What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-20 · 114 added, 131 removed, 456 unchanged (35% of the section changed)

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We have a broad base of customers, which includes a diverse mix of dealers, home improvement centers, leading wholesalers, specialty distributors, and industrial converters.

Our Wood Products and BMD segments are integrated from wood fiber procurement through distribution.

Our Wood Products and BMD

segments are integrated from wood fiber procurement through distribution.

During 2024, approximately 70% of our Wood Products segment sales, or approximately 75% and 50% of our Wood Product segment's EWP and plywood sales volumes, respectively, were to our BMD segment.

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In our Wood Products segment, income decreased by $105.7 million to $231.5 million for the year ended December 31, 2024, from $337.1 million in 2023.

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

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

These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes.

In our BMD segment, income decreased $291.3 million to $335.8 million for the year ended December 31, 2023, from $627.1 million for the year ended December 31, 2022, driven by a gross margin decrease of $276.0 million, resulting primarily from gross margin declines on EWP and commodity products and lower sales volumes across all product lines compared with 2022.

The decrease in segment income was due primarily to lower EWP and plywood sales prices, as well as higher wood fiber and conversion costs.

These decreases were offset partially by higher EWP sales volumes.

In our BMD segment, income decreased $32.4 million to $303.4 million for the year ended December 31, 2024, from $335.8 million for the year ended December 31, 2023.

The decline in segment income was driven by increased selling and distribution expenses and depreciation and amortization expense of $37.4 million and $17.2 million, respectively.

These decreases in segment income were offset partially by a gross margin increase of $15.1 million, resulting primarily from improved gross margins on general line products, offset partially by lower gross margins on EWP and commodity products.

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

On October 2, 2023, our wholly-owned subsidiary, Boise Cascade Building Materials Distribution, L.L.C.

(BMD) completed the previously announced acquisition of Brockway-Smith Company (BROSCO), a wholesale distributor specializing in doors and millwork, pursuant to the Agreement and Plan of Merger, dated August 22, 2023 (Merger Agreement), by and among BMD, Firepit Merger Sub, Inc., a wholly-owned subsidiary of BMD (the Merger Sub), BROSCO and the representative of the BROSCO stockholders.

On the terms and subject to the conditions set forth in the Merger Agreement, on October 2, 2023, Merger Sub merged with and into BROSCO, with BROSCO surviving the merger as a wholly-owned subsidiary of BMD (the BROSCO Acquisition).

The purchase price of the BROSCO Acquisition was $162.8 million, net of cash acquired, and inclusive of estimated working capital at closing of approximately $51 million, which is subject to post-closing adjustments.

We funded the BROSCO Acquisition and related costs with cash on hand.

These facilities expanded our door and millwork business into the Northeast U.S.

We ended 2024 with $713.3 million of cash and cash equivalents and $450.0 million of debt.

At December 31, 2024, we had $395.7 million of unused committed bank line availability.

We used $48.8 million of cash during the year ended December 31, 2023, as cash provided by operations was offset by capital spending, funding the BROSCO Acquisition and dividends paid on our common stock.

We used $236.3 million of cash during the year ended December 31, 2024, as cash provided by operations was offset by capital spending, dividends paid on our common stock, and treasury stock purchases.

A further description of our cash sources and uses for the comparative periods are discussed in "Liquidity and Capital Resources" below.

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Residential construction, particularly new single-family construction, is the key demand driver for the products we manufacture and distribute.

Recent industry forecasts for 2024 U.S.

housing starts are generally consistent with actual housing starts of 1.42 million in 2023, as reported by the U.S.

Census Bureau.

Despite recent declines in mortgage rates and homebuilders responding with various mechanisms to attract buyers, home affordability remains a challenge for consumers.

However, with a resilient economy and elevated mortgage rates, which limits existing home inventory for sale, new residential construction is expected to remain an important source of supply for homebuyers.

Within new residential construction, the recent reduction in rates and potential for future rate reductions has created optimism that single-family starts will reflect year-over-year growth.

However, there is reservation that multi-family starts may pull back from recent record highs due to capital costs for developers combined with cooling rents and elevated supply.

Regarding home improvement spending, the age of U.S.

housing stock and elevated levels of homeowner equity have provided a favorable backdrop for repair-and-remodel spending.

In 2023, year-over-year growth rates in renovation spending moderated due to economic uncertainty and higher borrowing costs.

While home improvement spending is expected to remain robust compared to history, recent industry forecasts project mid-single-digit declines in 2024.

Ultimately, macroeconomic factors, the level and expectations for mortgage rates, home affordability, home equity levels, and other factors will likely influence the near-term demand environment for the products we manufacture and distribute.

As reported by the U.S.

Census Bureau, housing starts were 1.37 million in 2024.

Current industry forecasts for U.S.

housing starts are approximately 1.35 million in 2025.

Single-family starts in 2024 outpaced 2023 levels by 7%, and are expected to remain at approximately 1.0 million, despite the affordability challenges consumers are facing in the current rate environment.

Multi-family starts declined sharply in 2024 and are expected to continue to face headwinds in 2025 due to prohibitive capital costs for developers, combined with elevated levels of multi-family unit completions in 2023 and 2024.

We expect 2025 to reflect modest growth in home improvement spending, as the age of U.S.

housing stock, elevated levels of homeowner equity, and recent improvement in existing home sales will provide a favorable backdrop for repair-and-remodel spending.

Ultimately, macroeconomic factors, the level and expectations for mortgage rates, home affordability, home equity levels, home size, levels of new and existing home inventory for sale, and other factors will influence the near-term demand environment for the products we manufacture and distribute.

As a manufacturer of certain commodity products, we have sales and profitability exposure to declines in commodity product prices and rising input costs.

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Future product pricing, particularly commodity products pricing and input costs, may be 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.

In addition, changes in laws or government regulations, such as the imposition of tariffs, could impact our product pricing and input costs.

Factors That Affect Our Operating Results and Trends

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A portion of the building products we manufacture or distribute, including OSB, plywood, and lumber, are commodities that are widely available from other manufacturers or distributors, with prices and volumes determined frequently in an auction market based on participants' perceptions of short-term supply and demand factors.

At times, the price for any one or more of the products we produce or distribute may fall below our cash production or purchase costs, requiring us to either incur short-term losses on product sales or curtail production at one or more of our manufacturing facilities.

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.

At times, the price for any one

or more of the products we produce or distribute may fall below our cash production or purchase costs, requiring us to either incur short-term losses on product sales or curtail production at one or more of our manufacturing facilities.

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

Composite structural panel and lumber prices have been volatile historically.

The following table provides changes in the average composite panel, including certain panel subcategories, and average composite lumber prices as reflected by Random Lengths, an industry publication, for the period noted below.

In addition to the year-over-year average price changes, 2022 was a year of exceptional price volatility when compared to historical results.

Year Ended December 31

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The level of housing starts is especially important to our results of operations.

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

Furthermore, changing demographics could impact product consumption and demand, including urbanization compounding issues around affordability, increasing importance of multi-family housing, declining size of single-family entry-level housing, increasing proportion of homes in warmer and/or coastal areas using slab-on-grade construction, reduced birthing statistics, and changing baby boomer needs freeing up housing capacity.

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

Furthermore, changing demographics could impact product consumption and demand, including urbanization compounding issues around affordability, increasing importance of multi-family housing, declining size of single-family entry-level housing, increasing proportion of homes using slab-on-grade construction, reduced birthing statistics, and changing baby boomer needs freeing up housing capacity.

In addition, EWP demand will be highly influenced by single-family housing starts.

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OSB accounted for approximately 6% of the aggregate amount of materials, labor, and other operating expenses (excluding depreciation) for our Wood Products segment in 2024.

OSB is a commodity, and prices have been historically 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.

OSB is a commodity, and 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, trade policies, inventory levels in various distribution channels, and seasonal demand patterns.

Wood fiber also includes, to a lesser extent than OSB, lumber purchased from third parties for I-joist production at our Canadian EWP facility and for production at our laminated beam plant in Idaho.

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During 2024, total U.S.

housing starts and single-family housing starts decreased 9% and 6%, respectively, compared with 2022.

For the year ended December 31, 2023, average composite lumber and average composite panel prices were 47% and 32% lower, respectively, compared with the same period in the prior year, as reflected by Random Lengths composite lumber and panel pricing.

These decreases in composite commodity pricing impacted our sales prices in both of our segments, as noted below.

housing starts decreased 4%, while single-family housing starts increased 7%, compared with 2023.

For the year ended December 31, 2024, average composite lumber and average composite panel prices were 3% lower and 1% higher, respectively, compared with 2023, as reflected by Random Lengths composite lumber and panel pricing.

Wood Products.

During the year ended December 31, 2024, sales, including sales to our BMD segment, decreased $100.3 million, or 5%, to $1,832.3 million from $1,932.6 million in 2023.

The decrease in sales was driven by lower plywood sales prices of 29%, resulting in decreased sales of $242.0 million.

In addition, lower sales prices for I-joists and LVL (collectively referred to as EWP) of 4% and 2%, respectively, resulted in decreased sales of $19.8 million and $9.7 million, respectively.

Lower sales volumes for I-joists and LVL of 4% and 1%, respectively, resulted in decreased sales of $20.9 million and $6.7 million, respectively.

EWP sales volumes decreased due to a decline in housing starts.

I-joist volumes were also impacted by the availability of product substitutes and construction methods in certain geographies that reduce the wood floor opportunity.

In addition, other sales, including byproducts and laminated beams, decreased sales by $16.1 million.

These decreases were offset partially by higher sales volumes for plywood of 21%, resulting in increased sales of $146.4 million.

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

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

The decrease in sales was driven by lower sales prices of 7% for both LVL and I-joists (collectively referred to as EWP), resulting in decreased sales of $41.4 million and $32.4 million, respectively.

Plywood sales volumes and sales prices both decreased 5%, resulting in decreased sales of $30.4 million and $25.4 million, respectively.

Plywood sales volumes decreased as we shifted a higher proportion of our internally produced veneer into EWP production, due to increased demand for EWP.

In addition, other sales, including lumber and residual byproducts, decreased $44.7 million.

These decreases were offset partially by higher sales volumes for LVL and I-joists of 11% and 7%, respectively, resulting in increased sales of $59.7 million and $30.4 million, respectively.

Building Materials Distribution.

During the year ended December 31, 2023, sales decreased $1,464.9 million, or 19%, to $6,178.7 million from $7,643.6 million in 2022.

Compared with the prior year, the overall decrease in sales was driven by sales price and sales volume decreases of 16% and 3%, respectively.

By product line, commodity sales decreased 32%, or $1,096.6 million, general line product sales decreased 4%, or $99.3 million, and sales of EWP (substantially all of which is sourced through our Wood Products segment) decreased 16%, or $269.0 million.

During the year ended December 31, 2024, sales decreased $12.2 million, or less than 1%, to $6,166.5 million from $6,178.7 million in 2023.

Compared with the prior year, the overall decrease in sales was driven by a sales price decrease of 3%, offset partially by a sales volume increase of 3%.

Excluding the impact of the BROSCO acquisition on October 2, 2023, sales would have decreased by 2%.

By product line, commodity sales decreased 5%, or $128.0 million, general line product sales increased 7%, or $172.3 million, and sales of EWP (substantially all of which is sourced through our Wood Products segment) decreased 4%, or $56.5 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) decreased $1,063.2 million, or 16%, to $5,409.3 million for the year ended December 31, 2023, compared with $6,472.5 million during 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 Coastal Plywood acquisition.

These increases were offset partially by lower per-unit costs of OSB (used in the manufacture of I-joists) and logs of approximately 9% and 4%, respectively, compared with 2022.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 770 basis points, which was due primarily to lower plywood and EWP 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 2022.

However, the BMD segment MLO rate increased 80 basis points compared to 2022 due primarily to lower margin percentages on EWP.

Depreciation and amortization expenses increased $30.9 million, or 30%, to $132.5 million for the year ended December 31, 2023, compared with $101.6 million during the prior year.

The increase was due primarily to the Coastal Plywood acquisition on July 25, 2022, accelerated depreciation of $6.2 million in fourth quarter 2023 for the indefinite curtailment of lumber production at our Chapman, Alabama facility, as well as other capital expenditures.

These increases were offset partially by decreases in depreciation related to fully depreciated assets.

Selling and distribution expenses increased $6.2 million, or 1%, to $559.5 million for the year ended December 31, 2023, compared with $553.3 million for the prior year.

The increase was due primarily to higher employee-related expenses of $17.0 million and increased shipping and handling and occupancy costs of $5.2 million and $2.1 million, respectively.

These increases were offset partially by lower sales commissions of $19.5 million.

General and administrative expenses increased $10.6 million, or 10%, to $114.4 million for the year ended December 31, 2023, compared with $103.8 million for the prior year.

The increase was due primarily to higher employee-

related expenses, including base pay increases and incentive compensation of $7.3 million.

In addition, for the year ended December 31, 2023 we incurred $5.1 million of acquisition-related expenses for the acquisition of BROSCO, compared to $1.3 million incurred for the year ended December 31, 2022 for the acquisition of Coastal Plywood.

For the years ended December 31, 2023 and 2022 other (income) expense, net, was $1.9 million of income and $1.7 million of income, respectively.

In both periods other income primarily included earn-out income related to a previous asset sale in our Wood Products segment.

Materials, labor, and other operating expenses (excluding depreciation) decreased $15.7 million, or less than 1%, to $5,393.6 million for the year ended December 31, 2024, compared with $5,409.3 million during the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher EWP sales volumes, higher costs of OSB (used in the manufacture of I-joists), and increased labor costs compared with 2023.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 480 basis points, due primarily to lower EWP and plywood sales prices.

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, offset partially by an increase in purchased materials costs due to the BROSCO acquisition.

The BMD segment MLO rate decreased 30 basis points, driven by higher margin percentages on general line products, offset partially by lower margins on EWP compared with 2023.

Depreciation and amortization expense increased $11.6 million, or 9%, to $144.1 million for the year ended December 31, 2024, compared with $132.5 million during the prior year.

The increase was due primarily to the BROSCO acquisition and other capital expenditures.

These increases were offset partially by less accelerated depreciation recorded in 2024 than 2023 related to the indefinite curtailment of lumber production at our Chapman, Alabama facility.

Selling and distribution expenses, inclusive of the BROSCO acquisition, increased $35.4 million, or 6%, to $594.9 million for the year ended December 31, 2024, compared with $559.5 million for the prior year.

The increase was due primarily to higher employee-related expenses of $21.9 million, offset partially by decreased incentive compensation expense of $6.6 million.

Shipping and handling and occupancy costs both increased $2.5 million.

In addition, costs related to professional fees, travel and entertainment, and advertising increased $5.4 million.

General and administrative expenses decreased $12.1 million, or 11%, to $102.3 million for the year ended December 31, 2024, compared with $114.4 million for the prior year.

The decrease was primarily the result of lower incentive compensation of $9.5 million.

In addition, we incurred $5.1 million of acquisition-related expenses in the prior year for the BROSCO acquisition.

These decreases were offset partially by an increase in other employee-related expenses of $1.5 million.

Income From Operations

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For the year ended December 31, 2024, segment income decreased $105.7 million to $231.5 million from $337.1 million for the year ended December 31, 2023.

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

In addition, segment income was negatively impacted by an increase in depreciation and amortization expense related to the Coastal Plywood acquisition and accelerated depreciation of $6.2 million in fourth quarter 2023 for the indefinite curtailment of lumber production at our Chapman, Alabama facility.

These decreases in segment income were offset partially by lower wood fiber costs and higher plywood sales volumes.

The decrease in segment income was due primarily to lower EWP and plywood sales prices, as well as higher wood fiber and conversion costs.

These decreases in segment income were offset partially by higher EWP sales volumes.

Building Materials Distribution.

For the year ended December 31, 2024, segment income decreased $32.4 million to $303.4 million from $335.8 million for the year ended December 31, 2023.

The decline in segment income was driven by a gross margin decrease of $276.0 million, resulting primarily from gross margin declines on EWP and commodity products and lower sales volumes across all product lines compared with 2022.

In addition, general and administrative expenses increased $7.8 million, due partially to acquisition-related costs.

Depreciation and amortization expenses also increased $5.3 million due primarily to increased capital expenditures, as well as the BROSCO Acquisition.

Unallocated corporate expenses increased $4.2 million to $48.6 million for the year ended December 31, 2023, from $44.4 million for the year ended December 31, 2022.

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

The decline in segment income was driven by increased selling and distribution expenses and depreciation and amortization expense of $37.4 million and $17.2 million, respectively.

In addition, general and administrative expenses decreased $6.7 million, primarily due to $5.1 million of acquisition-related expenses in the prior year for the BROSCO acquisition.

Unallocated corporate expenses decreased $3.8 million to $44.8 million for the year ended December 31, 2024, from $48.6 million for the year ended December 31, 2023.

The decrease was due primarily to lower incentive compensation, offset partially by an increase in other employee-related expenses.

Interest Income.

Interest income increased $35.8 million to $48.1 million for the year ended December 31, 2023, from $12.3 million for the year ended December 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 decreased $9.0 million to $39.1 million for the year ended December 31, 2024, from $48.1 million for the year ended December 31, 2023.

The decrease was due primarily to lower average balances of cash equivalents.

Change in fair value of interest rate swaps.

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Income Tax Provision

For the years ended December 31, 2023 and 2022, we recorded $161.4 million and $288.7 million, respectively, of income tax expense and had an effective rate of 25.0% and 25.2%, respectively.

For the years ended December 31, 2024 and 2023, we recorded $125.4 million and $161.4 million, respectively, of income tax expense and had an effective rate of 25.0% for both periods.

Our rate is affected by recurring items, such as state income taxes, and discrete items that may occur in any given year but are not consistent from year to year.

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At December 31, 2024, we had $1,109.0 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

Our cash and cash equivalents decreased by $48.8 million during the year ended December 31, 2023, as cash provided by operations was offset by capital spending, funding the BROSCO Acquisition and dividends paid on our common stock, as further discussed below.

Our cash and cash equivalents decreased by $236.3 million during the year ended December 31, 2024, as cash provided by operations was offset by capital spending, dividends paid on our common stock, and treasury stock purchases, as further discussed below.

At December 31, 2024, our cash was invested in high-quality, short-term investments, which we record in "Cash and cash equivalents." The majority of our cash and cash equivalents is comprised of money market funds that are broadly diversified and invested in high-quality, short-duration securities, including U.S.

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• A $105.7 million decrease in income in our Wood Products segment and a $32.4 million decrease in income in our BMD segment.

See "Operating Results" above for a discussion on our results for 2023.

• A $23.6 million decrease in working capital during 2023, compared with a $41.0 million decrease in working capital during 2022.

Working capital is subject to cyclical operating needs, seasonal buying patterns for inventory purchased for resale and logs, the timing of the collection of receivables, and the timing of payment of payables and expenses.

See "Our Operating Results" above for a discussion on our results for 2024.

• A $94.8 million increase in working capital during 2024, compared with a $23.6 million decrease in working capital during 2023.

Working capital is subject to cyclical operating needs, seasonal buying patterns for inventory purchased for resale and logs, participation in early-buy programs with certain vendors, the timing of the collection of receivables, and the timing of payment of payables and expenses.

The increase in working capital in 2024 was primarily attributable to an increase in inventories and a decrease in accounts payable and accrued liabilities, offset partially by decreased receivables.

The increase in inventories was due primarily to weaker market conditions and participation in certain BMD vendors' early-buy programs in 2024, as well as recently added inventory for our door and millwork facilities in our BMD segment.

The decrease in accounts payable and accrued liabilities was primarily due to less purchasing activity as a result of decreased demand, as well as lower accrued incentive compensation.

The decrease in receivables primarily reflects decreased sales of approximately 5%, comparing sales for the month of December 2024 with sales for the month of December 2023.

The decrease in working capital in 2023 was primarily attributable to an increase in accounts payable and accrued liabilities and decreased inventories, offset partially by higher receivables.

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The increase in receivables in 2023 primarily reflects increased sales of approximately 7%, comparing sales for the month of December 2023 with sales for the month of December 2022.

The decrease in working capital in 2022 was primarily attributable to lower receivables, offset partially by an increase

in inventories and a decrease in accounts payable and accrued liabilities.

The decrease in receivables in 2022 primarily reflects decreased sales of approximately 24%, comparing sales for the month of December 2022 with sales for the month of December 2021.

Inventories increased in 2022 primarily due to higher production costs for our manufactured products, the acquisition of two plywood facilities, and decreased housing demand related to economic uncertainties.

The decrease in accounts payable and accrued liabilities in 2022 was related to the decrease in inventories in our BMD segment and lower accrued rebates as of December 31, 2022 as housing activity slowed at the end of 2022.

• A $2.4 million decrease in cash paid for income taxes, net of refunds.

During 2024, cash paid for taxes, net of refunds received was $130.6 million, compared to $133.0 million in 2023.

The decrease in cash paid for income taxes is primarily due to a decrease in income from operations.

The decrease in cash paid for income taxes is primarily due to timing of income tax payments.

Investment Activities

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Quality and efficiency projects include quality improvements, modernization, energy, and cost-saving projects.

Our 2023 capital spending includes spending for veneer-related projects at mills that support EWP production, spending related to new door and millwork facilities in Kansas City, Missouri, and Denver, Colorado, the build out and start up of a new distribution center in Marion, Ohio, and the purchase of distribution centers in West Palm Beach, Florida, and Modesto, California.

In addition, our capital spending includes initial funding for greenfield distribution centers in Texas and South Carolina.

In our Wood Products segment, our 2024 capital spending includes spending to convert a plywood layup line to a parallel laminated veneer line at our Chapman, Alabama veneer and plywood mill.

In addition, it includes spending on multi-year investment projects to add I-joist production capabilities at our Thorsby, Alabama EWP mill, as well as significant modernization projects at our Oakdale, Louisiana veneer and plywood mill.

In our BMD segment, our 2024 capital spending includes spending on the previously announced greenfield distribution centers in Texas and South Carolina.

In addition, it includes the purchase of previously leased distribution centers in Westfield, Massachusetts and Chicago, Illinois.

Purchases of property and equipment also included approximately $5 million for environmental compliance in 2024.

In addition, we used $162.8 million, net of cash acquired, for the BROSCO Acquisition.

These facilities expanded our door and millwork business into the Northeast U.S.

markets and enhance BMD's general line product mix.

During the year ended December 31, 2023, we received $1.0 million of earn-out income related to a previous asset sale in our Wood Products segment.

In addition, during the year ended December 31, 2024, we used $10.2 million of cash for acquisitions of businesses and facilities, which consisted of $3.4 million for post-transaction closing adjustments related to the BROSCO acquisition, as well as $6.8 million for acquired assets of door and millwork operations in Boise, Idaho and Lakeland, Florida.

For further discussion on these acquisitions, see Note 6, Acquisitions, of the Notes to Consolidated Financial Statements in "Item 8.

Financial Statements and Supplementary Data" of this Form 10-K.

Excluding potential acquisitions, we expect capital expenditures in 2025 to total approximately $220 million to $240 million.

We expect our capital spending in 2025 will be for business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

Our 2024 capital expenditures range includes spending on previously announced projects to add I-joist production capabilities at our Thorsby EWP mill and converting a plywood layup line to a parallel laminated veneer line at our Chapman, Alabama plywood facility.

At our Oakdale, Louisiana facility, multiple investment projects are planned over the next two years which include upgrade and redesign of the log utilization center, a new veneer dryer and press, and modification of an existing veneer dryer.

In addition, our 2024 capital expenditures range includes spending on the previously announced greenfield distribution centers in Texas and South Carolina in our BMD segment.

Our 2024 capital spending also includes approximately $10 million for environmental compliance projects.

Our 2025 capital expenditures range includes additional spending on the multi-year investments at our Thorsby EWP and Oakdale veneer and plywood mills, as well as our greenfield distribution centers in Texas and South Carolina, as discussed above.

In addition, we expect to spend approximately $4 million for environmental compliance in 2025.

This level of capital expenditures could increase or decrease as a result of several factors, including acquisitions, efforts to further 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.

During the year ended December 31, 2022, we used $515.2 million of cash for the acquisition of Coastal Plywood.

In addition, we used approximately $114.1 million of cash for purchases of property and equipment, which included business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

Quality and efficiency projects include quality improvements, modernization, energy, and cost-saving projects.

In 2022, purchases of property and equipment included approximately $4 million for environmental compliance.

During the year ended December 31, 2023, we used approximately $215.4 million of cash for purchases of property and equipment, which included business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

Purchases of property and equipment also included approximately $3 million for environmental compliance in 2023.

In addition, we used $162.8 million, net of cash acquired, for the BROSCO acquisition.

During the year ended December 31, 2023, we received $1.0 million of earn-out income related to a previous asset sale in our Wood Products segment.

Financing Activities

During 2023, our financing activities used $360.7 million of cash, including $346.5 million for common stock dividend payments, $6.4 million for the repurchase of 75,678 shares of our common stock, and $5.9 million of tax withholding payments on stock-based awards.

See "Dividends on Common Stock" below for further discussion of common stock dividend

payments and "Stock Repurchase Program" below for further discussion of stock repurchases.

During 2024, our financing activities used $436.8 million of cash, including $228.8 million in common stock dividend payments, $194.9 million for the repurchase of 1,513,095 shares of our common stock, and $11.1 million of tax withholding payments on stock-based awards.

See "Dividends on Common Stock" below for further discussion of common stock dividend payments and "Stock Repurchase Program" below for further discussion of stock repurchases.

During 2024, we did not borrow under our revolving credit facility and therefore had no borrowings outstanding on the facility as of December 31, 2024.

During 2022, our financing activities used $166.3 million of cash, including $159.6 million for common stock dividend payments and $3.9 million of tax withholding payments on stock-based awards.

During 2023, our financing activities used $360.7 million of cash, including $346.5 million in common stock dividend payments, $6.4 million for the repurchase of 75,678 shares of our common stock, and $5.9 million of tax withholding payments on stock-based awards.

At December 31, 2023, we had no borrowings outstanding under the revolving credit facility.

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Stock Repurchase Program

On July 28, 2022, our board of directors authorized the repurchase of an additional 1.5 million shares of our common stock.

This increase was in addition to the remaining authorized shares under our prior common stock repurchase program that was authorized on February 25, 2015 (the Program).

On October 30, 2024, our board of directors authorized the repurchase of an additional 1.4 million shares of our common stock.

This is the most recent authorization under our common stock repurchase program that was authorized on February 25, 2015 (the Program).

Share repurchases may be made on an opportunistic basis through open market transactions, privately negotiated transactions, or by other means in accordance with applicable federal securities laws.

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As of December 31, 2024, we had long-term debt with varying maturities totaling an aggregate principal of $450.0 million, with no principal payments required within 12 months.

Future interest payments associated with the long-term debt total $147.9 million, with $22.6 million payable within 12 months.

Future interest payments associated with the long-term debt total approximately $124 million, with approximately $22 million payable within 12 months.

Long-term debt and interest amounts assume our debt is held to maturity.

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As of December 31, 2024, our minimum lease payments for finance leases were $44.8 million, with $3.7 million of lease payments required within 12 months.

These amounts exclude the undiscounted future lease payments for additional leases signed but not yet commenced as of December 31, 2024 of approximately $9 million.

Some lease agreements provide us with the option to renew the lease or purchase the leased property.

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Price fluctuations in our selling prices and key costs have a significant effect on our financial performance.

The markets for most of these commodities are cyclical and are primarily affected by 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.

The markets for most of these commodities are cyclical and are primarily affected by economic uncertainties, industry operating rates, supply-related disruptions, transportation constraints or disruptions, net import and export activity, trade policies, inventory levels in various distribution channels, and seasonal demand patterns.

For further discussion of commodity price risk, refer to "Item 1A.

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Interest Rate Risk

We are exposed to interest rate risk arising from fluctuations in variable-rate SOFR on our term loan and when we have loan amounts outstanding on our Revolving Credit Facility.

We are exposed to interest rate risk arising from fluctuations in variable-rate Secured Overnight Financing Rate (SOFR) on our term loan and when we have loan amounts outstanding on our Revolving Credit Facility.

At December 31, 2024, we had $50.0 million of variable-rate debt outstanding based on one-month term SOFR.

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The interest rate swap agreement was not designated as a cash flow hedge, and as a result, all changes in the fair value are recognized in "Change in fair value of interest rate swaps" in our Consolidated Statements of Operations rather than through other comprehensive income.

At December 31, 2023 and 2022, we recorded a long-term asset of $3.0 million and $4.8 million, respectively, in "Other assets" on our Consolidated Balance Sheets, representing the fair value of the interest rate swap agreement.

At December 31, 2024, we recorded a current asset of $0.9 million in "Prepaid expenses and other" on our Consolidated Balance Sheet.

At December 31, 2023, we recorded a long-term asset of $3.0 million in "Other assets" on our Consolidated Balance Sheet.

These assets represent the fair value of the interest rate swap agreement.

The swap was valued based on observable inputs for similar assets and liabilities and other observable inputs for interest rates and yield curves (Level 2 inputs).

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Failure to comply with these laws and regulations could result in civil or criminal fines or penalties or in enforcement actions.

Our failure to comply could also result in governmental or judicial orders that stop or interrupt our

operations or require us to take corrective measures, install additional pollution control equipment, or take other remedial actions.

Our failure to comply could also result in governmental or judicial orders that stop or interrupt our operations or require us to take corrective measures, install additional pollution control equipment, or take other remedial actions.

During 2024 and 2023, we spent approximately $5 million and $3 million, respectively, on capital expenditures to comply with environmental requirements.

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From time to time, legislative bodies and environmental regulatory agencies may promulgate new or revised regulatory programs imposing significant incremental operating costs or capital costs on us.

In January 2023, the EPA signed a proposal to lower the primary annual National Ambient Air Quality Standard (NAAQS) for fine particulate matter (PM-2.5).

Lowering the PM-2.5 NAAQS would result in more areas within the U.S.

that would exceed the NAAQS.

These areas would be classified as non-attainment areas.

It is possible that some of our manufacturing facilities would be located in areas that will be reclassified as non-attainment areas.

In February 2024, the EPA finalized a rule to lower the primary annual National Ambient Air Quality Standard (NAAQS) for fine particulate matter (PM-2.5).

This lower PM-2.5 standard resulted in more areas within the U.S.

that exceed the NAAQS.

Areas not in compliance with the new standard will be classified as non-attainment areas.

It is possible that some of our manufacturing facilities are located in areas that will be reclassified as non-attainment areas.

Non-attainment areas must develop regulations designed to bring the areas into attainment.

Our manufacturing facilities located in non-attainment areas would be subject to more stringent emission limits and permitting requirements, which could require additional costs to implement improvements to ensure compliance.

Further, it could become more difficult to permit mill expansions, which may restrict our future growth.

Until the EPA finalizes the new rules, we are unable to predict the specific impact to our facilities.

Our manufacturing facilities located in non-attainment areas will be subject to more stringent emission limits and permitting requirements, which could require additional costs to implement improvements to ensure compliance.

Further, because the standard is now at or near the typical ambient concentration at many locations where we operate, it could be more difficult to permit mill expansions, which may restrict our future growth.

We are unable to predict the specific impact to our facilities until attainment area designations are completed and implementation details are finalized in 2026.

In 2016, our facilities began complying with the Boiler Maximum Achievable Control Technology (Boiler MACT) regulations, which regulate emissions of hazardous air pollutants from industrial boilers and process heaters.

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Boilers must be in compliance with the revised standards by September 2025.

We determined boiler improvement projects are necessary to meet the revised standards at three of our facilities and we expect to spend approximately $4 million in 2024 on these projects.

We determined boiler improvement projects were necessary to meet the revised standards at three of our facilities and we substantially completed these projects in 2024.

Some of our wood products facilities are subject to the Plywood and Composite Wood Products (PCWP) MACT standards for hazardous air pollutants, and they have complied with these standards since 2007 or 2008.

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None of our mills were identified in the first tier risk group.

Our Medford plywood mill was identified in the second tier group.

To date the ODEQ has not completed the program for the first tier risk group.

We currently anticipate Medford Plywood will be selected into the program in 2024.

Our other Oregon mills were identified in the third and fourth tier groups and will likely not be selected for several more years.

When selected into the program, the facilities may incur expenses to evaluate the risk to the public and may be required to incur additional operating or capital expenditures to mitigate any significant risk.

Our Medford plywood mill was identified in the second tier risk group and was selected into the program in October 2024.

Our other Oregon mills were identified in the third and fourth tier risk groups and will likely not be selected for several more years.

When selected into the program, the facilities will incur expenses to evaluate the risk to the public and may be required to incur additional operating or capital expenditures to mitigate any significant risk.

As we were recently selected into the program, we are unable to estimate the specific impact to our business at this time.

The EPA's Regional Haze Rule sets standards for visual air clarity in "Federal Class I" areas such as national parks and wilderness areas.

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We are then required to be fully compliant with those new emission limits by August 2026.

We expect to spend approximately $2 million in 2024 related to these boiler combustion improvements.

Critical Accounting Estimates

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Because of the complexity of some of these rebates, the ultimate resolution may result in payments that are materially different from our current estimate of EWP rebates payable.

At December 31, 2023 and 2022, we had $63.0 million and $72.2 million, respectively, of EWP rebates payable recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

At both December 31, 2024 and 2023, we had $63.0 million of EWP rebates payable recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

Long-Lived Asset Impairment

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We also disclose Segment EBITDA, which is segment income before depreciation and amortization.

We believe EBITDA and Adjusted EBITDA are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance.

We also believe EBITDA and Adjusted EBITDA are useful to investors because they provide a means to evaluate the operating performance of our segments and our Company on an ongoing basis using criteria that are used by our management and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates.

EBITDA and Adjusted EBITDA, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measure derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity.

The use of EBITDA and Adjusted EBITDA instead of net income or segment income have limitations as analytical tools, including the inability to determine profitability;

We believe EBITDA, Adjusted EBITDA and Segment EBITDA are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance.

We also believe EBITDA, Adjusted EBITDA and Segment EBITDA are useful to investors because they provide a means to evaluate the operating performance of our segments and our Company on an ongoing basis using criteria that are used by our management and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates.

EBITDA, Adjusted EBITDA and Segment EBITDA, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measure derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity.

The use of EBITDA, Adjusted EBITDA and Segment EBITDA instead of net income or segment income have limitations as analytical tools, including the inability to determine profitability;

the exclusion of interest expense, interest income, and associated significant cash requirements;

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Management compensates for these limitations by relying on our GAAP results.

Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

Our measures of EBITDA, Adjusted EBITDA and Segment EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022:

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

What changed 10-K

Item 7. Management’s Discussion and Analysis