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spk03: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1. Good morning. My name is Tawanda, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascades' fourth quarter and four-year 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask the question during that time, simply press star 1-1 on your telephone keypad. Questions will be taken in the order they are received. If you would like to withdraw your question, please press star 1-1 again. It is now my pleasure to introduce you to Kelly Hibbs. Senior Vice President, CFO, and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your conference.
spk06: Thank you, Tawanda, and good morning, everyone. I would like to welcome you to Boise Cascade's fourth quarter 2022 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO, Mike Brown, head of our wood products operations, and Jeff Strum, head of our building materials distribution operations. Turning to slide two. This call will contain forward-looking statements. Please review the warning statements in our press release on the presentation slides and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our GAAP NET income to EBITDA and adjusted EBITDA and segment income to segment EBITDA. I will now turn the call over to Nate.
spk05: Thanks, Kelly. Good morning, everyone. Thank you for joining us on our earnings call today on slide number three. A few highlights as I reflect on a terrific 2022 for Boise Cascade. We reported full year net income of $857.7 million, or $21.56 per deleted share, on sales of $8.4 billion. We had strong performance and safety. We made great strides on our growth initiatives in both businesses, and we also rewarded our shareholders with $160 million of combined regular and special dividends. I also want to thank and recognize our nearly 7,000 associates across the company who made the results and accomplishments of 2022 possible. Let me now turn over to the fourth quarter results. New residential construction activity declined sharply, with total U.S. housing starts down 15%, driven by a decrease in single-family housing starts at 27% compared to the prior year quarter. Despite the challenging environment in the fourth quarter, we were able to deliver strong financial results. Our consolidated fourth quarter sales of $1.6 billion were down 9% from the fourth quarter of 2021. Our net income was $117.4 million, or $2.95 per share, compared to net income of $169.1 million, or $4.26 per share in the year-ago quarter. Wood Products reported segment EBITDA of $99.7 million in the fourth quarter, compared to $112.2 million in the year-ago quarter. Wood products was impacted by lower EWP sales volumes due to decline in housing starts and significant inventory stocking through the customer channel. We have and will continue to focus on managing our production levels to meet current and expected sales demand. Building materials distribution reported segment EBITDA of $99.4 million on sales of $1.4 billion for the fourth quarter compared to $144.2 million of segment EBITDA on sales of $1.6 billion in the comparative prior year quarter. BMD experienced lower sales volumes compared to the prior year quarter due to decline in housing starts and declining commodity prices also negatively impacted our financial results in the fourth quarter of 2022. However, our out-of-warehouse sales activity across a range of products was steady as our customers tend to desire mixed loads and look to manage inventory volume and risk during periods of market uncertainty. As we exit 2022, our balance sheet remains very strong and affords us the ability to further invest in our businesses through the business cycle. We look forward to the continued execution of our growth plans so that we remain well positioned when residential construction activity returns to normalized levels. I'll speak more to our growth initiatives during our outlook commentary. Kelly will now walk through our financial results in more detail and provide a further update on capital allocation, after which I'll come back to provide our outlook before we take your questions.
spk06: Kelly? Thank you, Nate. I'm on slide four. Wood product sales in the fourth quarter, including sales to our distribution segment, were $425.6 million compared to $446.6 million in fourth quarter 2021. As Nate mentioned, wood products reported segment EBITDA of $99.7 million down from EBITDA of $112.2 million reported in the year-ago quarter. The decrease in segment EBITDA was due primarily to lower EWP sales volumes and higher wood fiber and other manufacturing costs. We expect wood products annual depreciation and amortization moving forward to be approximately $100 million per year. This includes the incremental depreciation and amortization from the assets acquired in the coastal plywood transaction. BMD sales in the quarter were $1.4 billion, down 12% from fourth quarter 2021. BMD reported segment EBITDA of $99.4 million in the fourth quarter compared to segment EBITDA of $144.2 million in the prior year quarter. The decrease in segment EBITDA was driven by a gross margin decrease of $39.7 million, resulting from decreased sales volumes and declining commodity prices during fourth quarter 2022. In addition, selling and distribution expenses increased $3.6 million. Turning to slide five, our fourth quarter sales volumes for IJOYCE and LVL were down 55% and 30%, respectively, compared with fourth quarter 2021. EWP volumes were impacted by the decline in single-family housing starts and significant destocking of inventory through the customer channel. Pricing in fourth quarter for I-Joyce and LVL were up 5% and 2%, respectively, compared with third quarter 2022. Sharply declining sales volumes during the fourth quarter created positive rebate and allowance adjustments that were offset partially by broad pricing pressures across the system. We have continued to experience pricing pressures for EWP as we move through the first quarter of 2023, and we expect significant EWP price declines sequentially. However, we expect EWP prices will still be up in comparison to first quarter 2022 levels. As it relates to sequential EWP sales volume expectations, we currently expect both LVL and iJoyce to be modestly higher in first quarter 2023. Turning to slide six. Our fourth quarter plywood sales volume in wood products was 393 million feet compared to 304 million feet in fourth quarter 2021. The increase in plywood sales volumes was primarily related to the acquisition of coastal plywood. Excluding the coastal volumes, our fourth quarter plywood sales volumes were 334 million feet, up 10% from fourth quarter 2021 and 23% sequentially. The 396 per thousand average plywood net sales price in fourth quarter was down 1% from fourth quarter 2021 and down 17% sequentially. Thus far in the first quarter of 2023, plywood price realizations are approximately 10% below our fourth quarter average. Moving to slide seven and eight. BMD's fourth quarter sales were $1.4 billion, down 12% from fourth quarter 2021, driven by a sales volume decrease of 14%, offset partially by sales price increases of 2%. By product line, commodity sales decreased 17%, general line product sales decreased 2%, and sales of EWP decreased 19%. Gross margin dollars decreased $39.7 million in fourth quarter compared to the same quarter last year, resulting from decreased sales volumes and declining commodity prices during fourth quarter 2022. The gross margin percentage for BMD was 15.8% down 40 basis points from the 16.2% reported in fourth quarter 2021. BMD's EBITDA margin was 6.9% for the quarter down from the 8.8% reported in the year-ago quarter. Looking forward, B&B sales pace thus far in first quarter 2023 is seasonally weaker. We continue to provide high service levels, but are also focused on carrying prudent levels of inventory given economic uncertainty and weaker housing start projections. With the realities of today's marketplace, we anticipate reporting lower sales gross margins, and EBITDA margins sequentially and year-over-year in the first quarter of 2023. However, we also expect B&B's solid execution to continue and that our EBITDA margins will exceed pre-COVID levels. Moving to slides 9 and 10, these slides show the steady decrease in lumber and panel pricing during fourth quarter 2022 compared with sharp increases in the prior year quarter. As we enter 2023, commodity lumber and panel pricing has increased slightly. However, it is well below the historical highs experienced in previous years. We expect future commodity product pricing will continue to be volatile, but within tighter ranges than seen in recent years, as the industry attempts to adjust supply to levels needed to support an uncertain near-term demand environment. I'm now on slide 11. We had capital expenditures of $114 million in 2022 with $52 million of spending in wood products and $60 million of spending in BMD. In wood products, our capital expenditures included the replacement of a dryer at our Chester, South Carolina, veneer and plywood plant and post-acquisition veneer equipment-related spending at our Chapman, Alabama, facility. In BMD, our capital expenditures include funding for the previously disclosed organic expansions in Minnesota, Ohio, and Kentucky, as well as land purchases for our recently announced greenfield distribution centers in South Carolina and Texas. We expect capital expenditures in 2023 to total approximately $120 to $140 million, which includes the continuation of our multi-year capacity expansion projects in EWP and further investment in BMD organic growth projects. As we've noted before, the availability of engineering and construction resources, timing and availability of equipment purchases, and our financial results are among the factors that are expected to have an influence on these levels of capital expenditures. Speaking to shareholder returns, we paid $160 million of regular and special dividends to shareholders in 2022. In fourth quarter 2022, our board approved a $0.03 per share or 25% increase in our quarterly dividend. Dividends and opportunistic share repurchases remain our preferred options to return capital to shareholders under our balanced approach to capital allocation. We have no near-term debt maturities and had total available liquidity of December 31st of approximately $1.4 billion, which reflects our cash and availability under our committed bank line. As such, our balance sheet remains very strong, providing us ample flexibility to continue to invest in our existing asset base and organic growth projects in both businesses. I will turn it back over to Nate to discuss our business outlook.
spk05: Thanks, Kelly. I'm on slide number 12. We expect to continue to see a deceleration in housing starts, most notably in single-family starts, with forecasts for total 2023 housing starts in the U.S. generally calling for declines of 15% to 30% compared to 2022 levels. While mortgage rates have declined from peak levels in late 2022, and home price increases have moderated, home affordability remains a challenge for consumers. The Federal Reserve's upcoming actions in response to inflationary data and what impacts these actions have on mortgage rates and the broader economy will continue to influence the near-term demand environment. Despite the near-term uncertainty, we believe the longer-term demand drivers and fundamentals for new residential construction continue to be favorable, supported by strong demographic trends and an under-built housing stock. As it relates to home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity provide a favorable backdrop for repair and remodel spending. While likely tempered by an economic slowdown, we anticipate these drivers to continue to be supportive of homeowners' future investment in their residences. As Kelly mentioned, we remain well positioned to invest in our existing asset base and organic growth project in both businesses and have an expanded capital expenditure program for 2023. We also remain interested in M&A opportunities as a means to further grow the company. In wood products, we'll be focused on continuing to successfully integrate the coastal plywood operations into our system and execute on target investments to expand our EWP capacity in the Southeast US. The near-term weakness in new residential construction does not detract from the fundamental thesis for the coastal acquisition and our conviction to grow EWP capacity. We will also closely monitor the changing housing market landscape and adjust our production rates as appropriate to meet sales demand. BMD continues with its steady execution of organic growth. We recently announced purchases of property in South Carolina and Texas for Greenfield Distribution Centers. These new locations will allow us to better serve customers in Charleston, South Carolina, San Antonio, Texas, and the surrounding markets in both areas. In addition, we recently announced the purchase of new facility to house an additional door shop in Kansas City, Missouri. We fully believe in the value proposition that two-step distribution brings to the marketplace and are excited to continue our organic growth in BMD to support our vendor and customer partners. Lastly, we have proven our effectiveness in managing market uncertainties and I'm confident in our ability to do so in the future. We will continue to use our operating and financial strength to the benefit of our customers, suppliers, communities, and shareholders. We remain committed to the execution of our key strategic priorities as we navigate market uncertainties and the near-term demand environment for new resident construction. Thank you for joining us on the call today and for your continued support and interest in Boise Cascade. We welcome any questions at this time. Tawana, would you please open the phone lines?
spk03: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11 and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question comes from the line of George Stafford with Bank of America. Your line is open.
spk08: Hey, thanks very much. Hi, everyone. Good morning. Thanks for all the details. How are you doing, Nate? Congratulations on the year. I guess the first question that I had is, obviously, destocking hit volume in iJoyce and LVL. Can you talk to what you're seeing right now and how long, if the destocking is still happening, how long that will continue said differently, you know, what are your early, you know, run rates on volume in the quarter?
spk04: Hi, George. It's Mike. It's good to hear from you. Yeah, so thankfully I would say the beginning of this year is somewhat better than the tail end of last year. So not surprisingly with the destocking that occurred in late 2022, January sort of was a gave an opportunity for the pipeline to really refill on some of that working capital that they've worked down in the last part of last year. So January was all things considered, not a bad month relative to the prior two months in particular. And February, even though we're not finished yet, is looking like it's similar to January at this stage.
spk08: Okay, so recognizing That's kind of hard to get into all this on an earnings call live, Mike. Would it be fair to say directionally you expect wood EBITDA could be fairly comparable with fourth quarter, i.e. you've got certainly some sequential price declines in EWP, but you're kind of making it up on the volume. How would you have us think about that? What guardrails might you put on the analysts, how we think about your outlook for the quarter?
spk06: Yeah, so George, this is Kelly. We did give you some directional guidance in terms of EWP volumes. We did speak to expected price erosion in EWP, and then we also talked about plywood pricing being off 10% so far this quarter. We didn't speak to plywood volumes, but I will tell you we expect those to probably be flattish sequentially. So you put all that stuff together, and I would also say we're not – getting a lot of relief, if you will, on cost pressures as it relates to the wood, labor, glues, resins, et cetera. So we would not expect first quarter EBITDA to be at the same levels as it was in the fourth quarter. We would expect it to be down. Okay.
spk08: Understood. I'll ask one more here in this round, and then I'll turn it over. Can you talk to the operating stance that you're seeing or that you're running at, you know, at your mills in both plywood as well as at EWP? Thank you.
spk04: Yeah, sure, George. So I think as Nate mentioned, we're monitoring, obviously, the order files and the demand that we have in front of us and adjusting our run schedules appropriately. I think as you've heard several times in the past, because of our integrated nature where a lot of the veneer that we produce internally normally ends up in EWP, we're having to take some adjustments in terms of run schedules. So there are a variety of things that we're doing and they include reducing the number of shifts or the number of days per week and on occasion having to take outages of one or more weeks at a time. So it does vary a little bit by geography. So I'd say generally speaking, the southeast is a bit stronger and therefore is, you know, is running a bit more consistently than the Pacific Northwest. And so when I look at sort of the overarching sort of what will this mean to the total volumes and what have you, I think sort of the outcome in the first quarter will be not dissimilar to what we saw at the end of the year, so in Q4 last year. So you will notice, or maybe you've seen through some announcements at least, that we've taken downtime of a week here or a week there, depending on the location. And we'll continue to do that depending on the order files and what we have in front of us.
spk08: Mike, lead time is like a week or so right now. And I'll stop there.
spk04: Yeah, so the plywood order file is several weeks out in front of us. So it's a good thing. I'm very happy about that. And our EWP order file is actually increasing. So hence my earlier comments around January was, you know, significantly better than December as an example, and February's been pretty good so far. We'll see how that goes for the remainder of this month in March. Got it. Got it. I'll stand down. Thank you. Thanks, Mike.
spk03: Thank you. Please stand by for our next question. Our next question comes from the line of Susan McClary with Goldman Sachs. Your line is open.
spk02: Thank you. Good morning, everyone. And let me offer my congrats on a great year.
spk05: Thank you. Thanks, Susan.
spk02: My first question is, you know, it's clear that you are seeing an improved mix in BMD, given all the efforts there with the general line as a percent of that total. As you look out, can you talk to where those initiatives can get to over time? And the role that that will play in that segment margin, as you think, further than just, you know, the next quarter or so?
spk06: Yeah, so it's a good question, Sue, and it's certainly part of our strategy is to, you know, we will continue to be in the commodity business. We're good at that, but the pieces of the pie we're trying to grow in B&B are exactly what you just said, which is general line and EWP. And as we've said before, our expectation is that As we continue to grow those pieces of the pie, we do expect our EBITDA margin and gross margins to expand. And we have demonstrated that. We also did try to give you a little color here in terms of what we expect in terms of first quarter performance relative to pre-COVID levels in terms of EBITDA margins. But yes, over time, we're absolutely looking for that to be, you know, four plus percent as we move forward in terms of EBITDA margins and B&B.
spk02: Okay, that's helpful. And then turning to EWP and the commentary to the last question around the order file that is increasing there, I guess in general, you know, it feels like the builders are pretty excited about what they're seeing on the ground as we head into the spring and are perhaps positioning to add some more volumes there. Can you comment on one, the channel inventory there, as we do head into that? But two, how do you think about the ability to hold some of the pricing that you have realized, even if those underlying commodity prices do move lower? Do you think that that spread can hold to some extent?
spk04: So I'll have a stand at this to begin with, and the others can chime in. So the spread on the pricing side, I think the fundamental issue is that there's still significant downward pressure on EWP pricing. I mean, it's, I think, common knowledge that builders are looking to take out costs in every possible category. And so as a result, we're obviously not, haven't been on allocation for quite some time now. So I don't think the spread would remain. I think there'd be increasing pressure for some period of time. Hopefully, nothing like going back to the situation we found ourselves in pre-pandemic. As it relates to overall demand and what builders are seeing, I think, again, depending on geography, the southeast, if you will, in general, has been stronger than the northwest of late. But I think that could partially be due to the fact that California particularly was more or less underwater for several weeks. And finally, I think they're starting to see a little bit of additional action in California that could assist us going forward. So I think it's certainly not a green light, but it's no longer red. Maybe we're sort of flashing yellow. So there is a little bit more strength than we saw for sure late last year.
spk05: Hey, Stu, it's Nate. Maybe just to add to Mike's comments, I think to your point on maybe some of the optimism that the builders are describing here over the last couple of weeks, I think it's For me, it's maybe coming off a pretty pessimistic fourth quarter. So, in terms of why they're maybe more optimistic today, I think the reality is that we're still looking at a different marketplace than certainly we were this time last year. And perhaps, to your point, perhaps a bit more improved in terms of optimism and maybe some of the momentum that the builders are experiencing in a select market. We're watching that carefully and closely, and as we described, we're managing our business and capacity plans accordingly.
spk02: Okay. And I assume, or is it fair to assume that the inventory is still pretty lean in there?
spk04: So I think my earlier comments around January, and this is a normal thing that happens pretty much every year, So in January is generally a better month in terms of overall demand for EWP simply because of the way in which most of the industry focuses on working capital in any situation, any year. So I'd say the channel is certainly not full by any stretch of the imagination, nothing like it was, let's say, in the middle of last year. But I think it's too early to say that there's, I'll put it this way, I think there's ample opportunity for more volume to go into the channel. We're nowhere near full at this stage.
spk02: Okay. And then one last question is just obviously, you know, you've done a great job in cash generation and the balance sheet's in great shape. Can you just speak a bit to, one, the M&A pipeline as we kind of think about a shifting macro out there, but also just overall sort of uses of cash, shareholder returns, plans around that for 2023?
spk06: Yeah, sure. Sue, I'll take that. So maybe just let me speak to maybe capital allocation broadly, and then I think I'll get at your questions. So we do feel really good about our balance sheet, and we're fortunate to have the balance sheet we have as we head into an uncertain period of time. We are really planning on executing on our 120 to 140 capital spending plan we have in 2023. We We don't see our balance sheet being a hindrance of getting that done. We're excited about that. And I would also say that in environments like this where there are uncertainty, there's a reasonable chance that there could be some other organic or M&A sort of events that we would ponder. So yes, absolutely. We're looking to continue to grow the business with the plans we have in place as well as some things that might come to fruition. And then And then to the point on shareholder returns, we're not going to lose sight of the shareholders also, that we will continue to have, you know, ongoing dialogue with our board and figure out what the right timing, what the right mechanism is to return cash to shareholders when we deem it's appropriate.
spk02: Okay. Thank you and good luck.
spk03: Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Ketan Mamtoor with BMO. Your line is open.
spk01: Thank you, and good morning. First question, Kelly, is there a way to think about current utilization rate in EWP? And I know it's not as simple just because of the way sort of veneer flows through, but is there a way to think about it?
spk04: I guess I would say as a very general statement, We're not running anywhere near our capacity. I wouldn't like to go into specifics around are we running at 50 or 70 or 30%. I think that's not something that I'd like to get too far into, other than to say that if you look at the volumes that we were producing in the earlier part of last year, we were sort of running at capacity at that stage, but we were limited by both the near availability and people. We've certainly solved part of that problem, and so should the demand increase significantly, we will have the veneer available to increase output as long as we can maintain our current workforce and actually bring on some additional folks that we would need.
spk01: Okay. Got it. You know, switching to BMD, you know, I'm just curious, as you look at demand today and you touch on a lot of different, you move a lot of different products, can you give us a general sense of, you know, just inventory in the channel, just your sense of, you know, sort of the sell-through demand at this point? Obviously, we've talked about new residue down quite a bit. But I'm just curious, as you sit here and kind of look at it, how does that look?
spk00: This is Jeff Strauma. Inventory and the channel, I'll tell you this. The dealers, as was said earlier, they've definitely been destocking on everything. And they've been focused on networking capital and getting their inventories right size. And if you think about the risk-reward equation, where that stands right now is significantly different. That being said, there's a real reliance right now on inventory that we can ship prompt right out of warehouse in quantities that they need. So while things have slowed down overall, our business out of warehouse continues to be significant.
spk01: And do you think that the inventory destocking in at least most product categories has already played out, or is it? kind of in the process of happening, or we've got quite a bit of further destocking ahead of us?
spk00: So what we've heard from our locations is that most of it is complete, but there still is some to go, and it varies by geography and by product line. But most of it, it seems to be done.
spk05: Hey, Keenan, it's Nate. Maybe just to add to Jess' comments is that, you know, as you think about, you know, kind of where we're at in that process, you know, is there a view that the channel will really look to increase inventory levels and really kind of stock up for the building season? And I think given, you know, where we're at relative to the demand side of things, there's probably some hesitancy on risk-reward. And so, I think, you know, people will probably stay more here now relative to inventory levels and the dependency we think out of warehouse on a range of products and services will remain consistent and steady through the course of the year.
spk01: Got it. Now that's helpful. And then, you know, Nate, can you talk a little bit about, you know, sort of, you know, what you've seen from your coastal acquisition thus far and, you know, sort of any surprises there, either sort of positive or to the downside?
spk04: Yeah, sure, Kate. Yeah. So I would say we're very satisfied with the acquisition, but particularly I'm very, very satisfied with the way in which the Coastal Associates have transitioned to Boise Cascade Associates. Very, very good, very good philosophy, very good in adapting to different processes and requirements as a public company versus a private company. So that part has gone extremely well. We're executing on our capital plan that was part of the acquisition and we're already able to produce stress rated veneer from the Chapman, Alabama facility. So we've implemented the capital project, the initial capital project that allowed us to do that. So that's a tick because that was part of our plan. And so there's always process issues because we're changing our systems and what have you. Nothing that I would call at all a stumbling block. So I think we're very, very satisfied and it's put us in a remarkably good place when the demand returns as undoubtedly it will sometime.
spk01: Okay, that's helpful. I'll turn it over and jump back in the queue. Thank you.
spk05: Thanks, Leskin.
spk03: Thank you. Please stand by for our next question. Our next question comes from the line of Kurt Yinker with DA Davidson. Your line is open.
spk07: Great, thanks, and good morning, everyone. Morning, Kurt. Morning. You know, recognizing there's some noise right now in terms of BWP volumes, as you look out, I guess, over the course of the year and perhaps into 2024, do you think your volumes there can match or perhaps kind of outperform single-family starts trends and How do kind of non-single family related growth opportunities factor into your thoughts?
spk04: Yeah, Kurt, it's Mike. So we're doing everything that we can to offset the reduction in single family stocks. And that includes, obviously, things like multifamily, like commercial. And we are very, very focused on that. In addition to that, there are opportunities with... potential customers that we weren't supplying in the last round. And so we're on the offensive as it relates to looking for additional customers that may have been with somebody else and may not want to stay with the other brand. So I think we have ample opportunity to expand our shelf space across both single family as well as multifamily. How that will play out, I think a little bit to Nate's comments, we're not really sure how the year is going to progress with the uncertainties around interest rates and so forth and so on. So I wouldn't like to give you a concrete answer to will we have more or less volume this year compared to last year just at the moment. I think we need a few more months under our belt to have a bit better view of how the year will pan out.
spk07: Right. Okay. That makes sense. Thanks, Mike. And then Kelly, you kind of talked about not seeing much relief on the cost side yet, but In terms of refilling long inventories in the West and perhaps even in the South, do you have line of sight to some deflation there? And could you also maybe touch on OSB prices in terms of web stock and how that might factor into the cost side over the next couple quarters?
spk06: Yeah, I'll hit it briefly and then maybe I'll let Mike give you some more color if need be here. So yeah, we did allude to the cost pressures are still pretty persistent. In the south and the east, log costs have been, for a number of years, have been pretty steady. Not a lot of ups, not a lot of downs. We don't see that changing a whole lot. In fact, there'll probably be a little bit of pressure on those wood baskets as we move forward. In the west, you get two things to think about there as it relates to us. In northeast Oregon and northeast Washington, a good amount of the wood costs there are tied to end product prices. So we would expect to start to see some relief as we move through 2023 there. In Western Oregon, not so much the case. That's a challenge. Wood basket and costs are generally high there. So that's wood costs. And then I guess, you know, labor, you know, we have increased some costs there and happy to do that in support of our associates. And so we don't see that coming down. Glues and resins, it's tied to petrochemical. And so might we start to get some relief over time? Sure, but we haven't seen it yet. Any other color you'd add, Mike?
spk04: No, I think that's really it. I mean, for the most part, as I think everybody has seen, the wood, labor, energy, resin, maintenance materials costs have all increased significantly. And some of them may slide back a little bit during this year, but it'll depend a lot on how the macroeconomics situation pans out. So I certainly don't think we can get some of those costs back to where they were before, but the primary one obviously being the hourly wages number. But that's not going back to where it was before.
spk06: Yeah, and then one thing I didn't cover off there, Kurt, was yes, we would expect to start to see some benefit as OSB prices come off, but again, on a lagged basis as we've talked about before.
spk07: it okay thanks for the around the world there and then just lastly in terms of you know M&A opportunities that you kind of alluded to you know coastal I think strategically makes a lot of sense it expands the runway for growth and EWP in BMD you guys have been pretty successful just growing organically and so I I guess I was hoping you could just maybe provide a little bit of color at a high level around what strategically you would find attractive from an M&A perspective.
spk05: Hey, Curtis, Nate. Yeah, good question. I think in terms of M&A, to your point, I think we've gotten a number of things done here over the last maybe 12 to 24 months, and we still have a lot of work and optimism in front of us in terms of M&A and growth opportunities. For me, I would say we're going to stay centered in who we are and what we do. We're not going to be looking to get unique and get extreme in terms of how we show up in front of the marketplace on a day-in, day-out basis. I think we'll stay centered largely in the work and the business that we're involved in today. To your point, I think we feel good about the coastal acquisition and what that represents in terms of growth opportunities. I think we also continue to look at opportunities in the commercial construction space. And again, maybe what opportunities may exist down the road in terms of mass timber. I think in BMD, as you described it, it's really Spain making sure we have the right kind of capability and capacity, services and products in market on a day in and day out basis. And we continue to look at opportunities specifically to grow our door and millwork franchise. So we feel good about the work that's been done over the last year or so on that. specifically our work in Texas. We feel good about the announcement in Kansas City. And again, I think that's something that we'll continue to look for in terms of how do we continue to grow that platform, you know, given it's, again, it's fit both with our customers and as well as our suppliers. So I hope that provides some context. Again, we're not going to be heading into a unique place. I think we're going to stay pretty consistent and steady with the businesses and, you know, kind of the environment that we've been in here over the last number of years.
spk07: Got it. Okay, thanks for that, Nate. I'll turn it over. Thank you.
spk05: Thanks.
spk03: Thank you. Please stand by for our next question. We have a follow-up question from the line of George Stafford with Bank of America. Your line is open.
spk08: Hey, guys. Thanks for taking the follow-on. Just two quickies. One, what's the latest on the Brazilian plywood certification saga? And then, overall... You know, you had mentioned, you know, destocking had happened pretty sharply at the retail level, if I heard you correctly. Are there inventories now, your customers, you know, pretty normal from what you can see? You said there is room for inventories to move up, but I'm just wondering where, if I, you know, mapped it correctly, whether you think inventories are relatively normal at this juncture at retail, at the big home channel centers. Thanks, guys, and good luck in the quarter.
spk06: Yeah, thanks, George. I'll give it a go on the Brazilian plywood, and then we'll let Nate further speak to the inventory and the channel. So I think you used the word saga, George, when you asked about the certification as it relates to rated sheathing. That's probably still the appropriate word. There's kind of been several stops and starts there around that, and so we've seen, you know, the lowest level of imports from Brazil into the U.S. in January in the last – that we've seen in the last three years. And then, you know, it's kind of year-over-year volumes from Brazil were off about 18 percent. So, certainly, I think the certification issue has impacted that. We'll see where that goes from here. But we do feel like that has – created more incremental demand for U.S. domestic plywood production, which, you know, is obviously a good thing for Boise Cascade. Nate, on the inventory?
spk05: Yeah, and then with George, you know, I think in terms of kind of where the channel is at, where people are at, I think people will continue to look at the risk and reward equation, both on price and volumes. I think as you look at kind of where people are going to kind of index to and how they're thinking about it, I think largely it's what is their belief on pricing risk, as well as expected kind of demand levels in the marketplace. For me, it feels more, there's more normalcy in the conversation than there's been for a period of time. I think Mike even spoke to kind of the seasonality. I think we're seeing elements of that. And I think there's also kind of a view that access to material and services is better today than it's been in a number of years. And so in terms of needing to go long on inventory, that thesis doesn't really exist today. And so people are staying short, again, both on the demand and on the pricing side of things to make sure, again, that risk-reward equation is correct. For me, the other maybe data point here is it's not a question of whether customers in the channel can take on more in terms of their balance sheets, because they can. I think everyone's in a good spot. It's simply what the environment describes today on demand and price, and again, I think people are being conservative, and rightly so, in terms of how they're managing that. And again, I think that's showing up well for Boise Cascade in terms of the auto warehouse presence and services support that we're providing.
spk08: Thanks, Nate. We'll turn it over, and again, good luck in the quarter. Thank you. Thanks, Rick.
spk03: Thank you. I'm showing no further questions in the queue. I would now like to turn the call back to Nate for closing remarks.
spk05: Great. Thank you. We appreciate everyone joining us this morning for our update, and thank you for your continued interest in supporting Boise Cascade. Please be safe and be well. Thank you.
spk03: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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