Good morning. My name is Latonya and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's First Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Before we begin, I remind you that this call may contain forward-looking statements about the Company's future business prospects and anticipated financial performance. These statements are not guarantees of future performance, and the Company undertakes no duty to update them. Although these statements reflect management's expectations today, they are subject to a number of business risks and uncertainties. Actual results may differ materially from those expressed or implied in this call. For a discussion of the factors that may cause the actual results to differ from the results anticipated, please refer to Boise Cascade's recent filings with the SEC. 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.

Thank you, Latonya, and good morning everyone. I would like to welcome you to Boise Cascade's first 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 Strom, Head of our Building Materials Distribution operations. Turning to Slide 2, I would point out the information regarding our forward-looking statements. 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.

Thanks, Kelly. Good morning everyone. Thank you for joining our earnings call today. I want to start on Slide 3. 2022 is off to a tremendous start with both of our businesses delivering outstanding operating and financial results. Our consolidated first quarter sales of $2.3 billion were up 28% from the first quarter of 2021. Our net income was $302.6 million or $7.61 per share compared to net income of $149.2 million or $3.76 per share in the year-ago quarter. In the first quarter 2022, total U.S. housing starts increased 10% compared to the same period last year. Single Family Housing starts, the primary driver of our sales volumes, increased 4%. Wood Products reported segment EBITDA of $203.8 million in the first quarter compared to $110.4 million in the year-ago quarter. Wood Products benefited from improved engineered wood product (EWP) sales realizations and plywood sales prices compared to last year's first quarter. Wood Products continues to focus on manufacturing production levels in response to continued strong product demand for our EWP during the quarter. Building Materials Distribution recorded segment EBITDA of $232.5 million on sales of $2.1 billion for the first quarter compared to $126 million of segment EBITDA on sales of $1.6 billion in the comparative prior year quarter. While BMD's results were favorably impacted by escalating commodity product prices during the majority of the quarter, increasing margins across EWP general line products continued to be a consistent and key driver of BMD's outstanding results.

Thank you, Nate. I'm on Slide 4. Wood products sales in the first quarter, including sales to our distribution segment, were $558.9 million compared to $432.3 million in first quarter 2021. As Nate mentioned, with Wood Products reported segment EBITDA of $203.8 million, up from EBITDA of $110.4 million reported in the year-ago quarter. The increase in segment EBITDA was due primarily to higher EWP and plywood sales prices, offset partially by higher wood fiber costs and other manufacturing costs. BMD sales in the quarter were $2.1 billion, up 29% from first quarter 2021. BMD reported segment EBITDA of $232.5 million in the first quarter, compared to segment EBITDA of $126 million in the prior year quarter. The improvement in segment EBITDA was driven by a gross margin increase of $133.6 million resulting from improved gross margins across substantially all product lines. The margin improvement was offset partially by increased selling and distribution expenses of $25.5 million. Turning to Slide 5, our first quarter sales volumes for LVL were up 6%. While sales volumes through I-joists were down 9% compared with first quarter 2021. Transportation constraints continued to hinder our ability to consistently move finished goods inventory into the marketplace. Inbound transportation issues for webstock also negatively impacted I-joists production during the first quarter. Demand for EWP continued to be strong and our order files remain extended. Pricing in the first quarter for I-joists and LVL were up 3% and 2% respectively, compared with fourth quarter 2021, as previously announced price increases continued to take effect. We expect high single-digit sequential price increases in second quarter 2022 reflecting pricing actions taken in early 2022. Turning to Slide 6, our first quarter plywood sales volume in Wood Products was 317 million feet compared to 303 million feet in first quarter 2021. Our veneer and plywood mills operated well during the quarter, allowing us to benefit from strong plywood pricing. The average plywood net sales price in the first quarter was $689 per 1,000, up 24% from first quarter 2021 and up 72% sequentially. As we moved into the second quarter, plywood pricing declined. Our price realizations through April are approximately 12% below our first quarter average. In addition, we expect second quarter plywood volumes of approximately 300 million square feet as our project in Chester, South Carolina to replace a veneer dryer has commenced and will negatively impact near-term production volumes. Moving to Slide 7, BMD's first quarter sales were $2.1 billion, up 29% from first quarter 2021 driven by sales price increases as sales volumes were flat. By product line, commodity sales increased 22%, general line product sales increased 30%, and EWP increased 54%. Gross margin dollars generated improved by $133.6 million in the first quarter compared with the same quarter last year, resulting from improved gross margins across substantially all product lines. The gross margin percentage for BMD was 18%, up 290 basis points from the 15.1% reported in first quarter 2021. BMD's EBITDA margin was 11% for the quarter, up from the 7.7% reported in the year-ago quarter. BMD sales pace thus far in the second quarter 2022 remains strong across product lines and we continue to benefit from the stability and strength of EWP and general line products. The BMD team has also done a great job of mitigating our exposure to the commodity price declines we experienced in April.

Thanks, Kelly. I'm on Slide number 12. The demand environment for new residential construction continues to be favorable, supported by demographics in the U.S. and the continuation of work-from-home practices by many in the economy. We expect demand to remain strong in 2022 with April Blue Chip Consensus for U.S. housing starts at 1.65 million. In addition, limited new and existing home inventory availability and the age of U.S. housing stock will continue to provide a favorable backdrop for residential construction and repair and remodel spending. Although we believe that current U.S. demographics support the forecasted level of housing starts, and many national home builders are reporting strong near-term backlogs, labor shortages and supply-induced constraints on residential construction activity may continue to extend build times and limit activity. In addition, the pace of residential construction and repair and remodeling activity may be affected by the economic impact and the cost of building materials and construction, housing affordability, wage growth, prospective home buyers' access to financing and consumer confidence, as well as other factors. In Wood Products, we continue to enjoy strong demand and pricing momentum for EWP. Capital projects will continue to focus on veneer production to support our EWP growth, which includes the completion of our Chester dryer project in early third quarter. BMD continues with its steady execution of organic growth and is progressing well with its build-out of our expansion projects in Marion, Ohio; Walton, Kentucky; and Lakeville, Minnesota. The BMD team also continues to work a solid pipeline of additional organic growth opportunities in existing and new markets that we expect to share in upcoming quarters. These projects will add capacity to our system in support of our customers and suppliers. BMD continues to execute at a high level as we navigate fluid market conditions. We expect continued firm pricing in our EWP and general product line categories and remain confident we will effectively manage impacts and capture opportunities associated with fluctuating commodity prices. The extraordinary results of last year's second quarter will make our upcoming comparative results challenging, but we fully expect to deliver another solid quarter when we speak again in the summer. Our company remains incredibly well-positioned and we will continue to make sure we use our operating and financial strength to the benefit of our customers, suppliers, communities, and shareholders.

Thank you, Nate. We will now begin the question-and-answer portion of the call. Our first question comes from Mark Wilde of Bank of Montreal. Your line is open.

No good deed goes unpunished and looking at your stock this morning, it seems to be the case. But that's just looking at the quarter. I wondered, Nate, if you could just help us unpack that decline in EWP shipments. It sounds like some of it just was kind of constraints from webstock. But anything else would be helpful. It was surprising to me, given the fact that the industry is on allocation and demand is very strong?

Yes, Mark, let me just tee it up for Mike Brown. To your point, the demand signal remains steady, strong, and consistent. And, to your point, the supply side, including logistics, was really the challenge that Mike and the team worked through. But Mike, do you want to add additional comments on that?

Yes, I think as Kelly pointed out in the prepared remarks and your comments, we certainly would have liked to have made more and obviously sold more if we'd been able to get all the raw materials that we were looking for. The webstock that we use comes from Canada, and as I'm sure you're aware, there have been significant logistical issues north of the border. So really, it was a question about the availability of webstock. We certainly hope that, in the not too distant future, that situation will be resolved.

It might just to kind of follow on that. It seems like more than almost any company I cover. You guys have really wrestled with kind of COVID-related labor issues over the last six or seven quarters? Can you just give us some sense of how that's doing at this point? Because it wasn't something you called out in your release? So I don't know if that's a marker that it's actually proving?

So, it's an interesting quarter. January actually was a terrible month for us in terms of COVID-related activity, if you want to call it that. But since then, things have gotten markedly better. I certainly wouldn't say that COVID is no longer here. But when we look at our operations and look at the weekly updates from each of the regional managers, the number of absenteeism that we have now due to COVID is, I’d say, at its lowest in probably the last two years still some, but almost zero. So maybe it was the process that we put in place almost two years ago. But certainly, we've seen a marked improvement in terms of the COVID side of things. So that's really why we didn't call it out.

And then Nate, I wondered if you or Kelly could give us a little more granularity about where the CapEx dollars are going in both segments this year. I think that the number that you're pointing to is probably the biggest CapEx year that you've had since you became a public company?

Yes, you're right Mark, and that's fair. I would tell you we have a pretty big range there. You'll notice the $110 to $130 million, and $130 million is probably aspirational given the supply chain challenges we've talked about. Breaking that down between the two segments a little bit for you: Wood Products, we're targeting about $60 million for this year, and to give you a few highlights on that – and Mike can correct me if I’m wrong here. But we've got the Chester dryer we talked about, that's probably $6 million or so that we're going to get spent this year to get that up and functional probably early third quarter. We've also got a fair bit of work going in the Southeast as normal to make sure we secure and support efficient veneer supply in our system. So projects at Florien that revolve around some late work, Oakdale some dryer controls, and infrastructure, and then Alexandria some improvements there. That's probably the highlights that hit $40 million on Wood Products. And then BMD, you know, we hit on in our comments, we hit on the three organic expansions we're working on: our role in Kentucky, and then our greenfield in Marion, and then our brownfield in Kentucky as part of the broader Cincinnati, Ohio market.

Okay, just one more on the capital side for either you or Nate. You have been, you've added I think a few of these door and window shops and you've talked about sort of other unique site-specific places where you're expanding your product line. I'm just curious, are you comfortable enough with particularly the door and window shops that you want to start to roll that strategy out a little more aggressively?

Yes, Mark, it's Nate. I'll let me take that one. I think on the door millwork side, we like that business. Obviously, we've grown that business and specifically in Texas with our two new locations there, and we continue to look for other opportunities to grow that platform. So my view is that that'll be an important part of our growth story and BMD moving forward. And I think we've got the right level of support both from our customers and suppliers to continue to advance that conversation across other markets. So, yes, that is the main part of our growth story and plan as we head over the next couple of years.

And then the last one for me. If mortgage rates going up start to slow kind of housing activity, where would you expect to be able to see this or detect it first, Nate?

Yes, I think there are probably a couple of spots. Obviously, we have the privilege to have very close relationships with, not only our direct customers but also the parts of the builder community, and really understand what that demand signal looks like also in the repair and remodel. But I think, for me, Mark, the things that will center on are the cost of money and what's happening there. We'll be looking closely at inventory levels in terms of unsold inventory, both in terms of new and existing homes. Those will be important demand signals that we'll continue to monitor. I think it's my expectation that we feel good about what's in front of us here short-term. But longer-term, I think we are going to stay centered and focused on what the demand environment looks like. Long-term, we feel good about this industry and the fundamentals, but also recognize that the cost of money and some recessionary pressures might be out there that we'll have to make sure we are monitoring and adjust as appropriate.

And our next question comes from Susan Maklari of Goldman Sachs. Your line is open.

Good morning, I don't know. Maybe did she mean Susan Maklari?

Good morning, Su, that is the name we expected. Go ahead.

Here we go. I'm sorry. I misheard her. I'm sorry about that. Well, good morning, everyone, and congrats on a good quarter. I think my first question is sort of thinking about this bigger picture. Last summer it was the DIY market that kind of caused prices to come down. And when we look out this year, it feels as if the supply-demand environment is obviously, to some extent, a bit more disciplined, perhaps obviously, things on the ground are exceptionally tight, it seems on the EWP side and even just sort of across building materials. And so, as we get into this summer, how are you thinking about the overall sort of landscape and the ability to continue to see some of those volumes rise and maybe even on a relative basis supporting pricing as we move to the back half of the year?

Yes, Susan. It's Nate. Good morning. I'll start and then ask the team to maybe fill in any blanks. I think as we look at the overall demand environment and to your point, as I think the marketplace reflects on what took place in the third quarter of last year, but whether the discipline is the right description, but I think there’s more, people are very focused on risk versus reward. And I think the market in terms of demand signal feels again, good, steady, and consistent, and we are expecting that as we now climb into the spring housing season. But I think also people are somewhat measured in making sure that the risk-reward equation makes sense. And so I think that'll be a key theme as we go through the course of 2022. And frankly that matches up really well with who we are and what we do. Obviously, I think there will be perhaps a bit more even dependence on wholesale, two-step distribution on a range of products and services, as again people try to manage those risks. I know our Jeff and our BMD team is really well-positioned to support customers as they navigate some potential changes in the marketplace. So again, overall, we feel good about where things are at. And again, we see and feel the market managing that risk-reward as we go into the latter part of the second quarter and third quarter.

Yes. Okay. That's helpful color. And I guess, when we do think further out, if we do get a bigger than expected slowdown in housing, and things do turn as we get into next year. How do you think about the stickiness of some of the pricing that has been put through? I guess, especially on the EWP side, but even just as you think about your distribution arm, the pricing that those manufacturers are passing through, how do you just in general think about the sustainability of some of the inflation that is moving through the channel today?

Yes, I'll start. And then Mike and Jeff and Kelly can jump in here as well. I think in terms of pricing, some products and services come down to supply and demand balance. As I think we look at several categories that we are in today, things remain very tense in terms of supply and demand and essentially under allocation. So there would need to be probably a reasonable adjustment on demand or increase in supply for that equation to change. I think there is still a marketplace on those products and services, with a great desire to purchase product. And so we don't see any kind of hesitancy, at least short-term on any of those items. I think, as we see some sort of disruption on the demand side, we believe our organization and businesses are well-positioned to compete in that environment. We have the talent, the resources, and the capability to grow and gain share as appropriate. Should those market conditions allow us to take advantage of a slightly lower demand environment overall and more steady supply as a result. So again, something we're watching carefully, but things have settled down in terms of the demand side. Again, we see an opportunity to pivot in terms of how to maybe again play offense and continue to grow our position.

Okay, that's great color, Nate. And then let's squeeze one more in, which is last night you announced the supplemental dividend along with your quarterly dividend. Can you just talk a little bit about capital allocation? And when you do think about the outlook for the business, is there any interest at all in doing some buybacks? Or how should we think about shareholder returns or just capital allocation in general?

This is Kelly. So our script is very much the same in terms of how we think about it. First and foremost, investing in ourselves. You've heard about our expanded capital program that we have. We signaled that there are a number of other organic opportunities in BMD that are in the pipeline that we hope to speak more to in the future as those come to fruition. And then we want to keep that modest, quarterly dividend sustainable through any business cycle. After that, we'll look to grow whether that's through M&A, or is that further organic projects like we've spoken to, and then we'll bounce all that up against what our balance sheet looks like, and our cash position, and how do we return it. You've heard us speak many times, the two levers are share repurchases and supplemental dividends. We view that more as an opportunistic buy for us. We want to buy those at a meaningful discount. At this point, the cadence of the conversation continues with the board and we've elected to do a supplemental dividend this time around.

And I assume the supplement sort of reflects your confidence, obviously, in the outlook. I mean, we're still only in the first half of the year, but it's good to see it coming through.

And our next question comes from Kurt Yinger of D. A. Davidson. Your line is open.

I want to start out on EWP and hoping you could talk a little bit about how many quarters you think it will be until the Q1 price increases are fully implemented. And then second, can you talk a little bit about where order files currently stand and just the level of visibility on the volume side?

So order, I'll take the second part first. Order files and I think you're talking specific EWP, they're still extended. We can sell what we can make assuming we can get wheels underneath it. So, the demand side is strong. On pricing, I've referenced 10% sequentially second quarter compared to first. I would say, and that's with the early 2022 price increase that we announced. The few, if you will, in terms of the different mechanisms that differ that pricing realization, that window was a little bit shorter this time than it has been in previous increase announcements. So, we expect high single digits in each of the next two sequential quarters. And then after that, we think, barring any future increases, we've pretty well got everything realized at that point.

And then, I guess on the BMD side. I was hoping you could talk a little bit at a high level, about any notable changes in demand patterns across the different kinds of customer cohorts? And then over the last month and a half or so home center demand has kind of been cited as the big driving force in terms of the short-lived correction in commodity prices. Has that turned around more recently? And is that a product-specific kind of phenomena or consistent with what you saw in maybe other general line categories as well?

Kurt, this is Jeff. I tell you on the demand side for all products, it's strong across everything. It absolutely is. It hasn't abated at all. When you talk about the home center, when we think, we kind of break what goes through there a little bit, the professional remodeler business, that demand has been very strong and has remained that way, but as prices ticked up, the do-it-yourselfers that seem to be where it slowed down a little bit. Then the price corrected and you ask them to pick back up, I'd say from where we're seeing it, absolutely have that corrected.

Got it. And just that kind of price sensitivity is, I guess, mostly isolated to commodities that you're not seeing that same type of pullback in other categories that pricing is still up pretty significantly year-over-year?

Yes, no, it's definitely been on the commodity side. It was just very similar to last year when commodities got off to levels they did and hit the wall and did the same thing this year for the do-it-yourselfers particularly.

And then it sounds like the rebuild of the Scotch mill is kind of complete after the fire last year. Is that something that could provide you guys some relief in terms of third-party veneer supply or not really?

Good morning, Kurt, it's Mike. Yes, we have a long-standing relationship with the folks at Scotch and you are correct, the information I have is that the green end project is pretty much up and finished. They're running, more or less agile, very close to the production levels that they had before the fire. We were actually able to assist Scotch during the rebuild phase by supplying them with some of our green veneer. So we won't see a tremendous increase in the supply of veneer from the Scotch plywood company. Even though the grand end is up and running, it's more of a swapping the veneer that they will peel themselves for the veneer that we were sending them from one of our facilities, but it will certainly help a little bit but it's not a major or significant increase in availability of veneer to us.

And then, just my last one on capital allocation and maybe M&A specifically. Could you just talk about kind of the strategic priorities and maybe focus areas with M&A and just whether you think there is a possibility of putting some cash to work with deals this year?

Yes, Kurt. It’s Nate. Let me take that one. I think, as we look at our Wood Products opportunities and specifically our EWP franchise, I think we are still centered on how do we grow our veneer capabilities? And obviously, that has been an important part of who we are and will continue to be going forward. So we want to continue to look at how to strengthen our capabilities there and continue to build upon the platform that we currently have in place. So that remains an important opportunity. I would say, maybe behind that, within Wood Products, we continue to look for the opportunity around mass timber, what does that opportunity look like? That’s probably more of a long-term opportunity for us in the industry, but that is something that we continue to work and better understand in terms of what our fit and where our position might be in that opportunity moving forward. For BMD, we really have it probably broken down into three pieces. One is around how do we grow and support our existing footprint. And we have been doing that with several examples over the last couple of years in terms of expanding our capabilities and capacity in support of our growing business, as well as our growing product mix and vendors that we are supporting.

And our next question comes from Reuben Garner of Benchmark. Your line is open.

Thanks, everybody. A couple questions on BMD if I could. I guess first, can you talk about, I think you mentioned in your prepared remarks, how the business held up pretty well here recently with the correction. Can you put any numbers on that? Any way you could kind of give us an idea where the gross margins have been quarter-to-date in the second quarter kind of accounting for that commodity correction?

Yes. Sure. Good question, Reuben. Good morning. Let me maybe start with a little bit of reminder of Q1. It's kind of a quarter of a trifecta if you will, when you think about our gross margins. We had escalating commodity prices for the majority of the quarter, and we continue to see really, really good margins and margin growth across our EWP in the general product line. So we had the trifecta that really got us to the 18% gross margin. Then your question about how you're doing so far in the second quarter. Our sales pace is really consistent with first quarter; it's stayed very strong. And the margin goodness we get for media has become general line remains and is probably getting a little bit of escalation there. We've done a really good job in April in managing and mitigating the negative impacts of commodities. We've essentially worked through that high-cost inventory. Has it caused some margin squeeze in April? Yes, absolutely. But it's nothing like we saw if you remember, year ago, third quarter, the duration of that decline, as well as the steepness of that decline is nothing like we've experienced here in the second quarter. We've found a flat spot here in the last several weeks in commodities. So I would tell you, I won't give you a specific number, but I would tell you our gross margins through April are much, much closer to year-ago second quarter than they are to year and those third quarters.

Within BMD or staying with BMD, the general line sales were very strong again. Can you talk to us about how much of that 30 points of growth is driven by price versus volume? And then any specific product categories to call out that’s allowing you guys to continue to grow that fast on top of what are increasingly difficult comps?

On the growth, if you think about the lack of supply and how difficult it is, the growth has been 100% driven on price; there's no volume growth there. If we can get it, we know we can grow it. There isn't a product line on the general line that we're selling that is not in that situation right now, let's still tension up. It's kind of across the board on everything.

And then last one, I think, if I could sneak one more in. The engineered wood business within BMD continues to grow faster or looks to me to be continuing to grow faster than your EWP business from a manufacturing standpoint. How much more runway do you have there to sell more internally or through your own distribution?

This may I'll take that one. I think in terms of the overall EWP category, obviously, it remains under allocation. As we've described earlier, we expect that scenario to continue. When you look at the internal consumption by BMD compared to a product that is sold to independent third-party distribution, there’s a bit of change in terms of our external third-party distribution footprint in terms of the relationship, so that when you look at comps, that I suspect is part of the equation. What we tried to be is very consistent, fair, and predictable in terms of all of our relationships, internal and external, when it comes to EWP and allocation. So that would be again, probably a bit of a channel change last year that's contributing to that difference, as opposed to taking a material different view of how we think about the internal versus external distribution.

And sorry, I said last one, but I want to sneak one more small one in if I could. So if I have the numbers correct here, that was the first quarter for a while of volume growth for plywood and I know that's been a focus using the veneer for more valuable sources or more valuable means internally. Anything unique about the first quarter there? Was that just a one-off? Can you provide any color?

Reuben, it's Mike. Yes, the number was rounded up to 317 million feet of plywood. If you look back at 2021, we had one quarter that was significantly more than that was 337. Several other quarters that were right around 305, 310. As a general rule of thumb, we sort of tend to run around the 310 million feet of plywood each quarter, sometimes a bit more, sometimes a bit less, depends on how we run, you can imagine. But there was no sort of structural change in the way we're doing business; we weren't deliberately trying to put any additional fiber into plywood as compared to EWP because we just don't run our business that way. So it was just one of those series of events that led to us making a bit more plywood as compared to, for example, the prior quarter, which was I think, 305 if I remember correctly. So nothing structurally different, I promise you.

And our next question comes from George Staphos with Bank of America. Your line is open.

Nice quarter. I guess you can take the rest of the year off if you'd like, but probably won't happen. I wanted to hit a little bit on EWP and plywood. If possible, you talked about Florien, you talked about Alex, you obviously have the Chester project. In broad strokes if you want to be granular, what will that do both to your veneer and EWP production in terms of growth? What does that add to on an annualized basis looking at 2023 and beyond? Should we expect kind of relatedly imply, are you running close to 300 through Q3 since the project at Chester won't be done until early Q3, or will you see better production there?

Okay, I'll start and of course, others will chip in as appropriate, George. So let me start with Chester. The project at Chester is a very small dryer. We have three dryers there. This is the smallest of the dryers. Effectively, it will be out of service for like one quarter. Because of the size of that, the total gross impact on veneer production is going to be fun. That dryer is around $10 million that we will lose, which is not very much in the scheme of things. Don't forget that as Kelly pointed out, our total production will be down a bit this quarter because we did something else at Chester; we took the whole mill down for three weeks because we had a boiler project. During the month of April, the mill will only run for one week. That will have a more significant impact, and I think Kelly's comment was more along the lines. We should expect that our plywood volume in Q2 will be more like 300 compared to 317 that we saw in Q1. That's taking all that stuff into account. As it relates to will this make a significant impact on our ability to produce more EWP? The reality, unfortunately, in some respects is no. This new dryer in particular, we run mostly not always, but we mostly run veneer through that which goes into plywood, not into EWP. It doesn't give us a huge lift, even though it'll be a new dryer. There is not a significant lift in total stress-rated veneer production from this project. You asked about Florien, which has been an ongoing set of projects now for a number of years. That's mostly, I would say, complete. We have some upside there if you will potentially in the future, because we have another small dryer that we are thinking about replacing, should we ever be able to find the past to do it because they now are about two years away if we ordered them. So again, nothing that I see as sort of a significant step up in EWP production from internally generated veneer, the challenge is you have heard me say several quarters, is that we do buy some veneer on the outside, and that has been particularly challenging in the Pacific Northwest of recent times, where log prices are very high. External suppliers of veneer have been challenged. To a little bit, we buy a bit of veneer in the south as well, and as I mentioned earlier, with the Scotch green end project being completed, maybe there will be a little bit of additional third-party veneer available. But in the scheme of things, this is a very small potential increase; nothing really of any significance.

So, Mike, I mean, as you look out over the next couple of years, should we assume your ability to produce is basically going to be just around the lines of creep productivity 2%, 3%, if that's the right number, I don't know what the right number would be. But that would basically be the limit in terms of what we could see you produce and hit the market with?

So, I'd answer that question like this, George. We believe, if we could get all the people we need for all the days of the year, and we could get all the veneer that we need to fill our current installed capacity, we might be able to produce about 6% more in total. That’s the sort of number that we have used regularly for some period of time. The challenges are, can we get all the people all the days and can we possibly find some external veneer that would allow us to crank up production to sort of meet our nameplate capacity? That's obviously what we are trying to do. I will comment on your question about productivity. If you go back more than a decade, sort of about the time of the great recession, if you look at the productivity of our machine centers, we have really squeezed most of the blood out of that stone. Our machine centers have really, really, really improved tremendously because of the work of our folks. We might be able to get a little bit more because we are working on turning some things and changing out some parts, but to your point, it's very low percentage points point here, or point there. It's not like we won't get 6% just additional by productivity increases.

Understood, I appreciate that and the rundown there, Mike. Can you talk a little bit about where you see inventories in the chain right now? There is a sort of standard narrative that most of the year that inventories were lean; maybe inventories were a little bit high in Canada, but that tension was allowing the markets to do what they have been doing. Are you seeing any build in inventory or are you seeing this continued destocking where buyers ultimately expect prices to head lower, which would make sense? Therefore, they're not really stocking up inventory too low, and therefore you wind up with this continued tension and pricing in a good way. From your vantage point, how would you frame it given that very broad question?

George, this is Jeff. Overall, in general, I believe that the inventories in general lean. If you think about the general line EWP and even the millwork, they've all been strictly allocated and tough to get the transportation issues. So that piece of it is definitely lean. On the commodity side, with the risk-reward and where the numbers were, people were definitely waiting for a correction. I will tell you that they still seem to be lean out there right now, as people are looking to buy back in. Again, we've seen that from demand that comes out of our warehouse. So, there is still, if you look at where the numbers stopped this time and redirected, there's still a significant number. So there is no risk out there, and we look where we’re at right now, price-wise.

To last ones on capital allocation and I'll turn it over. So back to the question of the supplemental and again, congratulations in the way you're allocating capital. I know it's tough to predict, we're not really asking you to do that. But what factors would you need to see come into play for you to consider another supplemental this year? Because at these rates, even with the regular dividend, even with the CapEx of $110 to $130 million, you're going to have excess cash. So recognize are there other things, other growth projects, potential M&A? What would need to happen time-wise and consideration-wise such that you would consider another supplemental? Also, as you think about mass timber and CLT, would you consider, could you update us on your thoughts about whether you'd be willing to partner with anybody in that area? Is there any way to somehow get some benefit from the whole credit concept, which seems to be also driving people's interest in mass timber, recognizing that once it's cut down and put into a study, that credits no longer there? How do you partner with people around getting more of an ESG credit for what you do, and in turn, how you might be able to use that in terms of applying capital to that business?

So I'll take the first part of your question around capital allocation and you hit on a lot of the things we talked about and think about in terms of when might we consider another supplemental dividend. I would tell you, we certainly want to have more line of sight in terms of 2022 just in terms of operational performance. Then again, there’s a number of things in the pipeline on BMD, a lot of organic projects in particular that we're working on and looking at. We want to stay patient and flexible and kind of see how those events roll out over the year. If we end up getting towards the third, end of the third beginning of the fourth quarter, and some of the organic or M&A things don't come to fruition and we feel like we have more cash than appropriate, then we'll have that conversation again with the board around supplemental dividend or stock repurchase. I'll turn it to Nate or Mike to address the CLT and mass timber.

Yes, first thing, George, on the partnering question. We're actually doing that already. So, it's sort of behind the scenes we're obviously not out there in the CLT market. People like to talk about CLT as much as anything else. But we have a group of folks led by a gentleman by the name of Dennis Bott that has been working in this space now for going on three years. We don't produce a lot of material that we can put into these sorts of projects at the moment because of our allocated situation with our traditional EWP. But we are involved, in a small way, already, partnering with third parties to put together the supply of raw materials on a number of different projects. As a general statement, we are doing it, and we will continue to do it. If there is an opportunity that presents itself that is larger in scale, then we will certainly look at that very closely. The second question, part of your question, I believe was around the carbon credit item and how that fits into ESG in general. Okay, so this is a bit like you, this may not be the totally fully thought-through answer to your question, but my personal view on the carbon credit side of things as it relates to mass timber is it could become a thing over time. But it's sort of an add-on as opposed to a core component of why you would do mass timber. If we can find a way to either use some of our traditional products or develop new products that we can put into mass timber and partner with other folks, there may be an additional upside premium that comes, that falls to those that produce because of the carbon credit-related issue. I think we are in pretty early days of trying to find what that all looks like. I'm not sure I'm quite able to tell you how much that might be and when it is and what it might look like. I'm going to hedge my bets and say we'll be taking a closer look over time, but from my opinion, that's somewhat in the future and not the core part of how to justify mass timber buildings.

I just had a quick thought on that. As Mike described, as you think about wood competing against steel and concrete, the story is exceptional. As Mike described, not just on the carbon side, but on other elements in terms of construction and flexibility and design. So we see that storyboard continued to build across the industry. As Mike described, it's probably measured in multiple years, just given where things are at. But ultimately, we feel good about one’s ability to compete and win against some of the alternatives of steel and concrete.

I'm showing no further questions. I would now like to turn the conference back to Nate for closing remarks.

Okay, great. Thanks Latonya. Again, we appreciate everyone joining us today for this morning's call and update, and we appreciate your continued interest and support of Boise Cascade. With that said, please stay safe and be well. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.