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spk06: Good morning. My name is Chris, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's third quarter 2023 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. 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.
spk10: Thank you, Chris, and good morning, everyone. I would like to welcome you to Boise Cascades third quarter 2023 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 four 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.
spk08: Thanks, Kelly. Good morning, everyone. Thank you for joining us on Ernie's call today. I'm on slide number three. Our consolidated third quarter sales of $1.8 billion were down 15% from third quarter 2022. Our net income was $143.1 million, or $3.58 per share, compared to net income of $219.6 million, or $5.52 per share in the year-ago quarter. Total U.S. housing starts declined 6%, driven by decrease in multifamily housing compared to prior year quarter. However, single-family housing starts increased 7% compared to the same period in 2022. Both of our businesses again delivered solid operating financial results. I want to thank our associates for their continued focus, hard work, and loyalty as we continue to navigate ongoing economic uncertainties. As recently announced, we completed the acquisition of Roscoe and I'm pleased to welcome their outstanding team to Boise Cascade. We will provide additional details on this transaction following the discussion of our financial results. Kelly will now walk through our segment financial results, provide an update on our capital allocation, and discuss the Brocco acquisition in more detail, after which I'll provide our outlook before we take your questions. Kelly?
spk10: Thank you, Nate. Wood product sales in the third quarter, including sales to our distribution segment, were $515.2 million compared to $595.3 million in third quarter 2022. Wood products reported segment EBITDA of $122.9 million down from EBITDA of $177.3 million reported in the year-ago quarter. The decrease in segment EBITDA was due primarily to lower EWP and plywood sales prices, as well as lower LVL sales volumes. These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes. BMD sales in the quarter were $1.7 billion, down 15% from third quarter 2022. Lower pricing across product lines negatively impacted B&B's year-over-year revenue comparison. However, B&B's gross profit and EBITDA margins were again strong during the third quarter. B&B reported segment EBITDA of $104.9 million in the third quarter compared to segment EBITDA of $161.2 million in the prior year quarter. The decline in segment EBITDA was driven by a gross margin decrease of $48.4 million. In addition, selling and distribution expenses increased $6 million. Slide 5. On a year-over-year basis, third quarter volumes for I-JOISTS were flat, while volumes for LVL were down 5%. On a sequential basis, volumes for LVL and I-JOIST increased by 6% and 2%, respectively. Sequential pricing for LVL and I-JOIST was down 4% and 3%, respectively. Our strong volumes in the third quarter and consistent lead times to our customer base are a great testament to our wood products team and their ability to respond to stronger than expected demand in 2023. Looking forward to the fourth quarter, October volumes are modestly below third quarter monthly average levels, with recent declines in our order files indicative of the expected seasonal slowdown in construction activity. As such, in fourth quarter, we would expect sequential volume declines, but meaningful year over year increases. On EWP pricing, we currently expect modest single-digit sequential price declines in the fourth quarter. Turning to slide six, our third quarter plywood sales volumes in wood products was 390 million feet compared to 329 million feet in third quarter 2022. Our plywood sales team was effective in finding market opportunities, including the sale of incremental volumes related to the acquisition of the Chapman and Havana mills. Prior year volumes were also negatively impacted by downtime taken to replace an existing dryer at our Chester, South Carolina plywood facility. 392 per 1,000 average plywood net sales price in third quarter was down 20% from third quarter 2022 and up 5% sequentially. Thus far in the fourth quarter, plywood price realizations are modestly above our third quarter average. Moving to slide seven and eight. B&B's third quarter sales were $1.7 billion, down 15% from third quarter 2022, driven by sales price and sales volume decreases of 14% and 1%, respectively. Byproduct line commodity sales decreased 20%, general line product sales decreased 5%, and sales of EWP decreased 21%. Gross margin dollars decreased by $48.4 million in third quarter compared with the same quarter last year. As expected, lower margins on EWP were the principal driver of the decline in margin dollars, with the impact of a declining instead of a rising price environment negatively impacting results. However, BMD's overall gross margin percentage held strong at 15.2%, down only 20 basis points from the 15.4% reported in third quarter 2022, as we avoided the negative impacts of from a declining commodity pricing environment that we experienced during 2022. BMD's EBITDA margin was 6.3% for the quarter, down from the 8.2% reported in the year-ago quarter and down 20 basis points sequentially. BMD's sales pace thus far in fourth quarter 2023 is seasonally weaker or approximately 6% below daily sales averages in third quarter. However, With inventory management a clear focus for the industry in 2023 and a restored supply chain, we view inventory in the channel as appropriately positioned across most product lines. As such, we'd expect fourth quarter takeaways to generally align with market activity as opposed to the destocking events of last year. And as we have indicated before, reliance on two-step distribution is expected to remain strong when customers look to manage inventory volume and price risk. We anticipate lower EBITDA margins in the fourth quarter, resulting from deleveraging of fixed costs as sales decline, Brosco acquisition-related costs, and the potential of gross margin degradation from product price erosion. Moving to slides 9 and 10. These slides show the generally stable pricing environment for lumber and panel pricing during third quarter 2023, compared with the downward trajectory during the prior year quarter. While future price volatility is likely, we will maintain our approach to having inventory on hand to support our customer base. I'm now on slide 11. We had capital expenditures of $99 million during the nine months ended September 30, 2023, with $31 million of spending in wood products and $68 million of spending in BMD. In wood products, we continued to progress with our multi-year capacity expansion projects in the Southeast US. In BMV, our execution of organic growth continues, including our Kansas City and Denver door shops and the purchase of a distribution center in West Palm Beach, Florida. Our full year 2023 expected range for capital spending is now $190 to $210 million. We have yet to finalize our capital spending plans for 2024, but would expect it to exceed $200 million as we work towards completion of previously announced growth projects and also have a good mix of maintenance, resilience, and additional growth projects ahead of us. Speaking to shareholder returns, we paid $141 million in regular and special dividends to shareholders during the nine months ended September 30, 2023. And last week, our Board of Directors approved a $0.20 per share quarterly dividend and a $5 per share special dividend, including the expected fourth quarter amounts Full year 2023 dividends will be approximately $347 million. In addition, share repurchases are another manner in which we can return cash to our shareholders, and we have approximately 2 million shares available for repurchase under our share repurchase program. In summary, our balance sheet remains very strong, and our approach to capital allocation is unchanged. We will continue to invest in our existing asset base and organic growth projects, pursue M&A that aligns with our strategy, remain committed to our fixed dividend through the business cycle, and opportunistically return additional capital to shareholders as appropriate via special dividends or share repurchases. Turning to slide 12, we are pleased to have completed the acquisition of Brosco on October 2nd for a purchase price of $168 million, including estimated working capital at closing of $51 million. We funded the transaction with cash on hand, The acquisition price included the purchase of Roscoe's two full-scale distribution centers in Hatfield, Massachusetts and Portland, Maine, and provides us immediate scale in the Northeast with LTN September revenue and EBITDA of approximately $191 million and $19 million, respectively. Along with interior and exterior doors, these facilities also offer moldings, railings, windows, stair parts, and other general line products. The addition of these products are a nice enhancement to BMD's legacy general line product mix, and we are excited to be able to offer an expanded product offering to our customer base in the Northeast. I will turn it back over to Nate to discuss our business outlook.
spk08: Thanks, Kelly. I'm on slide number 13. Current estimates for 2023 U.S. housing starts are 1.4 million units compared with actual housing starts of 1.55 million in 2022 as reported by the U.S. Census Bureau. Throughout 2023, home affordability has been a challenge for consumers given higher mortgage rates and limited home price decreases. However, given a resilient economy and low levels of existing home inventory for sale, demand for new residential construction has been stronger than anticipated. Home builders have also addressed affordability challenges facing home buyers in various ways, including smaller home sizes, fewer amenities, price incentives, and mortgage rate buy-downs. Economic uncertainties, escalating mortgage rates, and home affordability are expected to continue to influence the near-term demand environment. Consensus forecasts for 2024 single and multifamily housing starts in the U.S. generally range from 1.3 million to 1.4 million units, which is comparable to 2023. Regarding home improvement spending, industry forecasts project continued moderation in year-over-year growth and renovation spending, and economic uncertainty may also negatively impact homeowners' further investment in their residences. Despite these near-term uncertainties, we believe the long-term demand drivers for new residential construction and repair remodeling activity continue to be favorable, supported by strong demographic trends, low home inventory, and the age of U.S. housing stock. As such, we will remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the company. Lastly, I'm very pleased with the early integration efforts related to the newly acquired Brosco facilities. I want to express my gratitude to all of our associates throughout the organization, including our newest associates at Roscoe, for keeping a sharp focus on our customers and working safely and effectively. Thank you for joining us today and your continued support and interest in Boise Cascade. We would welcome any questions at this time. Chris, would you please open the phone box?
spk06: Thank you. To ask a question, please press star 1-1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Susan Malkari of GS. Your line is open.
spk04: Thank you. Good morning, everyone.
spk07: Good morning, too.
spk04: I guess, you know, my first question is talking a bit about the demand environment. Appreciate the color that you gave in your prepared remarks. But can you talk a little bit about the divergence that I think we're seeing in terms of the R&R and markets while the new home construction stays fairly resilient? And I guess, how are you thinking about the current pace of starts that's flowing through your business? And the ability to capture that re-acceleration that we saw in starts as we move through this year.
spk08: So, Sue, it's Nate. Maybe just in terms of the repair and remodel activity, I think the – and then also new home sales – Today, we still see good pace on our repair and remodel business. And so I think that activity remains steady. And I think, to me, it speaks to a couple of things, including really the importance of two-step distribution in terms of supporting that marketplace. So we feel good about the pace of that business, obviously the relationships that we have on the supply side in support of that business, and again, the alignment we have with that marketplace. To me, that would be probably the key item is, again, the basic consistency on repair and remodel remains pretty good. I would say, in terms of the prepared for new home construction and maybe the resiliency that the team demonstrated, the wood product team and distribution team demonstrated in 2023, I think we were... We had really thoughtful plans that both teams put together. We were working closely with our customer base and making sure we had great clarity in terms of what their inventory positions are, what the pace of business was. And we made some early and I think important and effective decisions on putting our production capacity at levels to support a marketplace that frankly surprised at the upside. And I think as we think about 2024, Sue, we'll have that same kind of planning and work and diligence to make sure that we're staying close to the marketplace and prepared to serve the marketplace should there be an upside surprise or a downside risk associated with that. Kelly, anything you would add just in terms of the backdrop on housing and the repair and remodel? Yeah, happy to, Nate.
spk10: So, yeah, I guess maybe starting with single first, and I know, Sue, you're You're very close to the builders, and it seems like the national home builders are still relatively bullish, and they continue to want to increase their land position and build out new single families. So, you know, that seems to be – that could be flat to actually somewhat up year over year, 23 to 24. We'll see how that plays out. On multifamily, there does seem to be a bit of a pause, more concerns there around financing and potentially oversupply. And as you know, new single family is a bigger driver for us. In terms of R&R, we all typically think of R&R spending as it relates to sales of existing homes. And as we know, those are down a fair bit this year. But yet R&R has held up a fair bit, which I think speaks to the fact that people are I think they have a good amount of equity in their homes, and maybe they purchased a home a year or two ago that maybe didn't quite have the amenities they wanted, and so we're seeing maybe a little bit more R&R spending because of that dynamic.
spk04: That's encouraging. Good to hear that. And maybe turning the conversation a bit, any thoughts on how we should think about the margins in BMD as we kind of consider a world where wood product prices could be moving lower. And I guess with that, too, any implications to those BMD margins from the Brasco acquisition?
spk10: Yeah, and so I guess, you know, as we alluded to in our speaking points, you know, certainly seasonally, you know, third to fourth quarter here, we expect to see some compression as our sales come down and And we're not able to leverage those fixed costs. So we'll have some deleveraging there. But we feel really good about what BMD has been able to do and what's been quite volatile the last couple of years in terms of their margin profile. And we're executing upon what we said our strategy is, which is to make that product mix richer, to have a higher margin profile. And that would include things like the Brasco acquisitions.
spk04: Okay. And I'm going to squeeze one more in, which is, you know, you mentioned the ongoing investments in a lot of your strategic initiatives, the door shops in Kansas City, Denver, the acquisition in Florida that you closed. Just any update on, you know, how those are progressing and any further details there?
spk10: Yeah. So we have a pretty good amount of spending ahead of us in the balance of this year. And then we expect to have a Again, a pretty sizable capital plan in 2024, but we're still working a number of things, so we won't speak to 2024 in any detail at this point. But yeah, in BMD, for example, in the fourth quarter, we did announce that we got the West Palm Beach. We bought a new distribution center there, which expands our presence in that market, which is great. We continue to build out the Denver door shop. It's not quite up and running yet, but it will be here soon. We're close on completing the Marion, Ohio relocation that we started a year or two ago. And then we're forever chasing rolling stock that we hope to get landed here in the fourth quarter. In terms of the couple other big projects in BMD, those being Hondo, Texas, and Walterboro, South Carolina, those were greenfields. We bought bare pieces of ground. And it takes a fair bit of time to get those sites prepared. So we still have a fair bit of spending ahead of us on those. And those will be a while yet to come up. In terms of wood products, again, a fairly hefty spend here in the balance of this year. And that's not uncommon, right? When we have some seasonally slower periods, some holiday periods, we take advantage of those times to complete some capital projects. And we expect to do that again this fourth quarter. And I would say that's pretty normal course stuff in terms of like some random stackers in the west for veneer. Chapman PLV line, which is great. Again, that's part of our capacity expansion in terms of being able to capture that veneer and put it into EWP. We've got a little bit of spending on a relatively small mass timber project in White City, Oregon. And then just a fair bit of maintenance to do here in the fourth quarter. So I'll stop there, Sue.
spk04: Okay. Thank you for all that, Collar. It was helpful. I'll turn it over now. And good luck with everything.
spk10: Thank you. Thank you.
spk06: Thank you.
spk05: And one moment, please, for our next question. The next question will come from Kurt Yinger of D.A.
spk06: Davidson. Your line is open.
spk09: All right, thanks, and good morning, everyone.
spk08: Good morning.
spk09: I just wanted to follow up on Susan's question on DMD margins. I mean, commodity prices have largely normalized. EWP prices come up a decent amount. Volume's moderated a bit. But segmented EBITDA margins still nicely above 6%. I guess as you look to 2024, absent the potential for a softer demand environment and maybe some fixed cost deleveraging, Is there anything that you see today as kind of a material risk to that margin profile?
spk10: Yeah. I mean, I think you hit on the material risks, Kurt, in your comments around, you know, volumes and demands that could flow through there. And then, you know, there's always price risk. across commodities, across general line, and we're seeing some modest price risk here in EWP. So I guess Nate has an additional comment here.
spk08: Yeah, Kurt, I'd say just maybe the other thing to think about is, as we described in our opening remarks, is that I think as the channel in the marketplace continues to work its way through the year end and into early next year, I think the importance and the dependence on auto warehouse support you know, continues to be high. So, you know, unit business, job packs, and pieces. So as you think about, you know, margin profile, EBITDA margin for that segment for those services are generally a little bit higher as compared to the direct. So I think that's probably the other component to think about is, you know, that mix of direct versus out-of-warehouse. We like both, obviously, and obviously, you know, given where we're at this time of year seasonality, that out-of-warehouse component strengthens, and we're well positioned to support that.
spk09: Got it. And is that out of warehouse mix? Do you almost think that's kind of counter cyclical to where, you know, in a weaker environment, people are more closely managing those inventories and more relying on you guys versus feeling great about the end markets and, and, you know, that's, that's less of a requirement. So, you know, in a softer demand backdrop, that's actually kind of a, maybe a tail continues to be a tailwind on the margin side.
spk08: Yeah, I think so. I think you said it well. I think people, as they look at risk-reward, both on demand and as well as on realizations pricing, I think that the dependence and importance of two-step distribution remains very high. Probably the other component that we're, I think, excited about is we think about, especially from some of our general line partners, as they introduce new products and services, generally that is a bit of a transition in terms of people getting new SKUs. And I think in terms of the growth opportunity, you know, that represents, again, I think a margin opportunity for us largely based upon, you know, customers wanting to, again, be served and supported on units and job packs and pieces versus on a, you know, truckload kind of direct basis. Got it.
spk09: Okay. Thanks for that, Nate. Just on the wood products cost side, I mean, I imagine web stock costs could be a bit of a headwind as higher OSB prices flow through. But we've also seen a fair amount of pressure on Western log prices. So how do you see those kind of items coming together in Q4? And where does that set you up, at least at this stage, going into next year?
spk03: Yeah, good day, Kurt. It's Mike. So I think you're correct around web stock costs. And as I think I've mentioned previously, the way we cost our web stock into the finished product is not on a spot basis. We use a 13-week rolling average, so there's some buffering to the ups and downs that occur on the indices that you see every week. So clearly, over time, if the trend is up, then there is a bit of an impact, but it's not a tremendous impact immediately. As it relates to log costs, I think that's a geographical issue more than anything else. I would tend to say that the log cost profile in the southeastern United States in general is sort of flat, sort of flat to flat. And then in the Pacific Northwest, we've had some ups and downs of recent times. It's been on the way down, and you can see that in our data. I would say that generally speaking, Between now and the end of the year, we're in a very good position in terms of availability of logs, so we're not concerned about that. But at the same time, there has been a bit more pressure in general because of the lack of availability, particularly from federal lands. And so I'll say the industry looks to put itself in a position to be able to have logs available. We've spent a few extra dollars for buying logs that would be available over the longer term, a bit higher than the average that you see on a quarterly basis, but at the moment, I think you're very well aware that log costs have come down, and at least between now and the end of the year, we don't see any massive increases coming on log costs in the West. And in our case, I should remind you, I guess, some of our log costs are linked to finished product pricing. And so, given where that has gone, particularly for plywood, That certainly has assisted us and will continue to do so between now and the end of the year, I suspect. Got it.
spk09: Okay. Thanks for the color, Mike, and good luck here in Q4, guys.
spk03: Thank you. Thanks, Kurt.
spk09: Thank you.
spk05: And one moment for our next question. Our next question will come from Keaton Mamtora of BMO.
spk06: Your line is open.
spk01: Thank you and good morning. First question, can you give us some sense of how your order books are on the EWP side outside of the seasonal component, which we understand sort of slows in Q4? But have you kind of, you know, noticed any change in terms of sort of the activity levels and just your order books?
spk03: Yeah, Keaton, I'll have a few words about that. Thanks for the question. So if I just forget about the seasonality, which is very important, I'm sure everybody on the call realizes that as we get to the end of the calendar year, we normally see a decline in order files as that relates to, generally speaking, construction, particularly single family construction. Our order files have really been quite strong, and I think Nate referred to this earlier in his comments around how we put ourselves in a position to meet demand both in terms of inventory on the ground and also manufacturing posture in terms of having people and veneer available. So while our order files are not as strong today as they were perhaps like three months ago, they're still quite strong. And the way we manage that is we like to be able to ship, relatively speaking, quite quickly to our customer base when the orders do come in. So I think I'd summarize as saying that, yes, the orders are not as strong as they were three months ago, but they're still all things considered quite good relative to some other times that have been much more challenging than they are today.
spk01: Understood. Now that's helpful. And then, you know, switching to the BMD side and the PROSCO acquisition, you guys have made a lot of progress on growing, you know, sort of the windows and the door, that side of the millwork side of the business, I'm sorry. Can you talk to kind of what trends, you know, what you've learned as you, you know, expanded on that side of the business? And as you look at sort of further opportunity, is this sort of an area where we should expect, you know, growth over the next several years?
spk00: Jeff, I would say what do we learn? We've learned a lot as we've gone and with each one we've done, each one we've opened, we take some learning from the past and gotten a lot better and improved what we're doing. It's a good business for us. It fits right with our customers. It's the same customers that we're currently serving now. and so we're continuing to move forward with it. With the Brasco acquisition, I can just tell you in a short period of time, there's a lot of learnings from them. They've been in the millwork business for a long time, and we know we can take some of the processes that they have in place and roll them across our system. And then the future of it, what do we want to do? I can tell you this. We're still actively looking. It's a good business. We enjoy it, and we know there's more to go.
spk01: Got it. And then when I just look at the LTM performance, would you consider that as more kind of normalized, or would you say that was still helped by elevated activity, let's say the last three or four quarters? How would you characterize that?
spk10: Yeah, I think that's a pretty fair representation of what we think normalized will be. Like us, they would have experienced some run-up and then more recently a little bit of run-down in terms of pricing, but we feel like that's a that's a reasonable run rate to start from. And as Jeff said, we're pretty excited about, you know, not just can we offer more products to our existing customers through Brosco, but also at the same time, there's going to be some opportunity where some of their customers that we have not served previously, we can offer them a more full line of products as well. So we're excited about that. And the team at Brosco is really good. So we're excited there.
spk01: Got it. That's very helpful. I'll jump back in the queue. Good luck.
spk10: Thank you.
spk06: Thank you. One moment for our next question. Our next question will come from Michael Roxland of Truist Securities. Your line is open.
spk02: Thank you, Nate, Kelly, Mike, and Jeff for taking my questions, and congrats on a good quarter. Thank you, Mike.
spk10: Good morning.
spk02: Good morning. Good morning. Just on your last call, you guys mentioned maintaining good products margins higher than you had historically. And you referenced a number of upgrades and replacements that have been ongoing for more than a decade now. So in terms of the margin profile, as you continue to deploy new dryers, pressers, et cetera, what's the margin you're ultimately targeting for that business and over what timeframe?
spk10: Yeah, so... Yeah, that is the question set from last quarter. And I would tell you, we're targeting, you know, we're targeting mid-double-digit EBITDA margin in that business going forward. And some of the spending you referenced, you know, some of that is, frankly, maintenance, right? Dryers, LUCs, presses, those sorts of things. Those don't necessarily increase your profile, but they certainly sustain your capabilities to support the customers. And so... You know, we've really done a nice job of focusing that business over the last number of years, and I think the strategy is playing out as we hoped.
spk02: Got it. Thank you, Jack. Just one quick follow-up. You know, we see mid-double digits. You're talking about 20%, 25% type EBITDA margins on a go-forward basis, or, you know, and if so, is that 2024, 2025? How do you think about the time frame?
spk10: No, I wasn't speaking in the 20s, Mike. I was thinking the mid-teens.
spk02: Mid-teens, okay.
spk10: And we're above that today, as you've seen.
spk02: Got it. Thank you for that. And just one quick question on EWP. You know, with respect to EWP penetration in single-family home construction, has any share shipped back from Lumberg? Given weaker lumber prices, has lumber regained any share given where those prices are trending today?
spk03: So Mike, this is Mike. So I'm not sure I would say there's been a shift one way or the other, to be honest. I think the building approach that DWP in general caters to is not one necessarily that sees a lot of shift one way or another to that particular combination of lumber versus engineered wood products. It can have to do with availability as much as anything else. So as you would have seen or we all saw over the say the preceding few years when EWP was on allocation, yes there was a little bit I think of slippage of EWP or movement of EWP and lumber. But I think generally speaking, that's not something that happens to any great magnitude. But when there's nothing else available, lumber can be used in place of EWP. Our story for EWP is the quality, consistency, and availability, and speed of construction that it brings relative to other products. And obviously, the largest one is lumber.
spk08: And Mike, maybe just to add to Mike's comment, I think when you think about his last point, not just on the speed of construction, The homebuilders are really pushing for cycle time reduction on the job site. And so, EWP is very much part of the answer there in terms of taking time out of the construction cycle. And as Mike described, we feel good about that trend and that opportunity continuing as we head into 2024. And EWP will continue to play a really important role in that.
spk02: Got it. Very helpful. Good luck in 4Q.
spk03: Thank you, Q. Thank you.
spk05: And one moment for our next question. Our next question will come from George Stafford of Bank of America Securities, Inc.
spk06: Your line is open.
spk11: Thanks. Hi, gentlemen. How are you? Sorry, joining late, so you may have covered some of this in your discussion. I'll try to keep it quick. One, some of your peers have talked about extend the lead times for their EWP business. Have you seen a similar phenomenon and related point, and I think you might have covered this already, in terms of some of the price erosion that you're seeing in EWP, at this juncture, Mike, would you see that as just seasonal or is there something else that we need to be looking to? And then last question for me, just, you know, and perhaps you discussed this already, where you're seeing momentum in terms of open web trusses versus I-Joyce, or for that matter, laminated lumber in single-family construction. Are you seeing any further share erosion there, or is your EWP gaining back share? Thank you, guys. Good luck in the quarter.
spk03: Yeah, thanks for the questions there, George. Let me have a stab at these. Maybe there'll be additional comments from my colleagues here. So our lead times, I'd say, moved out just a relatively small amount over the last, you over the building season. And that was primarily due to the way we positioned ourselves coming into the building season. And so we had a lot of inventory on the ground, and we kept people employed, and we had good operating rates. And so we were able to meet the upswing in demand, I'll say, as well or better than anybody else in this particular sector. So we didn't see the extensions that maybe you are referring to from other manufacturers and we're still in a good position. So I think all in all our strategy worked quite well and continues to work very well. You had a question around price erosion and the seasonality or not of this. So I don't really think it's a seasonal issue per se. I think it's more like specific locations require attention at certain times when there is an opportunity. that presents itself, and we have discussions in specific markets around what market-related pricing is, but as I'm sure you're aware, EWP doesn't really have the seasonality that a commodity does, because EWP certainly doesn't follow that sort of cyclic nature. So I think to Kelly's point, we might see very, very modest low single-digit movement going forward, but we certainly don't see that as sort of anything more than that. The Open Web Trust question, so I think it would be fair to say that some of the momentum that Open Web Trusts saw was due to a lack of availability of EWP, specifically iJoyce. And so, as again, I'm sure you're aware, we are a very large producer of iJoyce and we continue to produce large quantities and we have it available So if anything, I think the opportunity for us to garner additional sales is actually quite positive at the moment because we have the availability, we're nationally orientated in terms of our capacity, and so I don't see open web trusts as being any more of a threat than they were six months ago. In fact, maybe less when I think about it.
spk11: Hey, Mike, one last one quickly, and I'll turn it over. Did you comment on the call at all on when you expect the pricing in EWP to start inflecting higher? And if you haven't, no worries, but just wanted to make sure we got that on the record.
spk10: Yeah, we didn't comment forward beyond what we expect sequentially in the fourth quarter, George, which is modest price erosion.
spk11: Okay. Thank you, guys. Thanks, Kelly. Talk to you in a bit. Thanks, George. Thanks, George.
spk06: Thank you. One moment, please, for our next question. And we have a follow-up from Kurt Enger of DA Davidson. Your line is open.
spk09: Great, thanks. Just two quick ones on capital allocation. First, Kelly, could you remind us what kind of go-forward maintenance capex is at this stage versus the more discretionary component within the $200 million guide for this year?
spk10: Yeah, sure, Kurt. So I think we think in terms of a normalized spend, we're probably in the range given our growth of kind of $125 million, give or take, but it's going to be a few years probably before we expect to moderate down to that level given some good opportunities that we have ahead of us. Got it.
spk09: And is that pretty evenly split between wood products and BMD?
spk10: No, I'd say it's probably a little bit heavier to wood products than it is BMD once we kind of normalize. Got it.
spk09: Okay, great. And then just lastly, I mean, the stock has pulled back here a little bit. Does that change your appetite at all around share repurchase activity and what would you need to see for that to maybe move up in terms of capital allocation priorities?
spk10: Yeah, good question. So I'll hit it like this, Kurt, which is stock repurchases are still very much in our toolkit for capital allocation options. And as I think you all know, there's many times where you have restrictions on stock repurchases if you're evaluating transactions, and fortunately we've been able to do several nice transactions in the last couple of years. So our opportunity set has been somewhat restricted at times. And so I guess at this point, and assuming there's no restrictions, we will buy shares if doing so we view that as being an attractive use of cash at that time relative to our other capital allocation opportunities. Got it.
spk09: Okay, thanks for the color, Kelly. Appreciate it.
spk10: Thank you, Kurt. Thanks, Kurt.
spk06: Thank you. And I see no further questions in the queue. I would now like to turn the conference back to Nate Jorgensen for closing remarks.
spk08: Thanks, Chris. We appreciate everyone joining us on the call this morning for their update, and thank you for your continuing interest in support of Boise Cascade. With that, please be safe and be well. Thank you.
spk06: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
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