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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-20 · 155 added, 190 removed, 380 unchanged (48% of the section changed)

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Company Background

Boise Cascade is a large, integrated wood products manufacturer and building materials distributor with widespread operations throughout the United States (U.S.) and one manufacturing facility in Canada.

We completed an initial public offering of our common stock on February 11, 2013.

Boise Cascade is a large, integrated building materials distributor and wood products manufacturer with widespread operations throughout the United States (U.S.) and one manufacturing facility in Canada.

We completed an initial public

offering of our common stock on February 11, 2013.

We have two reportable segments:

(i) Wood Products, which primarily manufactures engineered wood products (EWP) and plywood;

and (ii) Building Materials Distribution (BMD), which is a wholesale distributor of building materials.

(i) Building Materials Distribution (BMD), which is a wholesale distributor of building materials;

and (ii) Wood Products, which primarily manufactures engineered wood products (EWP) and plywood.

For more information, see Note 3, Revenues, and Note 15, Segment Information, of the Notes to Consolidated Financial Statements in "Item 8.

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Business" of this Form 10-K.

Our products are used in the construction of new residential housing, including single-family, multi-family, and manufactured homes, the repair-and-remodeling of existing housing, the construction of light industrial and commercial buildings, and industrial applications.

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.

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.

During 2025, approximately 71% of our Wood Products segment sales, or approximately 75% and 51% of our Wood Products segment's EWP and plywood sales volumes, respectively, were to our BMD segment.

Executive Summary

We recorded income from operations of $183.3 million during the year ended December 31, 2025, compared with $490.0 million during the same period in the prior year.

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 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 $81.2 million to $222.2 million for the year ended December 31, 2025, from $303.4 million for the year ended December 31, 2024.

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.

The decline in segment income was driven by a gross margin decrease of $48.8 million, resulting primarily from lower gross margins on commodity and EWP products, offset partially by improved gross margins on general line products.

In addition, selling and distribution expenses and depreciation and amortization expense increased $21.8 million and $9.2 million, respectively.

In our Wood Products segment, income decreased by $225.6 million to $5.8 million for the year ended December 31, 2025, from $231.5 million for the year ended December 31, 2024.

The decrease in segment income was due primarily to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs, which were impacted, in part, by planned downtime to complete significant mill modernization capital projects at our Oakdale plywood mill.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property.

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

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At December 31, 2025, we had $395.1 million of unused committed bank line availability.

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.

We used $236.0 million of cash during the year ended December 31, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, dividends paid on our common stock, and funding of an acquisition.

A further description of our cash sources and uses for the 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.

Residential construction, particularly new single-family construction, is the key demand driver 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.

Our distribution business purchases and resells a broad mix of products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability.

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.

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

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

In 2025, single-family starts fell short of 2024 levels by approximately 7% and are expected to be flat or modestly down in 2026.

Home builders moderated their starts in 2025 to avoid further buildup of finished home inventory as affordability remains a persistent challenge for prospective homebuyers.

Throughout 2025 builders bridged the supply-demand gap with increased incentives and high single-digit declines in new home prices.

Multi-family experienced growth in 2025 but starts are expected to level off in 2026 due to prohibitive capital costs for developers combined with low rent growth and a decrease in permit activity.

Industry experts expect flat home improvement spending in 2026 as high costs of borrowing and historically low home turnover continue to constrain demand.

Near term demand will continue to be influenced by factors such as mortgage rates, home affordability, home equity levels, home sizes, new and existing home inventory levels, unemployment rates, and consumer confidence.

Long-term demand drivers for residential construction, including generational tailwinds and an undersupply of housing units, remain strong, while elevated levels of homeowner equity and an aging U.S.

housing stock support robust repair-and-remodel spending and reinforce the industry’s solid fundamentals.

Our distribution business, which purchases and resells a diverse range of products, experiences opportunities for increased sales and margins during periods of rising prices, while periods of declining prices may present challenges.

Future product pricing, particularly for commodity products we distribute and manufacture, is expected to remain dynamic, influenced by economic conditions, industry operating rates, supply disruptions, duties, tariffs, transportation constraints, inventory levels, and seasonal demand patterns.

We will continue to monitor end market demand signals and align production rates and inventory stocking positions accordingly.

Factors That Affect Our Operating Results and Trends

Our results of operations and financial performance are influenced by a variety of factors, including:

(i) the commodity nature of a portion of the products we manufacture and distribute;

(i) the commodity nature of a portion of the products we distribute and manufacture;

(ii) general economic and industry conditions affecting demand;

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Commodity Nature of a Portion of Our Products

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 and procurement programs, and on managing our cost structure, particularly raw materials and labor, which represent the largest components of our operating costs.

A portion of the building products we distribute and manufacture, including OSB, plywood, and lumber, are commodities that are widely available from multiple sources, 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 distribute or produce may fall below our purchase or cash production 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 procurement and facilities maintenance 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.

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Increase (decrease) in composite lumber prices 6%

In our Wood Products segment, we manufacture plywood, but not OSB, and therefore our reported prices may not trend with the overall composite panel price index.

Our BMD segment purchases and resells a broad mix of commodity products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments may result in declines in sales and profitability.

However, we mitigate risk by utilizing rich data sets to effectively manage our inventory, which enables us to better navigate these market fluctuations and optimize our financial outcomes.

In our Wood Products segment, we manufacture plywood, but not OSB, and therefore our reported prices may not trend with the overall composite panel price index.

For further discussion of the impact of commodity prices, see "Our Operating Results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

Industry supply for the products we produce and distribute is influenced primarily by price-induced changes in the operating rates of existing facilities, but is also influenced over time by the introduction of new product technologies, capacity additions and closures, the restart of idled capacity, and log availability.

Industry supply for the products we distribute and produce is influenced primarily by price-induced changes in the operating rates of existing facilities, but is also influenced over time by the introduction of new product technologies, capacity additions and closures, the restart of idled capacity, and log availability.

The balance of supply and demand in the U.S.

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

The level of imported products is influenced by fluctuations in foreign currency exchange rates, duties, and tariffs.

We believe that our product line diversification provides us some protection from declines in new residential construction.

Our products are used not only in new residential construction but also in residential repair-and-remodeling projects.

Our products are used not only in new residential construction but also in residential repair-and-remodeling

projects and light commercial construction.

We believe the overall age of the U.S.

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OSB accounted for approximately 5% of the aggregate amount of materials, labor, and other operating expenses (excluding depreciation) for our Wood Products segment in 2025.

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.

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

OSB is a commodity, and prices have historically been volatile in response to economic uncertainties, industry operating rates, supply-related disruptions, duties, tariffs, transportation constraints or disruptions, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns.

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

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

We are substantially self-sufficient for veneer needs in our Southeast operations whereas third party purchases are used to satisfy a portion of our veneer requirements at our Western Oregon operations.

We also use various resins and glues in our manufacturing processes, which accounted for approximately 6% of the aggregate amount of materials, labor, and other operating expenses (excluding depreciation) for our Wood Products segment in 2025.

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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 years ended December 31, 2024 and 2023.

housing starts data, sales mix and gross margin information for our BMD segment, and segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment for the years ended December 31, 2025 and 2024.

Year Ended December 31

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Segment Sales

Wood Products $ 1,832.3 $ 1,932.6

Building Materials Distribution $ 5,941.3 $ 6,166.5

Wood Products 1,613.4 1,832.3

Intersegment eliminations (1,150.1) (1,274.5)

$ 6,404.6 $ 6,724.3

(percentage of BMD sales)

Building Materials Distribution

Product Line Sales

Commodity 35.0 % 35.8 %

General line 45.2 % 42.4 %

Engineered wood products 19.8 % 21.8 %

Gross margin percentage (b) 15.1 % 15.3 %

Wood Products

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Lumber (1,000 board feet) 629 682

(percentage of BMD sales)

Building Materials Distribution

Product Line Sales

Commodity 35.8 % 37.8 %

General line 42.4 % 39.5 %

Engineered wood products 21.8 % 22.7 %

Gross margin percentage (b) 15.3 % 15.0 %

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For the year ended December 31, 2025, total sales decreased $319.7 million, or 5%, to $6,404.6 million from $6,724.3 million during the year ended December 31, 2024.

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 for our sales.

As described below, the decrease in sales was driven by the changes in sales prices and volumes for the products we distribute and manufacture with single-family residential construction activity being the key demand driver for our sales.

During 2025, total U.S.

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 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.

housing starts and single-family housing starts decreased 1% and 7%, respectively, compared with 2024.

For the year ended December 31, 2025, average composite panel prices were 17% lower, while average composite lumber prices were 6% higher, compared with 2024, as reflected by Random Lengths composite panel and lumber pricing.

Building Materials Distribution.

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%.

During the year ended December 31, 2025, sales decreased $225.2 million, or 4%, to $5,941.3 million from $6,166.5 million in 2024.

Compared with the prior year, the overall decrease in sales was driven by decreases of 2% for both sales prices and sales volumes.

By product line, commodity sales decreased 6%, or $127.6 million, general line product sales increased 3%, or $71.7 million, and sales of EWP (substantially all of which is sourced through our Wood Products segment) decreased 13%, or $169.3 million.

Wood Products.

During the year ended December 31, 2025, sales, including sales to our BMD segment, decreased $218.9 million, or 12%, to $1,613.4 million from $1,832.3 million in 2024.

The decrease in sales was driven by lower sales prices for LVL and I-joists (collectively referred to as EWP) of 11% and 10%, respectively, resulting in decreased sales of $56.1 million and $41.7 million, respectively.

Additionally, sales volumes for I-joists and LVL decreased 8% and 2%, respectively, resulting in decreased sales of $37.4 million and $12.6 million, respectively.

EWP sales volumes were influenced by multiple factors, including the level of housing starts, competition from other wood-based products, and concrete floor applications that limit wood floor opportunity for I-joists.

Plywood sales prices and sales volumes decreased 6% and 4%, respectively, resulting in decreased sales of $31.1 million and $20.3 million, respectively.

Plywood sales volumes were impacted by planned downtime to complete significant mill modernization capital projects at our Oakdale plywood mill.

Costs and Expenses

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.

Materials, labor, and other operating expenses (excluding depreciation) decreased $42.9 million, or 1%, to $5,350.7 million for the year ended December 31, 2025, compared with $5,393.6 million during the prior year.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of a decline in sales compared with 2024.

However, materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our BMD segment increased 20 basis points, primarily due to lower margin percentages on our commodity sales compared with 2024.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher other manufacturing costs compared with 2024.

These increases were offset partially by decreased sales volumes of EWP and plywood, as well as lower costs of OSB compared with 2024.

The MLO rate in our Wood Products segment increased by 1,140 basis points, due primarily to lower sales prices and sales volumes for both EWP and plywood, which resulted in decreased leveraging of manufacturing costs.

The MLO rate was also impacted by planned downtime to complete significant mill modernization capital projects at our Oakdale plywood mill.

Depreciation and amortization expense increased $14.1 million, or 10%, to $158.2 million for the year ended December 31, 2025, compared with $144.1 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.

The increase was due primarily to purchases of property and equipment, including the recent investments at our Oakdale veneer and plywood mill.

The increase was offset partially by $2.2 million of accelerated depreciation recorded in first quarter 2024 for the indefinite curtailment of lumber production at our Chapman, Alabama facility.

Selling and distribution expenses increased $21.3 million, or 4%, to $616.3 million for the year ended December 31, 2025, compared with $594.9 million for the prior year.

The increase was primarily a result of higher professional fees and services and information technology related costs of $8.1 million, as well as higher shipping and handling and occupancy costs of $7.0 million.

In addition, employee-related costs increased $14.2 million, offset partially by lower incentive compensation expense of $12.6 million.

General and administrative expenses decreased $2.6 million, or 3%, to $99.7 million for the year ended December 31, 2025, compared with $102.3 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.

The decrease was primarily the result of lower incentive compensation expense of $7.5 million, offset partially by an increase in professional fees of $4.0 million.

Other (income) expense, net was $3.6 million of income for the year ended December 31, 2025, primarily related to gains on the sale of non-operating properties in our BMD and Wood Products segments of $3.8 million and $3.9 million, respectively, as well as a $1.9 million settlement gain associated with a fire at our BMD Phoenix location in second quarter 2021.

These gains were offset partially by approximately $6 million related to an accrual for legal proceedings in our BMD segment.

Income From Operations

Income from operations decreased $306.7 million to $183.3 million for the year ended December 31, 2025, compared with $490.0 million for the year ended December 31, 2024.

Wood Products.

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 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, 2025, segment income decreased $81.2 million to $222.2 million from $303.4 million for the year ended December 31, 2024.

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.

In addition, selling and distribution expenses and depreciation and amortization expense increased $21.8 million and $9.2 million, respectively.

Wood Products.

For the year ended December 31, 2025, segment income decreased $225.6 million to $5.8 million from $231.5 million for the year ended December 31, 2024.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property.

Unallocated corporate expenses decreased $0.1 million to $44.7 million for the year ended December 31, 2025, from $44.8 million for the year ended December 31, 2024.

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

The decrease was due primarily to lower incentive compensation expense and a $1.9 million settlement gain, offset partially by an increase in professional fees and employee-related expenses.

Interest Income.

Interest income decreased $20.4 million to $18.8 million for the year ended December 31, 2025, from $39.1 million for the year ended December 31, 2024.

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

The decrease was due primarily to lower average balances of cash equivalents, as well as lower interest rates.

Change in fair value of interest rate swaps.

For information related to our interest rate swap, see the discussion under "Disclosures of Financial Market Risks" and "Financial Instruments" included in this "Item 7.

For information related to our interest rate swap, which expired in June 2025, see the discussion under "Disclosures of Financial Market Risks" included in this "Item 7.

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

Income Tax Provision

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.

For the years ended December 31, 2025 and 2024, we recorded $47.1 million and $125.4 million, respectively, of income tax expense and had an effective tax rate of 26.2% and 25.0%, respectively.

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.

During the years ended December 31, 2024 and 2023, the primary reason for the difference between the federal statutory income tax rate of 21% and the effectiv e tax rate was the effect of state taxes.

During the year ended December 31, 2025, the primary reasons for the difference between the federal statutory income tax rate of 21% and the effectiv e tax rate was the effect of state taxes and nondeductible executive compensation.

During the year ended December 31, 2024, 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 more information related to our income taxes, see Note 4, Income Taxes, of the Notes to Consolidated Financial Statements in "Item 8.

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

Industry Mergers and Acquisitions

On July 1, 2025, James Hardie Industries plc (James Hardie) completed the acquisition of The AZEK Company Inc.

James Hardie is a significant supplier to our BMD segment.

In addition, AZEK produces products that compete with another significant supplier to us, Trex.

We have good relationships with both James Hardie and Trex and do not expect the transaction to negatively impact our distribution arrangements with either company or our future results of operations.

Liquidity and Capital Resources

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At December 31, 2025, we had $872.3 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

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.

Our cash and cash equivalents decreased by $236.0 million during the year ended December 31, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, dividends paid on our common stock, and funding of an acquisition, as further discussed below.

At December 31, 2025, 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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We generate cash primarily from sales of our products, as well as short-term and long-term borrowings.

Our primary uses of cash are for expenses related to the manufacture and distribution of building products, including inventory purchased for resale, wood fiber, labor, energy, and glues and resins.

In addition to paying for ongoing operating costs, we use cash to invest in our business, service our debt and lease obligations, and return cash to our shareholders through dividends or common stock repurchases.

Our primary uses of cash are for expenses related to the distribution and manufacture of building products, including inventory purchased for resale, wood fiber, labor, energy, and glues and resins.

In addition to paying for ongoing operating costs, we use cash to invest in our business, service our debt and lease obligations, and return cash to our stockholders through dividends or common stock repurchases.

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

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The $184.2 million decrease in cash provided by operations in 2025 relates primarily to the following:

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

• A $81.2 million decrease in income in our BMD segment and a $225.6 million decrease in income in our Wood Products segment.

See "Our Operating Results" above for a discussion on our results for 2025.

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

• A $94.0 million decrease in cash paid for income taxes, net of refunds.

During 2025, cash paid for income taxes, net of refunds received was $36.6 million, compared to $130.6 million in 2024.

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

• A $61.0 million increase in working capital during 2025, compared with a $94.8 million increase in working capital during 2024.

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 2025 was primarily attributable to a decrease in accounts payable and accrued liabilities, offset partially by decreased receivables and inventories.

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 4%, comparing sales for the month of December 2025 with sales for the month of December 2024.

The decrease in inventories was due primarily to weaker market conditions, offset partially by an increase in inventory related to additional locations in our BMD segment, as well as an increase in log inventory in our Wood Products segment.

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.

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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.

The increase in accounts payable was related to increased purchasing in fourth quarter 2023 in response to improved demand compared to fourth quarter 2022 and extended terms offered by certain BMD vendors.

The decrease in inventories was due primarily to improved housing demand in fourth quarter 2023 compared to fourth quarter 2022, offset partially by increased inventories at some BMD locations due to location expansions.

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.

• 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 timing of income tax payments.

Investment Activities

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

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.

In our BMD segment, our 2025 capital spending includes spending on our greenfield distribution center in Hondo, Texas, which was completed in August 2025.

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

In our Wood Products segment, our 2025 capital spending includes additional spending on the multi-year investments at our Thorsby EWP mill and Oakdale veneer and plywood mill.

Purchases of property and equipment also included approximately $3 million for environmental compliance in 2025.

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.

During the year ended December 31, 2025, we used $33.4 million of cash for the acquisition of Holden Humphrey.

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

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

In addition, we received $11.6 million from the sale of assets during the year ended December 31, 2025.

Excluding potential acquisitions, we expect capital expenditures in 2026 to total approximately $150 million to $170 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 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.

We expect our capital spending in 2026 will be for business improvement and efficiency projects, replacement projects, and ongoing environmental compliance.

We expect to spend approximately $4 million for environmental compliance in 2026, which is included in our capital spending range.

This level of capital expenditures could increase or decrease as a result of several factors, including 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, 2024, we used approximately $229.6 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 $5 million for environmental compliance in 2024.

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.

In addition, 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.

Financing Activities

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 2025, our financing activities used $226.9 million of cash, including $181.4 million for the repurchase of 2,101,392 shares of our common stock, $34.6 million in common stock dividend payments, and $5.9 million of tax withholding payments on stock-based awards.

On April 14, 2025, we entered into a credit agreement for a $450.0 million revolving credit facility which matures on April 12, 2030.

At closing, $50.0 million under the facility was borrowed.

Proceeds from the facility were used to repay the $50.0 million term loan under the asset-based revolving credit facility.

In connection with entering into the new credit agreement, both the term loan and asset-based revolving credit facility were terminated.

At December 31, 2025, we had $50.0 million of borrowings outstanding under the revolving credit facility.

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

Debt Structure

For information related to our debt transactions and debt structure, see Note 8, Debt, of the Notes to Consolidated Financial Statements in "Item 8.

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

Dividends on Common Stock

On November 14, 2017, our board of directors approved a dividend policy to pay quarterly cash dividends to holders of our common stock.

Future quarterly 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.

For a description of the restrictions in our asset-based credit facility and the indenture governing our senior notes on our ability to pay dividends, see Note 8, Debt, of the Notes to Consolidated Financial Statements in "Item 8.

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

The dividend policy may be suspended or canceled at the discretion of the board of directors at any time.

For more information regarding our dividend declarations and payments made during 2024 and 2023, see Note 12, Stockholders' Equity, of the Notes to Consolidated Financial Statements in "Item 8.

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

Stock Repurchase 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.

We are not obligated to purchase any shares, and there is no set date that the program will expire.

Our board of directors, at its discretion, may increase or decrease the number of authorized shares or terminate the Program at any time.

During the year ended December 31, 2024, we repurchased 1,513,095 shares under the Program.

As of December 31, 2024, there were approximately 1.8 million shares of common stock that may yet be purchased under the Program.

For more information related to our stock repurchases, see Note 12, Stockholders' Equity, of the Notes to Consolidated Financial Statements in "Item 8.

At December 31, 2024, we had no borrowings outstanding under the asset-based revolving credit facility.

For more information related to our debt transactions and debt structure, our dividend policy, and our stock repurchase program, see the discussion in Note 8, Debt and Note 12, Stockholders' Equity, respectively, of the Notes to Consolidated Financial Statements in "Item 8.

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

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Long-term Debt and Interest

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.

As of December 31, 2025, we had long-term debt 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 approximately $108 million, with approximately $22 million payable within 12 months.

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As of December 31, 2025, our minimum lease payments for finance leases were $26.5 million, with $2.4 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.

These amounts exclude the undiscounted future lease payments for an additional lease signed but not yet commenced as of December 31, 2025 of approximately $26 million.

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

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Seasonal Influences

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors.

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors impacting the level of construction activity.

These seasonal factors are common in the building products industry.

Seasonal changes in levels of building activity affect our building products businesses, which are dependent on housing starts, repair-and-remodeling activities, and light commercial construction activities.

We typically report lower sales volumes in the first and fourth quarters due to the impact of poor weather on the construction market, and we generally have higher sales volumes in the second and third quarters, reflecting an increase in construction due to more favorable weather conditions.

We typically have higher working capital in the first and second quarters in preparation and response to the building season.

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

Seasonal changes in levels of

building activity affect our building products businesses, which are dependent on housing starts, repair-and-remodeling activities, and light commercial construction activities.

Demand typically rises in the spring and summer months as favorable weather and increased building and remodeling projects boost sales volumes.

In contrast, the winter months during the first and fourth quarters generally bring lower sales due to reduced construction activity and higher operating costs, particularly for energy.

We also adjust our working capital ahead of the peak building season to ensure product availability.

These seasonal trends impact our sales, expenses and operational planning throughout the year.

Disclosures of Financial Market Risks

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Commodity Price Risk

A portion of the products we manufacture or purchase and resell and some of our key production inputs are commodities whose price is determined by the market's supply and demand for such products.

A portion of the products we purchase and resell or manufacture and some of our key production inputs are commodities whose price is determined by the market's supply and demand for such products.

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, trade policies, 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, duties, tariffs, transportation constraints or disruptions, net import and export activity, 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 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.

Our objective is to limit the variability of interest payments on our debt.

To meet this objective, we enter into receive-variable, pay-fixed interest rate swaps to mitigate the variable-rate cash flow exposure with fixed-rate cash flows.

We are exposed to interest rate risk arising from fluctuations in variable-rate Secured Overnight Financing Rate (SOFR) when we have loan amounts outstanding on our revolving credit facility.

At December 31, 2025, we had $50.0 million of variable-rate debt outstanding on our revolving credit facility based on Daily Simple SOFR.

In addition, we were exposed to interest rate risk arising from fluctuations in variable-rate SOFR on our term loan prior to its repayment in April 2025.

To limit the variability of interest payments on our debt, we entered into receive-variable, pay-fixed interest rate swaps to mitigate the variable-rate cash flow exposure with fixed-rate cash flows.

Our interest rate swap expired in June 2025.

Under the interest rate swap, we received one-month SOFR plus a spread adjustment of 0.10% variable interest rate payments and made fixed interest rate payments, thereby fixing the interest rate on $50.0 million of variable rate debt exposure from our term loan.

Payments on this interest rate swap, with a notional principal amount of $50.0 million, were due on a monthly basis at an annual fixed rate of 0.41%.

The interest rate swap agreement was not designated as a cash flow hedge, and as a result, all changes in the fair value were 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, 2024, the fair value of the interest rate swap agreement was immaterial.

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).

In accordance with our risk management strategy, we actively monitor our interest rate exposure and use derivative instruments from time to time to manage the related risk.

We do not speculate using derivative instruments.

At December 31, 2024, we had one interest rate swap agreement.

Under the interest rate swap, we receive one-month SOFR plus a spread adjustment of 0.10% variable interest rate payments and make fixed interest rate payments, thereby fixing the interest rate on $50.0 million of variable rate debt exposure.

Payments on this interest rate swap, with a notional principal amount of $50.0 million, are due on a monthly basis at an annual fixed rate of 0.41%, and this swap expires in June 2025.

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, 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).

Foreign Currency Risk

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Variable-rate debt payments (a)

Term Loan $ — $ — $ 50.0 $ — $ — $ — $ 50.0 $ 50.0

Revolving Credit Facility $ — $ — $ — $ — $ 50.0 $ — $ 50.0 $ 50.0

Average interest rates — — — — 5.1 % — 5.1 % —

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(b) We estimated the fair value using quoted market prices of our debt in inactive markets.

The table below provides information as of December 31, 2024, about our interest rate swap.

For information on our interest rate swap, see "Interest Rate Risk" of Note 14, Financial Instrument Risk, of the Notes to Consolidated Financial Statements in "Item 8.

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

The following is information about the notional amount and interest rate by contractual maturity date for our interest rate swap agreement, as well as the fair value at December 31, 2024:

December 31, 2024

2025 2026 2027 2028 2029 There-

after Total Fair

(millions, other than percentages)

Interest rate swap

Variable to fixed notional amount $ 50.0 $ — $ — $ — $ — $ — $ 50.0 $ 0.9

Average pay rate (a) 0.4 % — — — — — 0.4 % —

Average receive rate (b) 4.5 % — — — — — 4.5 % —

_______________________________________

(a) Represents the weighted average actual fixed interest rate payable on our interest rate swap.

(b) Represents the weighted average variable interest rate receivable on our interest rate swap at December 31, 2024.

Environmental

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We are not aware of any plans to regulate GHG emissions by other states in which we have manufacturing operations.

There are several states that have implemented, or have proposed to implement, regulations that will require sale of zero-emission heavy duty trucks and phase out existing diesel fueled trucks.

Our manufacturing and distribution operations rely on diesel fueled trucks to transport materials from suppliers and deliver products to customers.

These new zero-emission vehicles are expected to be more expensive than traditional diesel trucks.

In addition, there are concerns that the availability of compliant trucks may not be sufficient to meet demand at the time of scheduled replacement, the charging or hydrogen fuel infrastructure may not be adequate, and available early model zero-emission trucks may not be able to travel the distance or carry the load of existing trucks.

In addition, there are ongoing efforts by some states and various organizations to encourage and/or require companies to calculate, report, and reduce their carbon footprint.

There are ongoing efforts by some states and various organizations to encourage and/or require companies to calculate, report, and reduce their carbon footprint.

Furthermore, our customers may impose carbon footprint standards on their vendors, which may require us to incur additional costs associated with the evaluation and reduction of GHGs.

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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.

Following litigation of the standards, in September 2022, the EPA adopted more stringent Boiler MACT emission standards for several types of boilers, including boilers common to our facilities.

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

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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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.

As we are still working through the CAO process for our Medford plywood mill, 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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The emission reductions are not expected to impact the facility's ability to meet production goals.

Our Elgin plywood mill is required to conduct a study to determine what levels of emission reduction can be achieved by installation of improved boiler controls.

We began installation of boiler combustion improvements in May 2023, are monitoring emissions, and are required to propose new emission limits by December 2025.

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

Our Elgin plywood mill was required to conduct a study to determine what levels of emission reduction could be achieved by installation of improved boiler controls.

We began installation of boiler combustion improvements in May 2023, monitored emissions, and proposed new emission limits in December 2025.

Once the new emission limits are approved by ODEQ, we will be required to be fully compliant with those new emission limits by March 31, 2026.

Critical Accounting Estimates

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EWP rebates are based on the volume of purchases (measured in dollars or units), among other factors such as customer loyalty, conversion, and commitment incentives, as well as temporary protection from price increases.

EWP rebate estimates are based on the expected amount to be paid and are recorded as a decrease in "Sales" as revenue is recognized.

EWP rebate estimates are based on the most likely amount to be paid and are recorded as a decrease in "Sales" as revenue is recognized.

The estimate of EWP rebates is inherently difficult due to the time lag of information and it is challenging to estimate sales subject to rebate as the products transition beyond our wholesale customers and through the supply chain to homebuilders.

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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 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.

At December 31, 2025 and 2024, we had $52.2 million and $63.0 million, respectively, of EWP rebates payable recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

Long-Lived Asset Impairment

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2025 2024 2023

Wood Products

Building Materials Distribution

Segment income $ 222,218 $ 303,385 $ 335,808

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Segment EBITDA $ 280,907 $ 352,919 $ 368,161

Building Materials Distribution

Wood Products

Segment income $ 5,836 $ 231,454 $ 337,132

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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