in our business model due to a push into innovative products, new business markets, and digitalization are not sufficiently understood and managed, leaving us exposed to unknown risks.

In addition, we may not be successful in implementing evolving technologies and may spend resources on projects that ultimately are unsuccessful or yield a low return on the amount invested.

Without effective implementation, there may be credibility loss with both internal and external audiences, as well as lost market opportunities, which could adversely affect our financial condition, operating results, and cash flows.

Financial Risks

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

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

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

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In recent years, we have completed a number of capital investments;

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

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

including the expansion of our EWP capacity, the replacement or rebuild of veneer dryers and log utilization centers (or improvements to other manufacturing equipment), purchasing and leasing new or additional land and warehouse space for expansions related to our distribution centers and door and millwork facilities, and increasing our outdoor storage acreage.

These organic growth investments, along with recent acquisitions, have increased our base level of capital expenditures needed for the replacement and maintenance of our asset base.

In addition, the recent inflationary environment has increased the cost of machinery and equipment needed for our operations.

Ineffective deployment of increased capital and not maintaining our cost leverage could negatively affect our profitability if our revenue and operating results do not offset our incremental fixed costs.

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

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We cannot guarantee that our business will generate sufficient cash flows from operations or that future borrowings will be available to us at a cost or in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.

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

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

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

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There is increasing concern that climate change will cause significant changes in temperatures and weather patterns around the globe, an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality.

These events could adversely impact both the availability of raw materials required for

manufacture of our products and the delivery of products to our distribution facilities.

These events could adversely impact both the availability of raw materials required for the manufacture of our products and the delivery of products to our distribution facilities.

They could disrupt the operation of our supply chain and the productivity of our suppliers, increase our production and transportation costs, impose capacity restraints, and impact the purchases of our products.

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As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.

In the United States, it is possible that some form of new or additional legislation and regulations will be enacted at the federal level to reduce or mitigate the impact of climate change.

If we, or our suppliers, are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience increased costs for energy, production, transportation, and raw materials, increased costs related to environmental monitoring and reporting, increased capital expenditures, or increased insurance premiums and deductibles, which could adversely impact our operations.

In the United States, it is possible that some form of new or additional legislation and regulations will be enacted at the federal or state level to reduce or mitigate the impact of climate change.

If we, or our suppliers, are required to comply with these laws and regulations, we may experience increased costs for energy, production, transportation, and raw materials, increased costs related to environmental monitoring and reporting, increased capital expenditures, or increased insurance premiums and deductibles, which could adversely impact our operations.

Inconsistency of legislation and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations.

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As an owner and operator of real estate, we may be liable under environmental laws for the cleanup of past and present spills and releases of hazardous or toxic substances on or from our properties and operations.

We may also be contractually obligated to indemnify third parties under environmental laws for the cleanup of past spills and releases of hazardous or toxic substances for properties which we no longer own and operate.

We may also be contractually obligated to indemnify third parties under environmental laws for the cleanup of past spills and releases of hazardous or toxic

substances for properties which we no longer own and operate.

We could be found liable under these laws whether or not we knew of, or were responsible for, the presence of such substances.

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

The enactment of tax reform legislation could adversely impact our financial position and results of operations.

Various levels of government are increasingly focused on tax reform and other legislative actions to increase tax revenue.

Such proposed changes, as well as regulations and legal decisions interpreting and applying these changes, may have significant impacts on our effective tax rate, cash tax expense, and net deferred tax attributes in future periods.

The nature of our business exposes us to product liability, product warranty, casualty, manufacturing and construction defects, and other claims.

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In addition, we are exposed to potential claims arising from the conduct of our employees, and homebuilders and their subcontractors, for which we may be contractually liable.

Although we currently maintain what we believe to be

suitable and adequate insurance in excess of our self-insured amounts, there can be no assurance that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities.

Although we currently maintain what we believe to be suitable and adequate insurance in excess of our self-insured amounts, there can be no assurance that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities.

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

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The changes frequently appear to occur without regard to the operating performance of the affected companies.

Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.

Hence, the price of our common stock could fluctuate based on factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.

We may not pay cash dividends in the future.

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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

UNRESOLVED STAFF COMMENTS

We have no unresolved comments from the SEC staff.

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

What changed 10-K

Item 1A. Risk Factors