Good morning. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Second Quarter 2023 Earnings 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. It is now my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO and Treasurer, Boise Cascade. Mr. Hibbs, you may begin your conference.

Thank you, Michelle. Good morning, everyone. I would like to welcome you to Boise Cascade's second 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 Strom, Head of our Building Materials Distribution operations. Turning to Slide 2. 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.

Thanks, Kelly. Good morning, everyone. Thank you for joining us for our earnings call today. On Slide number 3. Both of our businesses again delivered strong financial results as associates across the Company continue to execute at a very high level, and the market proved to be resilient despite ongoing economic uncertainties. Our consolidated second quarter sales of $1.8 billion were down 20% from second quarter 2022. Our net income was $146.3 million or $3.67 per share compared to net income of $218.1 million or $5.49 per share in the year-ago quarter. Total U.S. housing starts and single-family housing starts declined 11% and 14%, respectively, compared to the prior year quarter. Wood Products reported segment EBITDA of $127 million in the second quarter compared to $167.8 million in the year-ago quarter. The Wood Products team delivered very good financial results as EWP volumes rebounded sharply from first quarter levels. Building Materials Distribution reported segment EBITDA of $105.9 million on sales of $1.6 billion for the second quarter compared to $161 million of segment EBITDA and sales of $2.1 billion in the prior year quarter. Substantially lower commodity product pricing negatively impacted BMD's year-over-year revenue comparison. However, BMD's volume results compared quite favorably to headline housing starts, and gross profit EBITDA margins were again strong. Kelly will now walk through our financial results in more detail and provide an update on our capital allocation, after which I'll provide our outlook before we take your questions.

Thank you, Nate. Wood Products sales in the second quarter, including sales to our distribution segment, were $530.3 million compared to $536 million in second quarter 2022. As Nate mentioned, Wood Products reported segment EBITDA of $127 million, down from EBITDA of $167.8 million reported in the year-ago quarter. The decrease in segment EBITDA was due primarily to lower plywood sales prices. This decrease was offset partially by higher plywood sales volumes, higher EWP sales prices, and lower wood fiber costs. BMD sales in the quarter were $1.6 billion, down 23% from second quarter 2022. BMD reported segment EBITDA of $105.9 million in the second quarter compared to segment EBITDA of $161 million in the prior year quarter. The decline in segment EBITDA was driven by a gross margin decrease of $49.8 million, resulting from lower margins on EWP and general line products, offset partially by margin improvements on commodity products. Turning to Slide 5. Our second quarter sales volumes for I-joists were down 9%, while sales volumes for LVL were up 2% compared with second quarter 2022. On a sequential basis, volumes for I-joist and LVL increased by 63% and 29%, respectively, driven primarily by an increase in new single-family housing starts of 39%. Sequential pricing for I-joists and LVL was down 4% and 3%, respectively. Looking forward to the third quarter, our order files and market activity are healthy. And new single-family starts will continue to be an important demand driver for EWP volumes. On EWP pricing, we currently expect low single-digit sequential price declines in the third quarter. Turning to Slide 6. Our second quarter plywood sales volumes in Wood Products were 440 million feet compared to 281 million feet in second quarter 2022. Plywood sales volumes increased during the quarter as we shifted a higher proportion of our veneer into plywood production given the change in demand for EWP. The increase in plywood sales volumes was also partially attributed to the acquisition of Coastal Plywood in July of last year, as well as downtime taken in 2022 to replace an existing dryer at our Chester, South Carolina plywood and veneer facility. The average plywood net sales price in the second quarter was $365,000, down 36% from second quarter 2022 and down 1% sequentially. Thus far in the third quarter of 2023, plywood price realizations are flat compared to our second quarter average.

Thanks, Kelly. I'm on Slide number 12. Housing starts in June 2023 were approximately 1.4 million on a seasonally adjusted annual rate basis, as reported by the U.S. Census Bureau. However, home affordability remains a challenge for consumers. The Federal Reserve's ongoing actions in response to inflationary data and the impacts of these actions on future mortgage rates and the broader economy will influence the near-term demand environment. Uncertainty in the outlook for the back half of 2023 is reflected in various industry forecasts for 2023 U.S. housing starts, which generally range from 1.3 million to 1.4 million units compared with actual housing starts of 1.55 million in 2022 as reported by the U.S. Census Bureau. Regarding home improvement spending, industry forecasts project continued moderation in year-over-year growth in renovation spending, and economic uncertainty may also negatively impact homeowners' further investment in their residences. Despite these near-term uncertainties, we believe the longer-term demand drivers for new residential construction and repair and remodel activity continue to be favorable, supported by strong demographic trends, low home inventory, and the age of U.S. housing stock. As such, we remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the Company. Lastly, I want to express my gratitude to our associates whose consistent focus, grit, and hard work, when coupled with the quality of our assets and the effectiveness of our business model, are the constant drivers behind our success. I expect our team to again deliver solid financial results in the third quarter despite the soft economic backdrop.

Our first question is from Kurt Yinger with D.A. Davidson. Please go ahead.

I wanted to begin with EWP, noting the nice recovery in volumes you mentioned. Considering the performance compared to the last two quarters, do you have any insights on how underlying demand improvements might weigh against a possible restocking effect? Based on the current order file, how do you anticipate Q3 volumes will compare to Q2?

Kurt, yes, it's Mike. Thanks very much for the question. So as we think about the coming quarter, at this point in time, we're envisioning a quarter pretty much like the last quarter. Our order file is quite strong, and our inventories are in pretty good condition. And we're operating not at maximum capacity, but at very high levels. So I think as we move through Q3, we should see a quarter pretty much like the last quarter.

Got it. And I guess, just given some of the big swings in I-joist, can you maybe talk about what you're seeing or hearing in terms of product substitution, whether it's solid in lumber or upland web trusses for floor applications?

Yes, Kurt. So my comment would be basically the following. So, we've seen obviously a significant change in both directions over time previously. So let's say last year when there was a lack of availability of I-joists because really, we're on allocation, there was substitution going on pretty much by any product that builders could get. As we sort of move through the first half of this year, I think you've seen some challenges with other products' availability, not the least of which is open web trusses. And so because of their longer lead times, that's actually helped our I-joist business. So that's sort of a bit of a fluid situation depending on demand and supply.

Kurt, it's Nate. Maybe just one other data point that as we have a chance to spend time with builders, their focus on cycle times is very high. And so as you think about what problems I-joist and EWP solve on the job side, it adds speed and simplicity to the job site and helps reduce cycle time. So, I think in terms of where the builders want to go, where they need to go in terms of reducing cycle times, I think EWP are very much part of that answer. And I think as Mike described, we're seeing some benefit of that as a result.

Got it. Okay. That makes sense. And then just lastly, on BMD, Jeff, hoping you could talk about what you're seeing in terms of customer appetite to replenish inventories across your different product categories and whether there's anything from a competitive perspective that you think could impact margins off the levels we've seen here through the first half?

So, I would say, overall, as confidence grew and as we had a little bit of a commodity run in there, the inventory started to build a little bit. People start taking some small positions, but nothing like in the past. And I'd tell you that people are still really relying very heavily on out-of-warehouse shipments, and that's the word we're going to continue to do this. So, we're going to expect some seasonality this year, which we haven't seen in a long time. But overall, I think honestly we are going to be out of warehouse, and people are not building inventories.

Thank you and one moment for our next question. Our next question is going to come from the line of Susan Maklari with Goldman Sachs. Your line is open. Please go ahead.

My first question is that you mentioned in your commentary that you are thinking about perhaps carrying a bit more inventory as you look to sort of support the service levels in the field. Can you talk a bit about how you manage or balance any sort of risk in this environment of carrying more volumes relative to wanting to be sure that you can support your end market customers?

Yes. So, it's Nate. Maybe just I think in terms of our commitment, both to our suppliers and our customers is to make sure we are in stock and have inventory to serve their needs, both in terms of bulk as well as units, job packs, and pieces. As we look at our inventory footprint and what's required, we work closely with our customers in terms of their expectations and what their needs will be as we move through the quarter and through the year. We work closely with our manufacturing and supplier partners as well to make sure we have a really good understanding of where they're at in their production plans as well as some of the things they're trying to do in terms of introducing new products. So that's part of our thinking. But ultimately, what we've said all along is that we want to put our balance sheet to work for the benefit of both our customers and suppliers. And we're going to be in stock. To me, that's an important part of who we are and what's created, I think, success and confidence with our customer and supplier partners, and that will remain certainly part of our game plan as we finish off 2023 and head into 2024.

Yes. Okay. That's helpful. And I guess when you think about the restocking that is generally happening across building product categories through the spring into the early parts of the summer. Would you say that there's any dispersion or differences as you think about products that might be earlier cycle relative to macro and housing versus later cycle in there and just any distinctions or nuances perhaps that you'd call out?

Yes, Sue, it's Nate again. I would say there's going to be always some variability by product and even by geography. Part of that geography is how that geography is served, whether truckload served or rail served; sometimes it will have a different element in what that natural inventory needs to be. But I think at this point, and as Jeff described well, we're seeing a more normal seasonality expectation as we go through the course of this year. So, I don't think there's any concern or anxiety by our customers. They are simply managing their working capital as they traditionally would. And I think that's going to put more dependence on BMD in terms of those auto warehouse services, which we're excited to support. So, nothing Sue that would represent in terms of early warning signs or things that we're looking at; I think it's ultimately staying close to our customers and suppliers, and then we'll continue to work from there.

Okay. And then I just want to squeeze one more in. As you think about your own working capital and the investments you're making in the business for this year. Anything that you can help quantify there in terms of perhaps changes in the working capital or cash flow dynamics that we should think about?

Sue, this is Kelly. So, yes, for sure, we have made some purposeful investments. I mean think about Kansas City door shop, Houston door shop, expanded some properties in BMD in a handful of geographies. So probably nothing I would specifically call out other than to say, certainly, when you have a start-up, i.e., a door shop startup, you're going to be pretty heavy on inventory because you need to ramp up. But I would say, really, I think what we've seen over time in terms of how our inventory moves and how our receivables move, certainly as we get into seasonally weaker periods in the fourth quarter, I don't see that we've made enough changes that I would really give you any different guidance than what we've typically done in terms of swings.

Thank you and one moment for our next question. Our next question is going to come from the line of George Staphos with Bank of America Securities. Your line is open. Please go ahead.

Congratulations on the performance. I had a few sort of modeling, shorter-term questions and a couple of longer-term ones. So, first of all, in terms of BMD margins, which once again were certainly well ahead of our expectations. The outlook for the year and being similar to what you've seen in the first half of the year, Kelly, I'm not trying to draw too fine a point on it, but is that more a reflection of what you've seen year-to-date or what we saw out of 2Q? And relatedly, what do you think recognizing a lot of it is going to be the demand and pricing in the world we're in right now, is the 6%, 6.5% margin normal for BMD?

Yes. I'll take the first part of that question then maybe I'll kick it to Nate to build on my comments. So what we had in our speaking points there, George, was really specific to the third quarter in terms of what our sales pace is so far through July and then just reminded folks in terms of kind of the how the mix, whether that's mixed by product or warehouse versus direct and those sorts of things that can move our margin profile. But what we did guide there softly for the third quarter was that we gave you some guidance on sales pace that today we think would probably end up towards the top end of the range that we saw in the second quarter. In terms of longer term, let me kick that question to Nate.

George, on a long-term basis, as Kelly mentioned, there are numerous factors to consider regarding our current situation. However, our primary goal remains to enhance our performance over time. We've made significant investments in our facilities, expanded our locations, and upgraded our products and services, including the growth of our door shops. This aligns with our commitment to improving our earnings profile in BMD. While there are many variables to navigate, our long-term perspective is focused on investment, and we are optimistic about meeting this elevated standard.

One thing I wanted to ask on sales velocity in 2Q. Was it where you expected it to be in BMD or did it surprise to the upside? And if so, in particular, where would there have been any variance, and if you had mentioned early in the call, I apologize, I was a little late joining because of another conference call.

Yes. No, you're fine, George. I'll take that and then maybe see if Jeff has any extra color to add. I think in our comments, we've all talked about the resiliency of the market being somewhat better than we would have expected. And that did play out through the second quarter, and sales activity did continue to ramp as we made our way through the second quarter. Anything else you'd add, Jeff?

I would say on the general line piece, particularly, our volumes were very good and very strong. Having inventory available and ready to go really played into your hand and played really well for us.

I have two final questions before I pass it on. First, are there specific product categories where you believe you're gaining market share in your distribution model? Are there categories that are performing especially well in the current environment through BMD? Secondly, regarding EWP, although performance in Wood has been strong, I noticed a slight drop in pricing. Could that be attributed to delayed changes or is there another reason?

Maybe I'll start with the question about BMD, and then I'll pass it to Mike. Regarding BMD's risk profile in relation to products and any trends, we don't observe any significant issues. Our key suppliers continue to introduce new products and services, which makes their offerings more complex and varied. This is beneficial as it creates more opportunities for BMD to serve our customers better with a wider range of products and services. Looking at our key partners, they have been somewhat cautious in the past couple of years due to the pandemic, which limited their ability to launch new products, especially in a challenging environment with supply shortages. We anticipate an increase in new products and services going forward, which is very promising for BMD. Additionally, customers are still focusing on their working capital. With the seasonal transitions, BMD is well-equipped to support our customers and suppliers through the expected seasonal changes. Overall, we are optimistic about our franchise and our operational readiness.

Are your suppliers asking to take more volume than they were say, a quarter or two quarters ago, just in general?

No, I don't think so. I think they're very well aware that we're going to buy to our sales pace.

George, sorry. And then Mike on just maybe the EWP question on pricing and what we're seeing and expecting there.

Yes, sure. George. EWP pricing, that modest decline is probably best explained as follows. The Boise Cascade value proposition for EWP includes a variety of different components. Our field services, our soaring services, our software, and, of course, market competitive pricing. There are others in this particular area, the players that don't necessarily bring all those components to the market and rely more on price. And we've had two instances where we thought some of the pricing that we saw in certain geographies could be adjusted. Going forward, we're going to continue to do what we've been doing. We're going to focus on our value proposition. And if there are geographies where price is the primary determinant, we will evaluate whether we need to do anything. But you can see that there was a quite modest decline in pricing, and it will remain to be seen whether that's the case in the coming quarter.

Thank you and one moment for our next question. Our next question is going to come from the line of Mike Roxland with Truist. Your line is open. Please go ahead.

Thanks, Nate, Kelly, Mike, and Jeff. Congratulations on a strong quarter. I have just one quick question to start. Can you provide an update on your Wood Products order files and how they compare to the first quarter? Additionally, could you comment on your operating rate in EWP and any changes from the second quarter to the first quarter? I understand that you're not operating at full capacity, but I'm trying to gauge how your current operations compare to earlier in the year.

Yes, Mike, I'll give you those numbers. So if you think about the second question first, the operating rate, I would say earlier in the year, Q1 is sort of a general statement. It was a little bit different by geography. So this is sort of an overarching comment. We were probably running around 60% of our capacity. Then you move into Q2, and particularly in the West, there was a quite significant increase in demand while the South has been strong earlier in the year and continues to be quite strong. So, our operating rate now, I'd say, is around 80%. And that's where it will probably stay for a while. You'll have to see what happens with the demand situation or what have you as you move through this next quarter. As it relates to order files, we'll start with EWP, but I'll also address plywood. So EWP order files were very strong to begin with in Q1 in the Southeast and maybe not quite so strong in the West. And then early in Q2, the West really started to take off with the changes in the climatic conditions in California, in particular. So, both the West and the South were quite strong in Q2, and we have very strong order files today, where I'll say the actions we took earlier in the year to ensure that we had enough people to run our operations as well as the $500 million that we spent last year to bring on additional veneer supply have allowed us to keep our order files and our lead times really quite short, relative to other players in our particular space. So, our order files are strong, and our lead times, while they're a little bit longer than they are normally, have probably moved out roughly a week or so compared to what I'd call a normal lead time. That's on EWP as it relates to plywood. Yes, we've produced more plywood as Kelly pointed out. We've been moving a lot of plywood into the system, and our order files are sort of typical for this time of the year, several weeks in front of us for plywood, and they continue to be sort of in that position.

Excellent. It's great. Just one quick follow-up on that. As for order files and EWP, I know we're probably a month into the third quarter. Has there been any acceleration from 2Q into 3Q?

No, I say, yes, that's a real good question, Mike. I think it sort of works like this. We're still in the height of the building season. Now we're going to go into August and September, and I think Jeff might have mentioned earlier on, the later we get into the year, seasonality starts to become a thing, particularly in our business. So at the moment, I don't see a change really much in either direction, but I think we need to watch that as we move through the quarter. I would expect if things go back to normal, whatever that really means, by the end of the quarter, we'll see some change to the normal downside, which is just the seasonality that happens towards the end of the third quarter and start of the fourth quarter.

Got it. Very helpful. And then just one final question on just Wood Products in general. You guys from a cost perspective have done a fantastic job of closing high-cost facilities, streamlining the cost structure of Wood Products. Can you just comment on any other initiatives you're working on to further improve margins? And should we expect that a normalized EBITDA margin could be 20% plus for that business on a go-forward basis?

Well, I'll have a crack at the first part, and then I'll let my capable CFO maybe address the second part of that question. So the Yes, we're always working on it, as you said, Mike. And Kelly kind of alluded to this a little bit in his commentary. We've been at machine center replacement now for more than a decade. So we have a program of capital expenditures where we're replacing old machine centers with new machine centers. That assists us in both better costs overall, in some cases because they're more efficient in terms of the output per unit time and sometimes because there are fewer people involved in those machine centers. We also get an uptick sometimes in volume. So we have a plan moving forward to continue to replace old machine centers, and I anticipate over the coming three, four, five years we will continue to invest in replacing old machine centers, and that will give us, hopefully, an improvement in our cost structure as we move forward. And I'm sure Kelly has some commentary on the second component.

Yes. On the second component, Mike, certainly, you can see and you can hear what the strategy and the focus has been for a long time in Wood Products, which is really to grow EWP. As we've spoken before, the constraint was veneer historically, and we've cleared that constraint with the acquisition that we did last year. So, we can continue to execute upon our strategy. EWP is a higher margin, more safely priced product, and that fits right into our strategy. So, yes, our expectations are that we'll continue to invest in that business. And to Mike's point, continue to focus on costs and efficiency. And we do want that trend to look better and the margin performance to be better than it was historically.

And one moment for our next question. Our next question comes from the line of Ketan Mamtora with BMO. Your line is open. Please go ahead.

Maybe first question to start with EWP. Any way to quantify the impact of higher OSB costs in Q3 so far as the EWP side is concerned?

Yes. As I think we've spoken to before, Ketan, we employ a rolling average concept for how we pay for OSB. As OSB costs rise, you could probably use kind of North Central in terms of that index as a metric to gauge the cost increase. However, there's going to be a lag.

Got it. And Kelly, typically, what is a good proxy to think about as a lag? Is it one month? Is it two months?

Yes. It's a quarter, Ketan, because we use that 13-week average concept.

Got it. That's helpful. Got it. No, that's helpful. And then switching to capital allocation. Obviously, the balance sheet is in very strong shape. You are putting substantial net cash. Curious as you navigate through an uncertain economic environment. One, either Nate or Kelly, how do you think about how much cash you should have on the balance sheet? And then as you think about deployment, whether it's M&A or your preferred kind of special dividend, can you talk to kind of the M&A pipeline or sort of approach to share repurchases here?

Yes. So that's a broad question around capital allocation. Let me try to hit it this way, Ketan. You've heard in my prepared remarks how we think about capital allocation, and that has not changed. Your comments around having a strong balance sheet are true, and we're very happy to have that and the flexibility and optionality it provides. We did reference a robust pipeline of capital projects ahead of us in both Wood Products and BMD. We have some lease facilities we might look to buy out, and we're exploring several new markets for door shops. All that said, we have a meaningful pipeline ahead of us over the next several quarters. As we look from now until the end of the year, there'll be factors that could influence our next conversation with our Board about additional returns to shareholders in October. The pace, execution, and market conditions will all factor into what we consider for shareholder returns before the end of 2023.

Thank you and one moment for our next question. Our next question is going to come from the line of Reuben Garner with The Benchmark Company. Your line is open. Please go ahead.

Congrats on the strong quarter. So first, a follow-up to an earlier question on the BMD margins kind of longer-term. You guys know I like to ask this question every quarter. But I looking for some clarity on a couple of things. Is there any way you could tell us what the mix of your kind of warehouse versus direct business is today versus maybe what it was in 2018, 2019 or prior to COVID? And is there any risk that like when things do officially normalize and your customers feel good again that you've got a margin kind of headwind even if demand is good because you're kind of going back to maybe a lower margin business?

Yes, good question. And we'd be disappointed if you didn't ask that question, Reuben. So, in terms of the mix between warehouse and direct, traditionally, when there's confidence in the market and there's not concern around forward pricing and inventory risk, I would say warehouse traditionally probably represented about 65% of the mix, while today we are probably more like in the 70% to 75% range. And again, that just comes back to the laser focus downstream on working capital and concern around inventory risk. If we shift back to a market with a higher percentage of direct, that would negatively impact our margin profile.

Maybe the other thing, Reuben, it's Nate, just to add is, again, as we had commented earlier, if you think about our suppliers, and they're adding new products and services and that complexity. So that generally creates maybe more of an out-of-warehouse opportunity as opposed to customers taking large quantities of some of those new products and services. It's not a question of customers not having the balance sheet to do it; it’s more about their inventory footprint and having more reliance on BMD, which is exactly what we do. So, again, that new product and new services, I think, are going to be part of the equation going forward.

Okay, great. And the uncertainty about forward pricing, I mean, is that in all product categories? I mean we've kind of already seen it on the commodity front at least. It appears that it's bottomed out. Is the concern EWP is the concerned general line products? Is it just everything that you think the market or your customer base thinks that there's price risk to the downside? And I guess, why hasn't that been reduced just given how strong things have been to date, even in a 'softer period'?

I guess I'll start and then invite Jeff or Nate to add color if they want to. If you break it into three buckets, commodity, general line, and EWP: for commodities, certainly, it's round-tripped and reverted not all the way back to maybe historical averages, but there is less downside risk than what we've seen in recent quarters. In EWP, we continue to experience some level of price erosion. It's a competitive marketplace. We're responding where we think is appropriate. General line pricing has generally held up, but there are some categories like doors, for example, that have come off some. There are deflationary risks, certainly in the general line product category.

On the general line, it really feels solid right now except in a couple of areas. If you look at what scrap metal is doing, if you look at futures of metal, that would be the one area that's a concern.

Thank you and one moment for our next question. Our next question is a follow-up question from Susan Maklari with Goldman Sachs. Your line is open. Please go ahead.

I just have two things that I wanted to follow up on. The first is that in response to one of the previous, I think Mike mentioned that there is the potential for some seasonality as you think about the back half and as we get into the fourth quarter. But I guess when you consider what's going on the ground and the builders committed to putting starts out through the third quarter looking to have that inventory on hand as we go into the 2024 selling season. Is there any potential you think that we actually sort of skirt some of that seasonality or see a more muted response to it as you think about the end of the year and maybe even going into the early parts of next year?

Yes. Good question. To your point, some of our messages could be somewhat conservative compared to what some others think. I guess we'll see how this plays out for the balance of the year. August can be very hot as we know, and that can impact job sites, and then we'll see what winter brings in the fourth quarter. We'll see how the macro environment plays out around monetary policy.

I'd add one thing to that: we're hearing loud and clear from some dealers, there was a really, really late start in certain markets this year due to weather. And in those markets, they're a little bit more confident about what could be going on in the fourth quarter than others.

Yes. And it also sounds like there could be some incremental delays too just because of the intense heat that we've seen in some markets as well. So, it feels like that weather is a factor all around. My other question is thinking about plywood capacity. And when you think about the demand that's coming through on EWP and your need for veneer, how are you thinking about the capacity in plywood and sort of balancing these things out?

We view the situation as unique due to our integrated model. Ideally, we would utilize all our stress-rated veneer for EWP based on the demand for that product group, but that's not currently the case. If demand for EWP remains strong or increases, we would likely see a decrease in plywood production since some veneer currently used for plywood would be repurposed for EWP. Our priority is to ensure veneer is used in the most effective way. Additionally, Brazilian plywood imports have significantly declined this year compared to last year, which could lead to stronger plywood performance than usual.

Thank you, and I'm showing no further questions at this time. I would like to turn the conference back over to Nate Jorgensen for any further remarks.

Thanks, Michelle. We appreciate everyone joining us this morning for our update, and thank you for your continued interest and support of Boise Cascade. Please be safe and be well. Thank you.

This concludes your conference today. Thank you for participating. You may now disconnect.