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Item 2. Management’s Discussion and Analysis

2026-05-04 compared with 2025-11-03 · 123 added, 189 removed, 139 unchanged (69% of the section changed)

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As used in this Form 10-Q, the terms "Boise Cascade," "we," and "our" refer to Boise Cascade Company and its consolidated subsidiaries.

Boise Cascade is a large, integrated wood products manufacturer and building materials distributor.

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 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.

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.

(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 11, Segment Information, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1.

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Executive Overview

We recorded income from operations of $32.3 million during the three months ended September 30, 2025, compared with income from operations of $117.4 million during the three months ended September 30, 2024.

For the three months ended September 30, 2025, Wood Products' segment loss was $12.1 million compared to segment income of $53.9 million for the three months ended September 30, 2024.

The decrease in income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

In our BMD segment, income decreased $20.5 million to $54.3 million for the three months ended September 30, 2025, from $74.8 million for the three months ended September 30, 2024, driven by a gross margin decrease of $10.6 million, resulting primarily from decreased margins on commodity and EWP products, offset partially by increased margins on general line products.

In addition, selling and distribution expenses and depreciation and amortization expense increased $7.8 million and $2.6 million, respectively.

We recorded income from operations of $27.8 million during the three months ended March 31, 2026, compared with income from operations of $54.5 million during the three months ended March 31, 2025.

In our BMD segment, income decreased $15.5 million to $32.9 million for the three months ended March 31, 2026, from $48.4 million for the three months ended March 31, 2025.

The decrease in segment income was driven by increased selling and distribution expenses of $8.2 million, as well as a $6.5 million gross margin decrease, resulting primarily from lower gross margins on all product lines, particularly EWP.

In our Wood Products segment, income decreased $9.2 million to $8.5 million for the three months ended March 31, 2026, from $17.7 million for the three months ended March 31, 2025.

The decrease in segment income was primarily due to lower EWP sales prices, as well as higher per-unit EWP conversion costs.

These decreases in segment income were offset partially by lower per-unit OSB costs, as well as higher plywood sales volumes and sales prices.

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

We ended third quarter 2025 with $511.8 million of cash and cash equivalents and $395.2 million of undrawn committed bank line availability, for total available liquidity of $907.0 million.

We had $450.0 million of outstanding debt at September 30, 2025.

We used $201.5 million of cash during the nine months ended September 30, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, and dividends paid on our common stock.

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

Demand for the products we manufacture, as well as the products we purchase and distribute, is 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 driver of demand for the products we manufacture and distribute.

During 2025, the housing market has been shaped by policy uncertainty, low consumer confidence, elevated interest rates, and affordability challenges for prospective homebuyers.

Early industry projections for 2026 are consistent with 2025 housing start levels.

Demand expectations are characterized by a cautious market in the first half of the year, with gradual improvement expected later in the year.

This improvement is expected to be driven by the continuation of interest rate cuts and normalized homebuilder inventory levels.

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.

However, 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.

We ended first quarter 2026 with $338.7 million of cash and cash equivalents and $395.1 million of undrawn committed bank line availability, for total available liquidity of $733.8 million.

We had $452.5 million of outstanding debt at March 31, 2026.

We used $138.5 million of cash during the three months ended March 31, 2026, to fund seasonal working capital increases, capital spending, share repurchases, and dividends paid on our common stock.

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

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.

The operating environment during the first quarter of 2026 presented a mix of opportunities and challenges.

For much of the quarter, mortgage rates declined to their lowest levels in over three years.

However, recent geopolitical turmoil has led to volatility in treasury and mortgage rates alike, casting unpredictability on the remainder of the spring selling season.

Consumer sentiment and home affordability challenges persist as the most prominent headwinds to residential construction activity.

In addition, home builders are responding to the cautious demand environment with thoughtful approaches to starts, home sizes, location, and inventory.

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.

As a manufacturer of plywood, a commodity product, we remain subject to fluctuations in product pricing and input costs.

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, is expected to remain dynamic, influenced by economic conditions, industry operating rates, supply disruptions, duties, tariffs, transportation constraints, inventory levels, and seasonal demand patterns.

With seasonally slower activity expected in the fourth quarter, we anticipate taking capital project and maintenance-related downtime at certain of our manufacturing facilities, and may also take periodic market-related downtime across our manufacturing system in order to align production rates and inventory stocking positions with end market demand signals.

Future product pricing, particularly for commodity products we distribute and manufacture, is expected to remain dynamic, influenced by economic and geopolitical conditions, input costs, industry operating rates, supply disruptions, duties, tariffs, cost and availability of transportation, 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

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• labor disruptions, shortages of skilled and technical labor, or increased labor costs;

• the need to successfully formulate and implement succession plans for key members of our management team;

• product shortages, loss of key suppliers, and our dependence on third-party suppliers and manufacturers;

• the cost and availability of third-party transportation services used to deliver the goods we manufacture and distribute, as well as our raw materials;

• cost and availability of raw materials, including wood fiber and glues and resins;

• the cost and availability of third-party transportation services used to deliver the goods we distribute and manufacture, as well as our raw materials;

• cost and availability of raw materials, particularly wood fiber;

• the need to successfully formulate and implement succession plans for key members of our management team;

• our ability to execute our organic growth and acquisition strategies efficiently and effectively;

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• restrictive covenants contained in our debt agreements;

• changes in or failure to comply with laws and regulations;

• changes in foreign trade policy, including the imposition of tariffs;

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Our Operating Results

The following tables set forth our operating results in dollars and as a percentage of sales for the three and nine months ended September 30, 2025 and 2024:

The following tables set forth our operating results in dollars and as a percentage of sales for the three months ended March 31, 2026 and 2025:

Three Months Ended

September 30 Nine Months Ended

2025 2024 2025 2024

Sales $ 1,498.6 $ 1,536.5

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Set forth below are historical U.S.

housing starts data, segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment, and sales mix and gross margin information for our BMD segment for the three and nine months ended September 30, 2025 and 2024:

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 three months ended March 31, 2026 and 2025:

Three Months Ended

September 30 Nine Months Ended

2025 2024 2025 2024

Housing Starts (a)

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Multi-family 106.1 89.0

242.9 353.2 935.2 1,044.8

Segment Sales

Wood Products $ 396,401 $ 453,896 $ 1,259,481 $ 1,412,647

Building Materials Distribution $ 1,388,948 $ 1,407,116

Wood Products 398,204 415,845

Intersegment eliminations (288,538) (286,467)

Total sales $ 1,498,614 $ 1,536,494

(percentage of BMD sales)

Building Materials Distribution

Product Line Sales

General line 45.0 % 42.6 %

Commodity 35.5 % 36.7 %

Engineered wood products 19.5 % 20.7 %

Gross margin percentage (b) 14.4 % 14.7 %

Wood Products (millions)

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Average Net Selling Prices

Laminated veneer lumber (LVL) (cubic foot) $ 24.03 $ 27.62 $ 25.12 $ 28.15

LVL (cubic foot) $ 24.22 $ 26.09

I-joists (1,000 equivalent lineal feet) 1,700 1,833

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ft.) (3/8" basis) 343 341

(percentage of BMD sales)

Building Materials Distribution

Product Line Sales

Commodity 34.2 % 34.9 % 35.0 % 35.5 %

General line 46.7 % 43.8 % 45.0 % 42.4 %

Engineered wood products 19.1 % 21.3 % 20.0 % 22.1 %

Gross margin percentage (b) 15.1 % 15.7 % 15.1 % 15.2 %

_______________________________________

housing starts for the three and nine months ended September 30, 2025 have yet to be published.

Therefore, the data presented is for the two and eight months ended August 31, 2025.

The three and nine months ended September 30, 2024 represent actual U.S.

(a) Actual U.S.

housing starts as reported by the U.S.

Census Bureau.

For the two months ended August 31, 2024 single-family, multi-family, and total U.S.

housing starts (in thousands) were approximately 170.4, 66.7, and 237.1, respectively.

For the eight months ended August 31, 2024 single-family, multi-family, and total U.S.

housing starts (in thousands) were 692.6, 236.1, and 928.7, respectively.

(b) We define gross margin as "Sales" less "Materials, labor, and other operating expenses (excluding depreciation)." Substantially all costs included in "Materials, labor, and other operating expenses (excluding depreciation)" for our BMD segment are for inventory purchased for resale.

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

For the three months ended September 30, 2025, total sales decreased $45.9 million, or 3%, to $1,667.8 million from $1,713.7 million during the three months ended September 30, 2024.

For the nine months ended September 30, 2025, total sales decreased $212.4 million, or 4%, to $4,944.4 million from $5,156.8 million for the same period in the prior year.

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

When comparing July 2025 and August 2025 housing starts to the same periods in 2024, total U.S.

housing starts increased 2%, while single-family housing starts decreased 3%.

On a year-to-date basis through August 2025, total U.S.

housing starts increased 1%, while single-family housing starts decreased 5%, compared to the same period in 2024.

Average composite panel prices for the three and nine months ended September 30, 2025 were 14% and 15% lower, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite panel pricing.

Average composite lumber prices for the three and nine months ended September 30, 2025 were 7% and 13% higher, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite lumber pricing.

Wood Products.

Sales, including sales to our BMD segment, decreased $57.5 million, or 13%, to $396.4 million for the three months ended September 30, 2025, from $453.9 million for the three months ended September 30, 2024.

The decrease in sales was driven by lower sales prices for LVL and I-joists (collectively referred to as EWP) of 13% and 12%, respectively, resulting in decreased sales of $16.5 million and $12.6 million, respectively.

Additionally, sales volumes for I-joists and LVL decreased by 10% and 7%, respectively, resulting in decreased sales of $10.9 million and $9.4 million, respectively.

In addition, lower plywood sales prices and sales volumes contributed $4.5 million to the sales decrease during the period.

For the nine months ended September 30, 2025, sales, including sales to our BMD segment, decreased $153.2 million, or 11%, to $1,259.5 million from $1,412.6 million for the same period in the prior year.

The decrease in sales was driven by lower sales prices for LVL and I-joists of 11% and 10%, respectively, resulting in decreased sales of $44.5 million and $32.6 million, respectively.

Additionally, sales volumes for I-joists and LVL decreased 6% and 1%, respectively, resulting in decreased sales of $21.3 million and $3.3 million, respectively.

Plywood sales prices and sales volumes decreased 6% and 3%, respectively, resulting in decreased sales of $23.9 million and $14.3 million, respectively.

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

For both periods described above, 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.

For the three months ended March 31, 2026, total sales decreased $37.9 million, or 2%, to $1,498.6 million from $1,536.5 million during the three months ended March 31, 2025.

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.

In first quarter 2026, total U.S.

housing starts increased 1% while single-family housing starts decreased 5%, compared with the same period in 2025.

Average composite panel and average composite lumber prices for the three months ended March 31, 2026 were 15% and 5% lower, respectively, than in the same period in the prior year, as reflected by Random Lengths composite panel and composite lumber pricing.

Building Materials Distribution.

Sales decreased $11.3 million, or 1%, to $1,556.2 million for the three months ended September 30, 2025, from $1,567.5 million for the three months ended September 30, 2024.

Compared with the same quarter in the prior year, the overall decrease in sales was driven by a sales price decrease of 1%, as sales volumes were flat.

By product line, commodity sales decreased 3%, or $16.2 million;

general line product sales increased 6%, or $41.7 million;

Sales decreased $18.2 million, or 1%, to $1,388.9 million for the three months ended March 31, 2026, from $1,407.1 million for the three months ended March 31, 2025.

Compared with the same quarter in the prior year, the overall decrease in sales was driven by net sales price decreases of 3%, offset partially by net sales volume increases of 2%.

By product line, general line product sales increased 4%, or $25.4 million;

commodity sales decreased 5%, or $24.1 million;

and EWP sales (substantially all of which are sourced through our Wood Products segment) decreased 7%, or $19.5 million.

During the nine months ended September 30, 2025, sales decreased $149.5 million, or 3%, to $4,578.2 million from $4,727.7 million for the same period in the prior year.

The overall decrease in sales was driven by sales price and sales volume decreases of 2% and 1%, respectively.

By product line, commodity sales decreased 5%, or $79.3 million;

general line product sales increased 3%, or $55.7 million;

and sales of EWP decreased 12%, or $125.9 million.

Wood Products.

Sales, including sales to our BMD segment, decreased $17.6 million, or 4%, to $398.2 million for the three months ended March 31, 2026, from $415.8 million for the three months ended March 31, 2025.

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 $8.5 million and $6.9 million, respectively.

Additionally, sales volumes for I-joists and LVL decreased by 5% and 1%, respectively, resulting in decreased sales of $5.1 million and $1.4 million, respectively.

These decreases were offset partially by higher plywood sales volumes and sales prices of 3% and 1%, respectively, resulting in increased sales of $4.5 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) increased $28.6 million, or 2%, to $1,404.3 million for the three months ended September 30, 2025, compared with $1,375.7 million during the same period in the prior year.

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

These increases were offset partially by decreased sales volumes for EWP, as well as lower costs of OSB

(used in the manufacture of I-joists) and decreased purchases of externally produced veneer compared with third quarter 2024.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 1,330 basis points, primarily as the result of lower EWP sales prices and volumes, which resulted in decreased leveraging of 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 decline in sales compared with third quarter 2024.

The BMD segment MLO rate increased 60 basis points, driven by lower margin percentages on commodity and EWP products.

For the nine months ended September 30, 2025, materials, labor, and other operating expenses (excluding depreciation) decreased $1.9 million, or less than 1%, to $4,122.0 million, compared with $4,123.8 million in the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs, as well as increased purchases of externally produced veneer for our Alexandria EWP mill as a result of downtime during the first half of 2025 to complete the modernization projects at our Oakdale veneer and plywood mill.

These increases were offset partially by decreased sales volumes of I-joists and plywood, as well as lower costs of OSB compared with the same period in the prior year.

The MLO rate in our Wood Products segment increased by 1,190 basis points, due primarily to lower sales prices and sales volumes for both EWP and plywood, which resulted in decreased leveraging of 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 decline in sales, as well as increased vendor rebates and allowances, compared with the first nine months of 2024.

The BMD segment MLO rate increased 10 basis points, primarily due to lower margin percentages on our commodity sales, offset partially by higher margins on our general line sales compared with the first nine months of 2024.

Depreciation and amortization expense increased $5.5 million, or 15%, to $42.4 million for the three months ended September 30, 2025, compared with $36.9 million during the same period in the prior year.

For the nine months ended September 30, 2025, these expenses increased $9.8 million, or 9%, to $116.9 million, compared with $107.1 million in the same period in the prior year.

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

For the nine months ended September 30, 2025, 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 $7.6 million, or 5%, to $165.1 million for the three months ended September 30, 2025, compared with $157.5 million during the same period in the prior year.

The increase was due to higher occupancy costs, shipping and handling, professional fees and services, and information technology related costs of $6.0 million.

Additionally, employee-related expenses increased $3.6 million, offset partially by a decrease in incentive compensation expense of $3.0 million.

For the nine months ended September 30, 2025, selling and distribution expenses increased $19.1 million, or 4%, to $470.5 million, compared with $451.4 million during the same period in 2024.

The increase was primarily a result of higher professional fees and services, shipping and handling, occupancy costs, and information technology related costs of $9.2 million.

In addition, employee-related expenses increased $13.6 million, offset partially by lower incentive compensation expense of $6.3 million.

General and administrative expenses decreased $0.4 million, or 2%, to $25.8 million for the three months ended September 30, 2025, compared with $26.2 million for the same period in the prior year.

For both the nine months ended September 30, 2025 and 2024 general and administrative expenses were $77.2 million.

For both periods, lower incentive compensation expenses were offset partially by an increase in professional fees.

For the three months ended September 30, 2025, other (income) expense, net was $2.0 million of income, primarily resulting from a settlement gain associated with a fire at our BMD Phoenix location in second quarter 2021.

For the nine months ended September 30, 2025, other (income) expense, net was $9.6 million of income, primarily related to gains on the sale of non-operating properties in our Wood Products and BMD segments in second quarter 2025, as well as the settlement gain discussed above.

Materials, labor, and other operating expenses (excluding depreciation) decreased $21.1 million, or 2%, to $1,255.1 million for the three months ended March 31, 2026, compared with $1,276.2 million during the same period in 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 lower prices, offset partially by increased sales volumes, compared with first quarter 2025.

However, materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our BMD segment increased 30 basis points, driven by lower margin percentages on general line and EWP products.

In our Wood Products segment, materials, labor, and other operating expenses decreased due to reduced purchases of external veneer for our Alexandria EWP mill, as operations resumed at our Oakdale veneer and plywood mill following planned downtime to complete significant mill modernization projects in 2025.

Additionally, lower per-unit costs of OSB (used in the manufacture of I-joists), lower other manufacturing costs, and decreased EWP sales volumes contributed to the decrease in MLO.

These decreases were offset partially by higher labor costs compared with first quarter 2025.

However, the MLO rate in our Wood Products segment increased by 150 basis points, primarily as the result of lower EWP sales prices and volumes, which resulted in decreased leveraging of costs.

Depreciation and amortization expense increased $1.9 million, or 5%, to $39.1 million for the three months ended March 31, 2026, compared with $37.1 million during the same period in the prior year.

The increase was primarily due to acquisition and organic growth in our BMD segment and the recent investments at our Oakdale veneer and plywood mill.

Selling and distribution expenses increased $6.8 million, or 5%, to $150.4 million for the three months ended March 31, 2026, compared with $143.6 million during the same period in the prior year.

The increase was due to higher employee-related expenses of $4.9 million, as well as higher shipping and handling costs of $2.3 million.

General and administrative expenses increased $1.3 million, or 5%, to $26.3 million for the three months ended March 31, 2026, compared with $25.0 million for the same period in the prior year.

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

Income From Operations

Income from operations decreased $85.0 million to $32.3 million for the three months ended September 30, 2025, compared with $117.4 million for the three months ended September 30, 2024.

Income from operations decreased $229.9 million to $167.4 million for the nine months ended September 30, 2025, compared with $397.3 million for the nine months ended September 30, 2024.

Wood Products.

For the three months ended September 30, 2025, segment loss was $12.1 million, compared with segment income of $53.9 million for the three months ended September 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

For the nine months ended September 30, 2025, segment income decreased $178.2 million to $19.6 million from $197.9 million for the nine months ended September 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property in second quarter 2025.

Income from operations decreased $26.7 million to $27.8 million for the three months ended March 31, 2026, compared with $54.5 million for the three months ended March 31, 2025.

Building Materials Distribution.

Segment income decreased $20.5 million to $54.3 million for the three months ended September 30, 2025, from $74.8 million for the three months ended September 30, 2024.

The decrease in segment income was driven by a gross margin decrease of $10.6 million, resulting primarily from decreased margins on commodity and EWP products, offset partially by increased margins on general line products .

Additionally, selling and distribution expenses and depreciation and amortization expense increased $7.8 million and $2.6 million, respectively.

For the nine months ended September 30, 2025, segment income decreased $51.9 million to $180.7 million from $232.7 million for the nine months ended September 30, 2024.

The decrease in segment income was driven by a gross margin decrease of $27.6 million, resulting primarily from lower sales volumes and decreased margins on commodity and EWP products, offset partially by increased margins on general line products.

In addition, selling and distribution expenses and depreciation and amortization expense increased $19.5 million and $7.9 million, respectively.

Segment income benefited from a $3.8 million gain on the sale of a non-operating property in second quarter 2025.

Unallocated corporate expenses decreased $1.4 million to $9.9 million for the three months ended September 30, 2025, from $11.3 million for the same period in the prior year.

For the nine months ended September 30, 2025, unallocated corporate expenses decreased $0.2 million to $33.0 million from $33.2 million for the nine months ended September 30, 2024.

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

Segment income decreased $15.5 million to $32.9 million for the three months ended March 31, 2026, from $48.4 million for the three months ended March 31, 2025.

The decrease in segment income was driven by increased selling and distribution expenses of $8.2 million, as well as a $6.5 million gross margin decrease, resulting from lower gross margins on all product lines, particularly EWP .

Wood Products.

Segment income decreased $9.2 million to $8.5 million for the three months ended March 31, 2026, from $17.7 million for the three months ended March 31, 2025.

The decrease in segment income was primarily due to lower EWP sales prices, as well as higher per-unit EWP conversion costs.

These decreases in segment income were offset partially by lower per-unit OSB costs, as well as higher plywood sales volumes and sales prices.

Additionally, operations resumed at our Oakdale veneer and plywood mill following planned downtime in 2025 to complete significant mill modernization projects, which provided a favorable impact on per-unit conversion costs.

Unallocated corporate expenses increased $2.0 million to $13.6 million for the three months ended March 31, 2026, from $11.6 million for the same period in the prior year.

The increase was primarily due to the absorption of approximately $1.8 million of estimated insurance losses related to a fire at our Florien plywood facility in first quarter 2026, in accordance with our self-insured risk retention program.

Interest Income.

Interest income decreased $6.0 million to $4.2 million for the three months ended September 30, 2025, from $10.2 million for the same period in the prior year.

For the nine months ended September 30, 2025, interest income decreased $17.0 million to $14.3 million from $31.3 million for the nine months ended September 30, 2024.

The decrease in both periods 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, which expired in June 2025, see the discussion under "Interest Rate Risk and Interest Rate Swap" of Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1.

Financial Statements" of this Form 10-Q.

Interest income decreased $2.6 million to $2.9 million for the three months ended March 31, 2026, from $5.5 million for the same period in the prior year.

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

Income Tax Provision

For the three and nine months ended September 30, 2025, we recorded $9.1 million and $41.5 million, respectively, of income tax expense and had an effective rate of 29.5% and 25.1%, respectively.

For the three and nine months ended September 30, 2024, we recorded $29.8 million and $101.1 million, respectively, of income tax expense and had an effective rate of 24.7% and 24.8%, respectively.

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

In addition, our effective tax rate during the three months ended September 30, 2025 was adversely impacted by the effect of permanent tax differences on decreased pre-tax book income for 2025.

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 have a material adverse impact on our distribution arrangements with either company or on our future results of operations.

For the three months ended March 31, 2026 and 2025, we recorded $6.6 million and $13.8 million, respectively, of income tax expense and had an effective tax rate of 27.0% and 25.5%, respectively.

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

Liquidity and Capital Resources

We ended third quarter 2025 with $511.8 million of cash and cash equivalents and $450.0 million of debt.

At September 30, 2025, we had $907.0 million of available liquidity (cash and cash equivalents and undrawn committed bank line

availability).

Our cash and cash equivalents decreased by $201.5 million during the nine months ended September 30, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, and dividends paid on our common stock.

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

We ended first quarter 2026 with $338.7 million of cash and cash equivalents and $452.5 million of debt.

At March 31, 2026, we had $733.8 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

Our cash and cash equivalents decreased by $138.5 million during the three months ended March 31, 2026, as we used cash to fund seasonal working capital increases, capital spending, share repurchases, and dividends paid on our common stock.

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

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations, working capital, income tax payments, and to pay cash dividends to holders of our common stock over the next 12 months.

We expect to fund our seasonal and intra-month working capital requirements in the remainder of 2025 from cash on hand and, if necessary, borrowings under our revolving credit facility.

We expect to fund our seasonal and intra-month working capital requirements in 2026 from cash on hand and, if necessary, borrowings under our revolving credit facility.

Sources and Uses of Cash

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

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

In addition to paying for ongoing operating costs, we use cash to invest in our business, service our debt 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.

Nine Months Ended

Net cash provided by operations $ 123,132 $ 343,752

Three Months Ended

Net cash used for operations $ (15,982) $ (28,476)

Net cash used for investment (39,473) (52,225)

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Operating Activities

For the nine months ended September 30, 2025, our operating activities generated $123.1 million of cash, compared with $343.8 million of cash generated in the same period in 2024.

The $220.6 million decrease in cash provided by operations was due primarily to a decrease in income from operations, as well as a greater year-over-year increase in working capital, offset partially by a $53.6 million decrease in cash paid for taxes, net of refunds, compared to the same period in 2024.

Working capital increased $122.8 million during the nine months ended September 30, 2025, compared with a $94.1 million increase for the same period in the prior year.

For the three months ended March 31, 2026, our operating activities used $16.0 million of cash, compared with $28.5 million of cash used in the same period in 2025.

The $12.5 million decrease in cash used for operations was due primarily to a lesser year-over-year increase in working capital, offset partially by a decrease in income from operations.

Working capital increased $80.5 million during the three months ended March 31, 2026, compared with a $123.7 million increase for the same period in the prior year.

See "Our Operating Results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations for more information related to factors affecting our operating results.

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

The increase in receivables in both periods primarily reflect increased sales of approximately 15% and 9%, comparing sales for the months of September 2025 and 2024 with sales for the months of December 2024 and 2023, respectively.

Inventories increased during the nine months ended September 30, 2025 in preparation for the building season, as well as expansions at some of our BMD facilities.

In addition, inventory levels for both segments were impacted by a weaker demand environment.

Inventories increased during the nine months ended September 30, 2024 in preparation and response to the building season.

During the nine months ended September 30, 2025, the increase in accounts payable and accrued liabilities was primarily related to the increase in inventories and extended terms offered by certain BMD vendors, offset partially by lower accrued employee incentive compensation and employee incentive compensation payouts made during the period.

The increase in accounts payable and accrued liabilities during the nine months ended September 30, 2024 was primarily related to the increase in inventories, offset partially by employee incentive compensation payouts made during the period.

The increase in receivables in both periods primarily reflect increased sales of approximately 26% and 18%, comparing sales for the months of March 2026 and 2025 with sales for the months of December 2025 and 2024, respectively.

Inventories increased during the three months ended March 31, 2026 in preparation for the spring building season, as well as participation in certain BMD vendors' early-buy programs.

These higher inventory levels were offset partially by the use of log inventory to support manufacturing activity in our Wood Products segment.

Inventories increased during the three months ended March 31, 2025 in preparation for the spring building season, as well as participation in certain BMD vendors' early-buy programs.

During both the three months ended March 31, 2026 and 2025, the increase in accounts payable and accrued liabilities was primarily related to the increase in inventories and extended terms offered by certain BMD vendors, offset partially by employee incentive compensation payouts made during the quarter and lower accrued rebates.

Investment Activities

During the nine months ended September 30, 2025 and 2024, we used $187.4 million and $135.8 million, respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

During the nine months ended September 30, 2025, we received proceeds of $11.1 million from the sale of assets.

During the nine months ended September 30, 2024, we also used $5.6 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 $2.2 million for acquired assets of a door and millwork operation in Boise, Idaho.

During the three months ended March 31, 2026 and 2025, we used $39.8 million and $53.2 million, respectively, of cash for purchases of property and equipment, including business improvement and efficiency projects, replacement projects, and ongoing environmental compliance.

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

We expect our capital expenditures, excluding potential acquisitions, to be approximately $150 million to $170 million in 2026.

We expect our capital spending in 2025 and 2026 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 mill and Oakdale veneer and plywood mill, as well as our greenfield distribution center in Texas.

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

These levels 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.

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

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.

Financing Activities

During the nine months ended September 30, 2025, our financing activities used $148.2 million of cash, including $111.0 million for the repurchase of 1,128,752 shares of our common stock, $26.6 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.

At September 30, 2025, we had $50.0 million of borrowings outstanding under the revolving credit facility.

During the nine months ended September 30, 2024, our financing activities used $391.6 million of cash, including $220.5 million in common stock dividend payments, $158.5 million for the repurchase of 1,232,345 shares of our common stock, and $11.1 million of tax withholding payments on stock-based awards.

During the nine months ended September 30, 2024, we did not borrow under our asset-based revolving credit facility.

During the three months ended March 31, 2026, our financing activities used $83.1 million of cash, including $65.5 million for the repurchase of 830,751 shares of our common stock, $10.4 million in common stock dividend payments, and $6.2 million of tax withholding payments on stock-based awards.

During the three months ended March 31, 2026, non-cash investing and financing activities included the issuance of a $2.5 million promissory note to partially finance a property purchase.

During the three months ended March 31, 2026, we did not borrow under our revolving credit facility.

At March 31, 2026, we had $50.0 million of borrowings outstanding under the revolving credit facility.

During the three months ended March 31, 2025, our financing activities used $70.8 million of cash, including $53.9 million for the repurchase of 482,700 shares of our common stock, $10.5 million in common stock dividend payments, and $5.9 million of tax withholding payments on stock-based awards.

During the three months ended March 31, 2025, we did not borrow under our asset-based revolving credit facility.

For more information related to our debt transactions and structure, our dividend policy, and our stock repurchase program, see the discussion in Note 6, Debt, and Note 9, Stockholders' Equity, respectively, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K.

As of September 30, 2025, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2024.

As of March 31, 2026, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2025.

Note 8, Debt, and Note 16, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8.

Financial Statements and Supplementary Data" in our 2025 Form 10-K describe the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make.

As of September 30, 2025, there have been no material changes to the guarantees disclosed in our 2024 Form 10-K.

As of March 31, 2026, there have been no material changes to the guarantees disclosed in our 2025 Form 10-K.

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.

As of October 26, 2025, we had approximately 7,640 employees.

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.

As of April 26, 2026, we had approximately 7,660 employees.

Approximately 17% of these employees work pursuant to collective bargaining agreements.

As of October 26, 2025, we had ten collective bargaining agreements.

Two agreements covering approximately 730 employees at our Oakdale and Florien plywood plants expired on July 15, 2025.

The terms and conditions of these agreements remain in effect pending negotiation of new agreements.

We may not be able to renew these agreements or may renew them on terms that are less favorable to us than the current agreements.

If any of these agreements are not renewed or extended upon their termination, we could experience a material labor disruption, strike, or significantly increased labor costs at one or more of our facilities, either in the course of negotiations of a labor agreement or otherwise.

As of April 26, 2026, we had ten collective bargaining agreements.

One agreement covering approximately 70 employees at our Canadian EWP facility is set to expire on December 31, 2026.

The terms and conditions of this agreement will remain in effect after expiration, pending negotiation of a new agreement.

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

If any of these agreements are not renewed or extended upon their termination, or additional collective bargaining agreements are formed, we could experience a material labor disruption, strike, or significantly increased labor costs at one or more of our facilities, either in the course of negotiations of a labor agreement or otherwise.

Labor disruptions or shortages could prevent us from meeting customer demands or result in increased costs, thereby reducing our sales and profitability.

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In the normal course of business, we are exposed to financial risks such as changes in commodity prices, interest rates, and foreign currency exchange rates.

As of September 30, 2025, there have been no material changes to financial market risks disclosed in our 2024 Form 10-K.

As of March 31, 2026, there have been no material changes to financial market risks disclosed in our 2025 Form 10-K.

Environmental

As of September 30, 2025, there have been no material changes to environmental issues disclosed in our 2024 Form 10-K.

As of March 31, 2026, there have been no material changes to environmental issues disclosed in our 2025 Form 10-K.

For additional information, see Environmental in "Item 7.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K.

At September 30, 2025, there have been no material changes to our critical accounting estimates from those disclosed in our 2024 Form 10-K.

At March 31, 2026, there have been no material changes to our critical accounting estimates from those disclosed in our 2025 Form 10-K.

New and Recently Adopted Accounting Standards

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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-Q

Item 2. Management’s Discussion and Analysis