BCC 10-Q Quarterly Report March 31, 2019

BOISE CASCADE CO

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10-Q 1 bcc331201910-q.htm 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35805

Boise Cascade Company

(Exact name of registrant as specified in its charter)



Delaware	20-1496201
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1111 West Jefferson Street Suite 300

Boise, Idaho 83702-5389

(Address of principal executive offices) (Zip Code)

(208) 384-6161

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	BCC	New York Stock Exchange

There were 38,974,684 shares of the registrant's common stock, $0.01 par value per share, outstanding on April 26, 2019 .

Table of Contents



PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Notes to Unaudited Quarterly Consolidated Financial Statements	7
	1. Nature of Operations and Consolidation	7
	2. Summary of Significant Accounting Policies	7
	3. Income Taxes	11
	4. Net Income Per Common Share	11
	5. Sale of Manufacturing Facility	12
	6. Debt	12
	7. Leases	14
	8. Retirement and Benefit Plans	18
	9. Stock-Based Compensation	19
	10. Stockholders' Equity	20
	11. Transactions With Related Party	21
	12. Segment Information	21
	13. Commitments, Legal Proceedings and Contingencies, and Guarantees	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
	Understanding Our Financial Information	23
	Executive Overview	23
	Factors That Affect Our Operating Results and Trends	24
	Our Operating Results	26
	Liquidity and Capital Resources	29
	Contractual Obligations	31
	Off-Balance-Sheet Activities	31
	Guarantees	31
	Seasonal Influences	31
	Employees	31
	Disclosures of Financial Market Risks	31
	Environmental	32
	Critical Accounting Estimates	32
	New and Recently Adopted Accounting Standards	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
	Signatures	35

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PART I—FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

Boise Cascade Company Consolidated Statements of Operations (unaudited)

	Three Months Ended March 31
	2019			2018
	(thousands, except per-share data)
Sales	$	1,042,086		$	1,182,841

Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)	897,822			1,009,778
Depreciation and amortization	19,217			22,111
Selling and distribution expenses	87,026			83,356
General and administrative expenses	16,675			15,886
Other (income) expense, net	(308		)	(94		)
	1,020,432			1,131,037

Income from operations	21,654			51,804

Foreign currency exchange gain (loss)	162			(263		)
Pension expense (excluding service costs)	(299		)	(244		)
Interest expense	(6,437		)	(6,362		)
Interest income	492			264
Change in fair value of interest rate swaps	(983		)	1,641
	(7,065		)	(4,964		)

Income before income taxes	14,589			46,840
Income tax provision	(3,200		)	(9,790		)
Net income	$	11,389		$	37,050

Weighted average common shares outstanding:
Basic	38,884			38,778
Diluted	39,203			39,396

Net income per common share:
Basic	$	0.29		$	0.96
Diluted	$	0.29		$	0.94

Dividends declared per common share	$	0.09		$	0.07

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Company Consolidated Statements of Comprehensive Income (unaudited)

	Three Months Ended March 31
	2019			2018
	(thousands)
Net income	$	11,389		$	37,050
Other comprehensive income, net of tax
Defined benefit pension plans
Amortization of actuarial (gain) loss, net of tax of ($11) and $208, respectively	(32		)	613
Other comprehensive income (loss), net of tax	(32		)	613
Comprehensive income	$	11,357		$	37,663

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Company Consolidated Balance Sheets (unaudited)

	March 31, 2019		December 31, 2018
	(thousands)
ASSETS
Current
Cash and cash equivalents	$	136,204	$	191,671
Receivables
Trade, less allowances of $1,471 and $1,062	292,761		214,338
Related parties	612		436
Other	10,428		14,466
Inventories	573,860		533,049
Prepaid expenses and other	19,109		31,818
Total current assets	1,032,974		985,778

Property and equipment, net	460,650		487,224
Operating lease right-of-use assets	67,493		—
Finance lease right-of-use assets	20,376		—
Timber deposits	12,314		12,568
Goodwill	59,159		59,159
Intangible assets, net	16,597		16,851
Deferred income taxes	8,259		8,211
Other assets	9,225		11,457
Total assets	$	1,687,047	$	1,581,248

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Company Consolidated Balance Sheets (continued) (unaudited)

	March 31, 2019			December 31, 2018
	(thousands, except per-share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable
Trade	$	284,518		$	210,587
Related parties	1,890			1,070
Accrued liabilities
Compensation and benefits	48,366			87,911
Interest payable	1,818			6,748
Other	70,298			63,509
Total current liabilities	406,890			369,825

Debt
Long-term debt	439,707			439,428

Other
Compensation and benefits	43,361			41,283
Operating lease liabilities, net of current portion	61,902			—
Finance lease liabilities, net of current portion	21,687			—
Deferred income taxes	20,392			19,218
Other long-term liabilities	14,091			38,904
	161,433			99,405

Commitments and contingent liabilities

Stockholders' equity
Preferred stock, $0.01 par value per share; 50,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $0.01 par value per share; 300,000 shares authorized, 44,341 and 44,076 shares issued, respectively	443			441
Treasury stock, 5,367 shares at cost	(138,909		)	(138,909		)
Additional paid-in capital	527,283			528,654
Accumulated other comprehensive loss	(47,684		)	(47,652		)
Retained earnings	337,884			330,056
Total stockholders' equity	679,017			672,590
Total liabilities and stockholders' equity	$	1,687,047		$	1,581,248

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Company Consolidated Statements of Cash Flows (unaudited)

	Three Months Ended March 31
	2019			2018
	(thousands)
Cash provided by (used for) operations
Net income	$	11,389		$	37,050
Items in net income not using (providing) cash
Depreciation and amortization, including deferred financing costs and other	19,788			22,595
Stock-based compensation	2,200			2,286
Pension expense	460			449
Deferred income taxes	1,313			1,125
Change in fair value of interest rate swaps	983			(1,641		)
Other	(49		)	(96		)
Decrease (increase) in working capital
Receivables	(75,606		)	(91,252		)
Inventories	(39,483		)	(62,050		)
Prepaid expenses and other	(1,883		)	(1,949		)
Accounts payable and accrued liabilities	29,810			48,571
Pension contributions	(469		)	(517		)
Income taxes payable	12,753			20,751
Other	1,835			2,919
Net cash used for operations	(36,959		)	(21,759		)

Cash provided by (used for) investment
Expenditures for property and equipment	(14,347		)	(13,272		)
Proceeds from sale of facilities	2,493			—
Proceeds from sales of assets and other	1,149			93
Net cash used for investment	(10,705		)	(13,179		)

Cash provided by (used for) financing
Borrowings of long-term debt, including revolving credit facility	—			2,800
Payments of long-term debt, including revolving credit facility	—			(2,800		)
Tax withholding payments on stock-based awards	(3,569		)	(5,117		)
Dividends paid on common stock	(4,053		)	(2,758		)
Other	(181		)	357
Net cash used for financing	(7,803		)	(7,518		)

Net decrease in cash and cash equivalents	(55,467		)	(42,456		)

Balance at beginning of the period	191,671			177,140

Balance at end of the period	$	136,204		$	134,684

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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Boise Cascade Company Consolidated Statements of Stockholders' Equity

	Common Stock			Treasury Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares	Amount		Shares	Amount
	(thousands)
Balance at December 31, 2018	44,076	$	441	5,367	$	(138,909	)	$	528,654		$	(47,652	)	$	330,056		$	672,590
Net income														11,389			11,389
Other comprehensive loss											(32		)				(32		)
Common stock issued	265	2															2
Stock-based compensation								2,200									2,200
Common stock dividends ($0.09 per share)														(3,561		)	(3,561		)
Tax withholding payments on stock-based awards								(3,569		)							(3,569		)
Other								(2		)							(2		)
Balance at March 31, 2019	44,341	$	443	5,367	$	(138,909	)	$	527,283		$	(47,684	)	$	337,884		$	679,017


	Common Stock			Treasury Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares	Amount		Shares	Amount
	(thousands)
Balance at December 31, 2017	43,748	$	437	5,167	$	(133,979	)	$	523,550		$	(76,702	)	$	361,243		$	674,549
Net income														37,050			37,050
Other comprehensive income											613						613
Common stock issued	292	3															3
Stock-based compensation								2,286									2,286
Common stock dividends ($0.07 per share)														(2,793		)	(2,793		)
Tax withholding payments on stock-based awards								(5,117		)							(5,117		)
Proceeds from exercise of stock options								464									464
Other								(3		)							(3		)
Balance at March 31, 2018	44,040	$	440	5,167	$	(133,979	)	$	521,180		$	(76,089	)	$	395,500		$	707,052

See accompanying notes to consolidated financial statements.

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Condensed Notes to Unaudited Quarterly Consolidated Financial Statements


1.	Nature of Operations and Consolidation

Nature of Operations

Boise Cascade Company is a building products company headquartered in Boise, Idaho. As used in this Form 10-Q, the terms "Boise Cascade," "we," and "our" refer to Boise Cascade Company and its consolidated subsidiaries. We are one of the largest producers of engineered wood products (EWP) and plywood in North America and a leading United States (U.S.) wholesale distributor of building products.

We operate our business using two reportable segments: (1) Wood Products, which primarily manufactures EWP and plywood, and (2) Building Materials Distribution, which is a wholesale distributor of building materials. For more information, see Note 12, Segment Information.

Consolidation

The accompanying quarterly consolidated financial statements have not been audited by an independent registered public accounting firm but, in the opinion of management, include all adjustments necessary to present fairly the financial position, results of operations, cash flows, and stockholders' equity for the interim periods presented. Except as disclosed within these condensed notes to unaudited quarterly consolidated financial statements, the adjustments made were of a normal, recurring nature. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The quarterly consolidated financial statements include the accounts of Boise Cascade and its subsidiaries after elimination of intercompany balances and transactions. Quarterly results are not necessarily indicative of results that may be expected for the full year. These condensed notes to unaudited quarterly consolidated financial statements should be read in conjunction with our 2018 Form 10-K and the other reports we file with the Securities and Exchange Commission (SEC).


2.	Summary of Significant Accounting Policies

Accounting Policies

The complete summary of significant accounting policies is included in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2018 Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets, and other long-lived assets; legal contingencies; guarantee obligations; indemnifications; assumptions used in retirement, medical, and workers' compensation benefits; assumptions used in the determination of right-of-use assets and related lease liabilities; stock-based compensation; fair value measurements; income taxes; and vendor and customer rebates, among others. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

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Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For revenue disaggregated by major product line for each reportable segment, see Note 12, Segment Information.

Fees for shipping and handling charged to customers for sales transactions are included in "Sales." When control over products has transferred to the customer, we have elected to recognize costs related to shipping and handling as an expense. For our Wood Products segment, costs related to shipping and handling are included in "Materials, labor, and other operating expenses (excluding depreciation)." In our Wood Products segment, we view our shipping and handling costs as a cost of the manufacturing process and the movement of product to our end customers. For our Building Materials Distribution segment, costs related to shipping and handling of $36.5 million and $33.6 million , respectively, are included in "Selling and distribution expenses" for the three months ended March 31, 2019 , and 2018 . In our Building Materials Distribution segment, our activities relate to the purchase and resale of finished product, and excluding shipping and handling costs from “Materials, labor, and other operating expenses (excluding depreciation)” provides us a clearer view of our operating performance and the effectiveness of our sales and purchasing functions.

Customer Rebates and Allowances

Rebates are provided to our customers and our customers' customers based on the volume of their purchases, among other factors such as customer loyalty, conversion, and commitment. We provide the rebates to increase the sell-through of our products. Rebates are generally estimated based on the expected amount to be paid and recorded as a decrease in "Sales." At March 31, 2019 , and December 31, 2018 , we had $48.2 million and $52.1 million , respectively, of rebates payable to our customers recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

Vendor Rebates and Allowances

We receive rebates and allowances from our vendors under a number of different programs, including vendor marketing programs. At March 31, 2019 , and December 31, 2018 , we had $6.0 million and $9.7 million , respectively, of vendor rebates and allowances recorded in "Receivables, Other" on our Consolidated Balance Sheets. Rebates and allowances received from our vendors are recognized as a reduction of "Materials, labor, and other operating expenses (excluding depreciation)" when the product is sold, unless the rebates and allowances are linked to a specific incremental cost to sell a vendor's product. Amounts received from vendors that are linked to specific selling and distribution expenses are recognized as a reduction of "Selling and distribution expenses" in the period the expense is incurred.

Inventories

Inventories included the following (work in process is not material):



	March 31, 2019		December 31, 2018
	(thousands)
Finished goods and work in process	$	487,954	$	441,774
Logs	48,019		54,301
Other raw materials and supplies	37,887		36,974
	$	573,860	$	533,049

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Property and Equipment

Property and equipment consisted of the following asset classes:



	March 31, 2019			December 31, 2018
	(thousands)
Land	$	38,888		$	38,888
Buildings (a)	141,720			164,878
Improvements	50,776			49,509
Mobile equipment, information technology, and office furniture	150,935			150,712
Machinery and equipment	639,994			629,337
Construction in progress	29,797			31,015
	1,052,110			1,064,339
Less accumulated depreciation	(591,460		)	(577,115		)
	$	460,650		$	487,224

___________________________________


(a)	As of December 31, 2018 , capital lease assets were included in the "Buildings" asset class. For additional information related to leases, see Note 7, Leases.

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy under GAAP gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value (Level 1). If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly (Level 2). If quoted prices for identical or similar assets are not available or are unobservable, we may use internally developed valuation models, whose inputs include bid prices, and third-party valuations utilizing underlying asset assumptions (Level 3).

Financial Instruments

Our financial instruments are cash and cash equivalents, accounts receivable, accounts payable, long-term debt, and interest rate swaps. Our cash is recorded at cost, which approximates fair value, and our cash equivalents are money market funds. As of March 31, 2019 , and December 31, 2018 , we held $116.6 million and $160.4 million , respectively, in money market funds that are measured at fair value on a recurring basis using Level 1 inputs. The recorded values of accounts receivable and accounts payable approximate fair values based on their short-term nature. At March 31, 2019 , and December 31, 2018 , the book value of our fixed-rate debt for each period was $350.0 million , and the fair value was estimated to be $344.8 million and $328.1 million , respectively. The difference between the book value and the fair value is derived from the difference between the period-end market interest rate and the stated rate of our fixed-rate, long-term debt. We estimated the fair value of our fixed-rate debt using quoted market prices of our debt in inactive markets (Level 2 inputs). The interest rate on our term loans is based on market conditions such as the London Interbank Offered Rate (LIBOR) or a base rate. Because the interest rate on the term loans is based on current market conditions, we believe that the estimated fair value of the outstanding balance on our term loans approximates book value. As discussed below, we also have interest rate swaps to mitigate our variable interest rate exposure, the fair value of which is measured based on Level 2 inputs.

Interest Rate Risk and Interest Rate Swaps

We are exposed to interest rate risk arising from fluctuations in variable-rate LIBOR on our term loans and when we have loan amounts outstanding on our Revolving Credit Facility. At March 31, 2019 , we had $95.0 million of variable-rate debt outstanding. Our objective is to limit the variability of interest payments on our debt. To meet this objective, in 2016 we entered into receive-variable, pay-fixed interest rate swaps to change the variable-rate cash flow exposure to fixed-rate cash flows. In accordance with our risk management strategy, we actively monitor our interest rate exposure and use derivative instruments from time to time to manage the related risk.

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On February 16, 2016, and March 31, 2016, we entered into interest rate swap agreements with notional principal amounts of $50.0 million and $75.0 million , respectively, to offset risks associated with the variability in cash flows relating to interest payments that are based on one-month LIBOR. We do not speculate using derivative instruments. At March 31, 2019 , and December 31, 2018 , the notional principal amount of our interest rate swap agreements was $95.0 million after liquidating $30.0 million of the interest rate swap with original notional principal amount of $75.0 million in November 2018.

Under the interest rate swaps, we receive LIBOR-based variable interest rate payments and make fixed interest rate payments, thereby fixing the interest rate on $95.0 million of variable rate debt exposure. Payments on the interest rate swaps with notional principal amounts of $50.0 million and $45.0 million are due on a monthly basis at an annual fixed rate of 1.007% and 1.256% , respectively, and expire in February 2022 and March 2022, respectively. The interest rate swap agreements were not designated as cash flow hedges, and as a result, all changes in the fair value are recognized in "Change in fair value of interest rate swaps" in the Consolidated Statements of Operations rather than through other comprehensive income. At March 31, 2019 , and December 31, 2018 , we recorded long-term assets of $2.8 million and $3.8 million , respectively, in "Other assets" on our Consolidated Balance Sheets, representing the fair value of the interest rate swap agreements. The swaps were valued based on observable inputs for similar assets and liabilities and other observable inputs for interest rates and yield curves (Level 2 inputs).

Concentration of Credit Risk

We are exposed to credit risk related to customer accounts receivable. In order to manage credit risk, we consider customer concentrations and current economic trends and monitor the creditworthiness of significant customers based on ongoing credit evaluations. At March 31, 2019 , receivables from two customers accounted for approximately 12% and 11% , respectively, of total receivables. At December 31, 2018 , receivables from two customers accounted for approximately 13% and 11% , respectively, of total receivables. No other customer accounted for 10% or more of total receivables.

New and Recently Adopted Accounting Standards

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU provides guidance on implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The guidance aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in such a CCA. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We currently do not expect the adoption of the guidance to have a material effect on our financial statements, but will continue to monitor the standard through the effective date.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans . This ASU amends ASC 715 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant related to defined benefit pension and other postretirement plans. The ASU's changes related to disclosures are part of the FASB's disclosure framework project. The updated guidance is effective retrospectively for annual reporting periods ending after December 15, 2020, with early adoption permitted. We are currently evaluating the effects of this ASU on our disclosures in the notes to our financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement . This ASU amends ASC 820 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant related to recurring and nonrecurring fair value measurements. The ASU's changes related to disclosures are part of the FASB's disclosure framework project. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We currently do not expect the adoption of the guidance to have a material effect on our financial statements, but will continue to monitor the standard through the effective date.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . This amendment requires a lessee to recognize a right-of-use (ROU) asset and an associated lease liability on the balance sheet for all leases (whether operating or finance leases) with a term longer than 12 months. For leases defined as finance leases under the new standard, the lessee subsequently recognizes interest expense and amortization of the ROU asset, similar to accounting for capital leases under the previous lease

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standard. For leases defined as operating leases under the new standard, the lessee subsequently recognizes straight-line lease expense over the life of the lease. We adopted this standard effective January 1, 2019. The new lease standard had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of operations or cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. See Note 7, Leases, for additional information on the impact of this standard on our accounting for leases and additional required qualitative disclosures of our lease policies.

There were no other accounting standards recently issued that had or are expected to have a material impact on our consolidated financial statements and associated disclosures.

Reclassifications

Certain amounts in prior year's consolidated financial statements have been reclassified to conform with current year's presentation, none of which were considered material.

3. Income Taxes

For the three months ended March 31, 2019 , and 2018 , we recorded $3.2 million and $9.8 million , respectively of income tax expense and had an effective rate of 21.9% and 20.9% , respectively. During the three months ended March 31, 2019 , and 2018 , the primary reason for the difference between the federal statutory income tax rate of 21% and the effective tax rate was the effect of state taxes, offset by excess tax benefits of vested share-based payment awards.

During the three months ended March 31, 2019 and 2018 , refunds received, net of cash taxes paid were $11.0 million and $12.0 million , respectively.


4.	Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Weighted average common shares outstanding for the basic net income per common share calculation includes certain vested restricted stock units (RSUs) and performance stock units (PSUs) as there are no conditions under which those shares will not be issued. Diluted net income per common share is computed by dividing net income by the combination of the weighted average number of common shares outstanding during the period and other potentially dilutive weighted average common shares. Other potentially dilutive weighted average common shares include the dilutive effect of stock options, RSUs, and PSUs for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share and the amount of compensation expense, if any, for future service that has not yet been recognized are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted net income per common share:



	Three Months Ended March 31
	2019		2018
	(thousands, except per-share data)
Net income	$	11,389	$	37,050
Weighted average common shares outstanding during the period (for basic calculation)	38,884		38,778
Dilutive effect of other potential common shares	319		618
Weighted average common shares and potential common shares (for diluted calculation)	39,203		39,396

Net income per common share - Basic	$	0.29	$	0.96
Net income per common share - Diluted	$	0.29	$	0.94

The computation of the dilutive effect of other potential common shares excludes stock awards representing 0.2 million and no shares of common stock, respectively, in the three months ended March 31, 2019 and 2018 . Under the treasury stock method, the inclusion of these stock awards would have been antidilutive.

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5.	Sale of Manufacturing Facility

In December 2018, we committed to sell a hardwood plywood facility located in Moncure, North Carolina, and subsequently entered into a definitive sale agreement in January 2019 (the Sale). This facility generated net sales and operating loss of approximately $5.5 million and $1.4 million , respectively, during the three months ended March 31, 2019 , and net sales and operating loss of approximately $7.8 million and $1.2 million , respectively, during the three months ended March 31, 2018 . These results are included in the operating results of our Wood Products segment.

On March 1, 2019, we closed on the Sale and received proceeds of $2.5 million . The disposal group met the criteria to be classified as held for sale during fourth quarter 2018. Upon classification as held for sale, we discontinued depreciation of the long-lived assets, and performed an assessment of impairment to identify and expense any excess of carrying value over fair value less costs to sell. As a result, we recorded pre-tax impairment and sale-related losses of $24.0 million during fourth quarter 2018.


6.	Debt

Long-term debt consisted of the following:



	March 31, 2019			December 31, 2018
	(thousands)
Asset-based revolving credit facility	$	—		$	—
Asset-based credit facility term loan due 2022	50,000			50,000
Term loan due 2026	45,000			45,000
5.625% senior notes due 2024	350,000			350,000
Deferred financing costs	(5,293		)	(5,572		)
Long-term debt	$	439,707		$	439,428

Asset-Based Credit Facility

On May 15, 2015, Boise Cascade and its principal operating subsidiaries, Boise Cascade Wood Products, L.L.C., and Boise Cascade Building Materials Distribution, L.L.C., as borrowers, and Boise Cascade Wood Products Holdings Corp., as guarantor, entered into an Amended and Restated Credit Agreement, as amended, (Amended Agreement) with Wells Fargo Capital Finance, LLC, as administrative agent, and the banks named therein as lenders. The Amended Agreement includes a $370 million senior secured asset-based revolving credit facility (Revolving Credit Facility) and a $50.0 million term loan (ABL Term Loan) maturing on May 1, 2022. Interest on borrowings under our Revolving Credit Facility and ABL Term Loan are payable monthly. Borrowings under the Amended Agreement are constrained by a borrowing base formula dependent upon levels of eligible receivables and inventory reduced by outstanding borrowings and letters of credit (Availability).

The Amended Agreement is secured by a first-priority security interest in substantially all of our assets, except for property and equipment. The proceeds of borrowings under the agreement are available for working capital and other general corporate purposes.

The Amended Agreement contains customary nonfinancial covenants, including a negative pledge covenant and restrictions on new indebtedness, investments, distributions to equity holders, asset sales, and affiliate transactions, the scope of which are dependent on the Availability existing from time to time. The Amended Agreement also contains a requirement that we meet a 1 :1 fixed-charge coverage ratio (FCCR), applicable only if Availability falls below 10% of the aggregate revolving lending commitments, or $37 million . Availability exceeded the minimum threshold amounts required for testing of the FCCR at all times since entering into the Amended Agreement, and Availability at March 31, 2019 , was $365.4 million .

The Amended Agreement permits us to pay dividends only if at the time of payment (i) no default has occurred or is continuing (or would result from such payment) under the Amended Agreement, and (ii) pro forma Excess Availability (as defined in the Amended Agreement) is equal to or exceeds 25% of the aggregate Revolver Commitments (as defined in the Amended Agreement) or (iii) (x) pro forma Excess Availability is equal to or exceeds 15% of the aggregate Revolver Commitment and (y) our fixed-charge coverage ratio is greater than or equal to 1 :1 on a pro forma basis.

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Revolving Credit Facility

Interest rates under the Revolving Credit Facility are based, at our election, on either LIBOR or a base rate, as defined in the Amended Agreement, plus a spread over the index elected that ranges from 1.25% to 1.75% for loans based on LIBOR and from 0.25% to 0.75% for loans based on the base rate. The spread is determined on the basis of a pricing grid that results in a higher spread as average quarterly Availability declines. Letters of credit are subject to a fronting fee payable to the issuing bank and a fee payable to the lenders equal to the LIBOR margin rate. In addition, we are required to pay an unused commitment fee at a rate of 0.25% per annum of the average unused portion of the lending commitments.

At both March 31, 2019 , and December 31, 2018 , we had no borrowings outstanding under the Revolving Credit Facility and $4.6 million of letters of credit outstanding. These letters of credit and borrowings, if any, reduce Availability under the Revolving Credit Facility by an equivalent amount.

ABL Term Loan

The ABL Term Loan was provided by institutions within the Farm Credit system. Borrowings under the ABL Term Loan may be repaid from time to time at the discretion of the borrowers without premium or penalty. However, any principal amount of ABL Term Loan repaid may not be subsequently re-borrowed.

Interest rates under the ABL Term Loan are based, at our election, on either LIBOR or a base rate, as defined in the Amended Agreement, plus a spread over the index elected that ranges from 1.75% to 2.25% for LIBOR rate loans and from 0.75% to 1.25% for base rate loans, both dependent on the amount of Average Excess Availability (as defined in the Amended Agreement). During the three months ended March 31, 2019 , the average interest rate on the ABL Term Loan was approximately 4.24% .

We have received and expect to continue receiving patronage credits under the ABL Term Loan. Patronage credits are distributions of profits from banks in the Farm Credit system, which are cooperatives that are required to distribute profits to their members. Patronage distributions, which are generally made in cash, are received in the year after they are earned. Patronage credits are recorded as a reduction to interest expense in the year earned. After giving effect to expected patronage distributions, the effective average net interest rate on the ABL Term Loan was approximately 3.2% during the three months ended March 31, 2019 .

Term Loan

On March 30, 2016 (Closing Date), Boise Cascade and its principal operating subsidiaries, Boise Cascade Wood Products, L.L.C., and Boise Cascade Building Materials Distribution, L.L.C., as borrowers, and the guarantors party thereto, entered into a term loan agreement, as amended, (Term Loan Agreement) with American AgCredit, PCA, as administrative agent and sole lead arranger, and other banks in the Farm Credit system named therein as lenders. The Term Loan Agreement was for a $75.0 million secured term loan (Term Loan). The outstanding principal balance of the Term Loan amortizes and is payable in equal installments of $10 million per year on each of the sixth, seventh, eighth, and ninth anniversaries of the Closing Date, with the remaining principal balance due and payable on March 30, 2026. Interest on our Term Loan is payable monthly.

In December 2016, we prepaid $30 million of the Term Loan, which became available to reborrow. In November 2018, we terminated the ability to reborrow this prepaid Term Loan. Amounts prepaid and eligible for reborrowing were subject to an unused line fee of 0.325% per annum times the average daily amount of the unused commitments. This prepayment of $30 million satisfied our principal obligations due on the sixth, seventh, and eighth anniversaries of the Closing Date.

Pursuant to the Term Loan Agreement, the borrowers are required to maintain, as of the end of any fiscal quarter, a Capitalization Ratio lower than 60% , a Consolidated Net Worth greater than $350 million , and Available Liquidity greater than $100 million (each as defined in the Term Loan Agreement). In addition, under the Term Loan Agreement, and subject to certain exceptions, the borrowers may not, among other things, (i) incur indebtedness, (ii) incur liens, (iii) make junior payments, (iv) make certain investments, and (v) under certain circumstances, make capital expenditures in excess of $50 million during four consecutive quarters. The Term Loan Agreement also includes customary representations of the borrowers and provides for certain events of default customary for similar facilities.

The Term Loan Agreement permits us to pay dividends only if at the time of payment (i) no default has occurred or is continuing (or would result from such payment) under the Term Loan Agreement, and (ii) our interest coverage ratio is greater than or equal to 3 :1 at such time or (iii) our fixed-charge coverage ratio is greater than or equal to 1 :1.

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Interest rates under the Term Loan Agreement are based, at our election, on either the LIBOR or a base rate, as defined in the Term Loan Agreement, plus a spread over the index. The applicable spread for the Term Loan ranges from 1.875% to 2.125% for LIBOR rate loans, and 0.875% to 1.125% for base rate loans, both dependent on our Interest Coverage Ratio (as defined in the Term Loan Agreement). During the three months ended March 31, 2019 , the average interest rate on the Term Loan was approximately 4.38% . We have received and expect to continue receiving patronage credits under the Term Loan. After giving effect to expected patronage distributions, the effective average net interest rate on the Term Loan was approximately 3.4% .

The Term Loan is secured by a first priority mortgage on our Thorsby, Alabama, and Roxboro, North Carolina, EWP facilities and a first priority security interest on the equipment and certain tangible personal property located therein.

2024 Notes

On August 29, 2016, Boise Cascade issued $350 million of 5.625% senior notes due September 1, 2024 (2024 Notes), through a private placement that was exempt from the registration requirements of the Securities Act. Interest on our 2024 Notes is payable semiannually in arrears on March 1 and September 1. The 2024 Notes are guaranteed by each of our existing and future direct or indirect domestic subsidiaries that is a guarantor under our Amended Agreement.

The 2024 Notes are senior unsecured obligations and rank equally with all of the existing and future senior indebtedness of Boise Cascade Company and of the guarantors, senior to all of their existing and future subordinated indebtedness, effectively subordinated to all of their present and future senior secured indebtedness (including all borrowings with respect to our Amended Agreement to the extent of the value of the assets securing such indebtedness), and structurally subordinated to the indebtedness of any subsidiaries that do not guarantee the 2024 Notes.

The terms of the indenture governing the 2024 Notes, among other things, limit the ability of Boise Cascade and our restricted subsidiaries to: incur additional debt; declare or pay dividends; redeem stock or make other distributions to stockholders; make investments; create liens on assets; consolidate, merge or transfer substantially all of their assets; enter into transactions with affiliates; and sell or transfer certain assets. The indenture governing the 2024 Notes, permits us to pay dividends only if at the time of payment (i) no default has occurred or is continuing (or would result from such payment) under the indenture, and (ii) our consolidated leverage ratio is no greater than 3.5 :1, or (iii) the dividend, together with other dividends since the issue date, would not exceed our "builder" basket under the indenture. In addition, the indenture includes certain specific baskets for the payment of dividends.

The indenture governing the 2024 Notes provides for customary events of default and remedies.

Interest Rate Swaps

For information on interest rate swaps, see Interest Rate Risk and Interest Rate Swaps of Note 2, Summary of Significant Accounting Policies.

Cash Paid for Interest

For the three months ended March 31, 2019 and 2018 , cash payments for interest were $10.8 million and $10.7 million , respectively.

7. Leases

Adoption of ASC Topic 842, "Leases"

On January 1, 2019, we adopted Topic 842 using the modified retrospective transition method and used the effective date as our date of initial application. Consequently, leases for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840.

The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. We did not elect the use-of-hindsight practical expedient.

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We recorded additional lease liabilities for operating leases of $72.4 million, with an offsetting increase to ROU assets of approximately $69.2 million as of January 1, 2019, substantially all of which are real estate leases. The difference between these amounts is related to the reclassification of accrued straight-line rent upon adoption. Capital leases were also reclassified from "Property and equipment, net" to "Finance lease right-of-use assets" and from "Other long-term liabilities" to "Finance lease liabilities" on our consolidated balance sheet. The standard did not have a material impact on our consolidated net earnings and cash flows. There was no cumulative effect adjustment recorded to opening retained earnings as of January 1, 2019, upon adoption of Topic 842.

The effect of the changes made to our consolidated balance sheet as of January 1, 2019, for the adoption of the new lease standard was as follows:



	Balance at December 31, 2018		Adjustments Due to ASC 842			Balance at January 1, 2019
	(thousands)
ASSETS
Property and equipment, net	$	487,224	$	(21,732	)	$	465,492
Operating lease right-of-use assets	—		69,155			69,155
Finance lease right-of-use assets	—		20,872			20,872
Prepaid expenses and other	31,818		(246		)	31,572

LIABILITIES
Accrued liabilities, other	63,509		8,863			72,372
Operating lease liabilities, net of current portion	—		63,498			63,498
Finance lease liabilities, net of current portion	—		21,921			21,921
Other long-term liabilities	38,904		(26,233		)	12,671

In accordance with the new lease standard requirements, the disclosure of the impact of adoption on our consolidated balance sheet was as follows:



	March 31, 2019
	As Reported		Balances Without Adoption of ASC 842		Effect of Change Higher/(Lower)
	(thousands)
ASSETS
Property and equipment, net	$	460,650	$	481,873	$	(21,223	)
Operating lease right-of-use assets	67,493		—		67,493
Finance lease right-of-use assets	20,376		—		20,376
Prepaid expenses and other	19,109		19,355		(246		)

LIABILITIES
Accrued liabilities, other	70,298		61,460		8,838
Operating lease liabilities, net of current portion	61,902		—		61,902
Finance lease liabilities, net of current portion	21,687		—		21,687
Other long-term liabilities	14,091		40,118		(26,027		)

Leases

We primarily lease land, building, and equipment under operating and finance leases. We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or upon modification. Substantially all of our leases with initial terms greater than one year are for real estate, including distribution centers, corporate headquarters, land, and other office space. Substantially all of these lease agreements have fixed payment terms based on the passage of time and are recorded in our Building Materials Distribution segment. Many of our leases include fixed escalation clauses, renewal options and/or termination options that are factored into our determination of lease term and lease payments when appropriate. Renewal options generally range from one to ten years with fixed payment terms similar to those in the

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original lease agreements. Some lease agreements provide us with the option to purchase the leased property at market value. Our lease agreements do not contain any residual value guarantees.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. The current portion of our operating and finance lease liabilities are recorded in "Accrued liabilities, Other" on our Consolidated Balance Sheets.

We use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. In determining our incremental borrowing rates, we give consideration to publicly available interest rates for instruments with similar characteristics.

For purposes of determining straight-line rent expense, the lease term is calculated from the date we first take possession of the facility, including any periods of free rent and any renewal option periods we are reasonably certain of exercising. Variable lease expense generally includes reimbursement of actual costs for common area maintenance, property taxes, and insurance on leased real estate and are recorded as incurred.

The new standard provides practical expedients for an entity’s ongoing accounting. We elected the practical expedient to not separate lease and non-lease components for all of our leases. We also elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases in transition. Our short-term leases primarily include equipment rentals with lease terms on a month-to-month basis, which provide for our seasonal needs and flexibility in the use of equipment. Our short-term leases also include certain real estate for which either party has the right to cancel upon providing notice of 30 to 90 days.

Lease Costs

The components of lease expense were as follows:



	Three Months Ended March 31, 2019
	(thousands)

Operating lease cost	$	3,341
Finance lease cost
Amortization of right-of-use assets	375
Interest on lease liabilities	461
Variable lease cost	619
Short-term lease cost	994
Sublease income	(132		)
Total lease cost	$	5,658

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Other Information

Supplemental cash flow information related to leases was as follows:



	Three Months Ended March 31, 2019
	(thousands)

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,301
Operating cash flows from finance leases	461
Financing cash flows from finance leases	181
Right-of-use assets obtained in exchange for lease obligations
Operating leases	585
Finance leases	—

Other information related to leases was as follows:



	March 31, 2019

Weighted-average remaining lease term (years)
Operating leases	9
Finance leases	16
Weighted-average discount rate
Operating leases (a)	6.5	%
Finance leases	8.8	%

___________________________________

(a) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

As of March 31, 2019 , our minimum lease payment requirements for noncancelable operating and finance leases are as follows (in thousands):



	Operating Leases			Finance Leases
	(thousands)
Remainder of 2019	$	9,859		$	1,937
2020	12,737			2,617
2021	11,598			2,656
2022	10,211			2,694
2023	9,881			2,740
Thereafter	41,189			30,177
Total future minimum lease payments	95,475			42,821
Less imputed interest	(24,735		)	(20,390		)
Total lease obligations	70,740			22,431
Less current obligations	(8,838		)	(744		)
Long-term lease obligations	$	61,902		$	21,687

Disclosures Related to Periods Prior to Adoption of ASC Topic 842, "Leases"

Rental expense for operating leases was $4.6 million for the three months ended March 31, 2018. Sublease rental income was not material. During the three months ended March 31, 2018, we recorded a capital lease for a distribution center with an initial lease term of 20 years in the amount of $14.3 million , which represents a non-cash investing and financing

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activity. At December 31, 2018, capital lease obligations are recorded in "Other long-term liabilities" on our Consolidated Balance Sheets.

As of December 31, 2018, our minimum lease payment requirements for noncancelable operating and capital leases with terms of more than one year are as follows:



	Operating Leases		Capital Leases
	(thousands)
2019	$	13,222	$	2,578
2020	12,734		2,617
2021	11,595		2,656
2022	10,208		2,694
2023	9,800		2,740
Thereafter	40,381		30,177
Total	$	97,940	43,462
Less - interest on capital lease obligations			(20,838		)
Total principal payable on capital lease obligations			22,624
Less - current obligations			(703		)
Long-term capital lease obligations			$	21,921

These future minimum lease payment requirements have not been reduced by sublease income due in the future under noncancelable subleases. Minimum sublease income expected to be received in the future is not material.

8. Retirement and Benefit Plans

The following table presents the pension benefit costs:



	Three Months Ended March 31
	2019			2018
	(thousands)
Service cost	$	161		$	205
Interest cost	1,816			4,011
Expected return on plan assets	(1,474		)	(4,588		)
Amortization of actuarial (gain) loss	(43		)	821
Net periodic benefit expense	$	460		$	449

Service cost is recorded in the same income statement line items as other employee compensation costs arising from services rendered, and the other components of net periodic benefit expense are recorded in "Pension expense (excluding service costs)" in our Consolidated Statements of Operations.

During the three months ended March 31, 2019 , we contributed $0.5 million in cash to the pension plans. For the remainder of 2019 , we expect to make approximately $1.4 million in cash contributions to the pension plans.

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9.	Stock-Based Compensation

In February 2019 and 2018, we granted two types of stock-based awards under our incentive plan: performance stock units (PSUs) and restricted stock units (RSUs).

PSU and RSU Awards

During the three months ended March 31, 2019 , we granted 110,923 PSUs to our officers and other employees, subject to performance and service conditions. For the officers, the number of shares actually awarded will range from 0% and 200% of the target amount, depending upon Boise Cascade's 2019 return on invested capital (ROIC), as approved by our Compensation Committee in accordance with the related grant agreement. For the other employees, the number of shares actually awarded will range from 0% to 200% of the target amount, depending upon Boise Cascade’s 2019 EBITDA, defined as income before interest (interest expense and interest income), income taxes, and depreciation and amortization, determined in accordance with the related grant agreement. Because the ROIC and EBITDA components contain a performance condition, we record compensation expense over the requisite service period based on the most probable number of shares expected to vest. The PSUs granted to officers in 2019 , if earned, generally vest in a single installment three years from the date of grant, while the PSUs granted to other employees vest in three equal tranches each year after the grant date.

During the three months ended March 31, 2018 , we granted 78,976 PSUs to our officers and other employees, subject to performance and service conditions. During the 2018 performance period, officers and other employees earned 100% and 110% , respectively, of the target based on Boise Cascade’s 2018 ROIC and EBITDA, determined by our Compensation Committee in accordance with the related grant agreement.

During the three months ended March 31, 2019 and 2018 , we granted an aggregate of 165,350 and 98,375 RSUs, respectively, to our officers, other employees, and nonemployee directors with only service conditions. The RSUs granted to officers and other employees vest in three equal tranches each year after the grant date. The RSUs granted to nonemployee directors vest over a one -year period.

We based the fair value of PSU and RSU awards on the closing market price of our common stock on the grant date. During the three months ended March 31, 2019 and 2018 , the total fair value of PSUs and RSUs vested was $11.1 million and $15.2 million , respectively.

The following summarizes the activity of our PSUs and RSUs awarded under our incentive plan for the three months ended March 31, 2019 :



	PSUs				RSUs
	Number of shares		Weighted Average Grant-Date Fair Value		Number of shares		Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2018	429,788		$	25.90	289,173		$	29.52
Granted	110,923		29.48		165,350		29.08
Performance condition adjustment, net (a)	1,443		43.05		—		—
Vested	(212,891	)	19.45		(182,857	)	26.42
Forfeited	(10,512	)	37.99		(5,561	)	35.96
Outstanding, March 31, 2019	318,751		$	31.13	266,105		$	31.24

_______________________________


(a)	Represents additional PSUs granted to non-officers based on achievement of 2018 EBITDA in excess of target.

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Compensation Expense

We record compensation expense over the awards' vesting period and account for share-based award forfeitures as they occur, rather than making estimates of future forfeitures. Any shares not vested are forfeited. We recognize stock awards with only service conditions on a straight-line basis over the requisite service period. Most of our share-based compensation expense was recorded in "General and administrative expenses" in our Consolidated Statements of Operations. Total stock-based compensation recognized from PSUs and RSUs, net of forfeitures, was as follows:



	Three Months Ended March 31
	2019		2018
	(thousands)
PSUs	$	979	$	1,087
RSUs	1,221		1,199
Total	$	2,200	$	2,286

The related tax benefit for both the three months ended March 31, 2019 and 2018 , was $0.6 million . As of March 31, 2019 , total unrecognized compensation expense related to nonvested share-based compensation arrangements was $13.7 million . This expense is expected to be recognized over a weighted-average period of 2.1 years.

10. Stockholders' Equity

Dividends

On November 14, 2017, we announced that our board of directors approved a dividend policy to pay quarterly cash dividends to holders of our common stock. During the first quarters of 2019 and 2018 , we declared and paid a dividend of $0.09 per share and $0.07 per share, respectively, of our common stock. As such, we paid $4.1 million and $2.8 million of dividends to shareholders during the three months ended March 31, 2019 and 2018 , respectively. On May 2, 2019 , our board of directors declared a dividend of $0.09 per share of common stock, payable on June 17, 2019 , to stockholders of record on June 3, 2019 . For a description of the restrictions in our asset-based credit facility, Term Loan, and the indenture governing our senior notes on our ability to pay dividends, see Note 6, Debt.

Accumulated Other Comprehensive Loss

The following table details the changes in accumulated other comprehensive loss for the three months ended March 31, 2019 and 2018 :



	Three Months Ended March 31
	2019			2018
	(thousands)
Beginning balance, net of taxes	$	(47,652	)	$	(76,702	)
Amortization of actuarial (gain) loss, before taxes (a)	(43		)	821
Income taxes	11			(208		)
Ending balance, net of taxes	$	(47,684	)	$	(76,089	)

___________________________________


(a)	Represents amounts reclassified from accumulated other comprehensive loss. These amounts are included in the computation of net periodic pension cost. For additional information, see Note 8, Retirement and Benefit Plans.

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11.	Transactions With Related Party

Louisiana Timber Procurement Company, L.L.C. (LTP) is an unconsolidated variable-interest entity that is 50% owned by us and 50% owned by Packaging Corporation of America (PCA). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of us and PCA in Louisiana. We are not the primary beneficiary of LTP as we do not have power to direct the activities that most significantly affect the economic performance of LTP. Accordingly, we do not consolidate LTP's results in our financial statements.

Sales

Related-party sales to LTP from our Wood Products segment in our Consolidated Statements of Operations were $4.5 million and $4.3 million , respectively, during the three months ended March 31, 2019 and 2018 . These sales are recorded in "Sales" in our Consolidated Statements of Operations.

Costs and Expenses

Related-party wood fiber purchases from LTP were $20.0 million and $20.4 million , respectively, during the three months ended March 31, 2019 and 2018 . These costs are recorded in "Materials, labor, and other operating expenses (excluding depreciation)" in our Consolidated Statements of Operations.


12.	Segment Information

We operate our business using two reportable segments: Wood Products and Building Materials Distribution. Corporate and Other results are presented as reconciling items to arrive at total net sales and operating income. There are no differences in our basis of measurement of segment profit or loss from those disclosed in Note 17, Segment Information, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2018 Form 10-K.

Wood Products and Building Materials Distribution segment sales to external customers, including related parties, by product line are as follows:



	Three Months Ended March 31
	2019		2018
	(millions)
Wood Products (a)
LVL	$	11.9	$	13.5
I-joists	5.3		9.9
Other engineered wood products	5.7		6.6
Plywood and veneer	67.4		87.1
Lumber	13.2		24.9
Byproducts	20.1		22.1
Particleboard	—		10.8
Other	10.8		15.5
	134.4		190.5

Building Materials Distribution
Commodity	398.4		490.6
General line	323.4		315.2
Engineered wood products	185.9		186.6
	907.7		992.4
	$	1,042.1	$	1,182.8

___________________________________


(a)	Amounts represent sales to external customers. Sales are calculated after intersegment sales eliminations to our Building Materials Distribution segment, as well as the cost of EWP rebates and sales allowances provided at various stages of the supply chain

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(including distributors, retail lumberyards, and professional builders). For the three months ended March 31, 2019 , approximately 75% of Wood Products' EWP sales volumes were to our Building Materials Distribution segment.

An analysis of our operations by segment is as follows:



	Three Months Ended March 31
	2019			2018
	(thousands)
Net sales by segment
Wood Products	$	319,523		$	397,991
Building Materials Distribution	907,708			992,381
Intersegment eliminations and other (a)	(185,145		)	(207,531		)
Total net sales	$	1,042,086		$	1,182,841

Segment operating income
Wood Products	$	11,630		$	26,121
Building Materials Distribution	17,517			32,388
Total segment operating income	29,147			58,509
Unallocated corporate and other	(7,493		)	(6,705		)
Income from operations	$	21,654		$	51,804

___________________________________


(a)	Primarily represents intersegment sales from our Wood Products segment to our Building Materials Distribution segment.

13. Commitments, Legal Proceedings and Contingencies, and Guarantees

Commitments

We are a party to a number of long-term log supply agreements that are discussed in Note 18, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2018 Form 10-K. In addition, we have purchase obligations for goods and services, capital expenditures, and raw materials entered into in the normal course of business. As of March 31, 2019 , there have been no material changes to the above commitments disclosed in the 2018 Form 10-K.

Legal Proceedings and Contingencies

We are a party to legal proceedings that arise in the ordinary course of our business, including commercial liability claims, premises claims, environmental claims, and employment-related claims, among others. As of the date of this filing, we believe it is not reasonably possible that any of the legal actions against us will, individually or in the aggregate, have a material adverse effect on our financial position, results of operations, or cash flows.

Guarantees

We provide guarantees, indemnifications, and assurances to others. Note 18, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2018 Form 10-K describes the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make. As of March 31, 2019 , there have been no material changes to the guarantees disclosed in the 2018 Form 10-K.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Understanding Our Financial Information

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in "Item 1. Financial Statements" of this Form 10-Q, as well as our 2018 Form 10-K. The following discussion includes statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other nonhistorical statements in the discussion, are forward-looking. These forward-looking statements include, without limitation, any statement that may predict, indicate, or imply future results, performance, or achievements and may contain the words "may," "will," "expect," "believe," "should," "plan," "anticipate," and other similar expressions. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Item 1A. Risk Factors" in our 2018 Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume an obligation to update any forward-looking statement. Our future actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q.

Background

Boise Cascade Company is a building products company headquartered in Boise, Idaho. As used in this Form 10-Q, the terms "Boise Cascade," "we," and "our" refer to Boise Cascade Company and its consolidated subsidiaries. Boise Cascade is a large, vertically-integrated wood products manufacturer and building materials distributor. We have two reportable segments: (i) Wood Products, which primarily manufactures engineered wood products (EWP) and plywood; and (ii) Building Materials Distribution (BMD), which is a wholesale distributor of building materials. For more information, see Note 12, Segment Information, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q.

Executive Overview

We recorded income from operations of $21.7 million during the three months ended March 31, 2019 , compared with income from operations of $51.8 million during the three months ended March 31, 2018 . In our Wood Products segment, income decreased $14.5 million to $11.6 million for the three months ended March 31, 2019 , from $26.1 million for the three months ended March 31, 2018 . The decrease in segment income was due primarily to lower sales prices of plywood and lower sales volumes of EWP and plywood, as well as higher per-unit conversion costs. These decreases were offset partially by higher EWP sales prices and lower costs of OSB used in the manufacture of I-joists. In our Building Materials Distribution segment, income decreased $14.9 million to $17.5 million for the three months ended March 31, 2019 , from $32.4 million for the three months ended March 31, 2018 , driven primarily by a gross margin decrease of $10.0 million , resulting from lower average commodity prices and lower sales volumes compared with first quarter 2018, as well as increased selling and distribution expenses of $4.1 million . These changes are discussed further in "Our Operating Results" below.

We ended first quarter 2019 with $136.2 million of cash and cash equivalents and $439.7 million of debt. At March 31, 2019 , we had $365.4 million of unused committed bank line availability. We used $55.5 million of cash during the three months ended March 31, 2019 , principally to fund seasonal working capital increases and capital spending. A further description of our cash sources and uses for the three month comparative periods are discussed further in "Liquidity and Capital Resources" below.

Demand for the products we manufacture, as well as the products we purchase and distribute, is closely correlated with new residential construction in the U.S., which has historically been cyclical. To a lesser extent, demand for our products correlates with residential repair-and-remodeling activity and light commercial construction. As of April 2019, the Blue Chip Economic Indicators consensus forecast for 2019 and 2020 single- and multi-family housing starts in the U.S. were 1.25 million and 1.27 million units, respectively, compared with actual housing starts of 1.25 million in 2018 , as reported by the U.S. Census Bureau. Single-family housing starts have represented approximately two-thirds of total housing starts in recent years and are the primary driver of our sales.

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Although we believe U.S. demographics are supportive of higher levels of housing starts, we expect near-term residential construction growth to be flat or only modestly improving due to constraints faced by builders, such as availability of labor and building lots, as well as affordability constraints faced by prospective buyers. The pace of household formation rates and residential repair-and-remodeling activity will be affected by employment growth, wage growth, prospective home buyers' access to and cost of financing, housing affordability, and consumer confidence, as well as other factors. Household formation rates in turn will be a key factor behind the demand for new construction. In addition, the size of new single-family residences as well as the mix of single and multi-family starts will influence product consumption.

Extreme winter weather in many parts of the U.S., coupled with seasonally weak demand and additional industry capacity brought on in 2018, led to weak commodity products pricing in first quarter 2019. Commodity product pricing during the remainder of 2019 will be dependent on industry operating rates, net import and export activity, transportation constraints or disruptions, inventory levels in various distribution channels, and seasonal demand patterns. Composite panel and lumber pricing indices are approximately 35% below average levels experienced in the second quarter of 2018, and even if we experience meaningful price increases from current levels, we expect our year-over-year financial comparisons to again be negative in the second quarter of 2019.

Factors That Affect Our Operating Results and Trends

Our results of operations and financial performance are influenced by a variety of factors, including the following:


•	the commodity nature of our products and their price movements, which are driven largely by industry capacity and operating rates, industry cycles that affect supply and demand, and net import and export activity;

•

general economic conditions, including but not limited to housing starts, repair-and-remodeling activity, light commercial construction, inventory levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, household formation rates, prospective home buyers' access to and cost of financing, and housing affordability, that ultimately affect demand for our products;


•	the highly competitive nature of our industry;


•	material disruptions and/or major equipment failure at our manufacturing facilities;


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


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


•	disruptions to information systems used to process and store customer, employee, and vendor information, as well as the technology that manages our operations and other business processes;


•	our ability to successfully and efficiently complete and integrate acquisitions;


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


•	concentration of our sales among a relatively small group of customers, as well as the financial condition and creditworthiness of our customers;


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


•	impairment of our long-lived assets, goodwill, and/or intangible assets;


•	substantial ongoing capital investment costs, including those associated with recent acquisitions, and the difficulty in offsetting fixed costs related to those investments;


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


•	cost of compliance with government regulations, in particular environmental regulations;


•	exposure to product liability, product warranty, casualty, construction defect, and other claims;

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•	declines in demand for our products due to competing technologies or materials, as well as changes in building code provisions;


•	the impact of actuarial assumptions, investment return on pension assets, and regulatory activity on pension costs and pension funding requirements;


•	our indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs;


•	change in interest rate of our debt;


•	restrictive covenants contained in our debt agreements;


•	fluctuations in the market for our equity; and


•	the other factors described in "Item 1A. Risk Factors" in our 2018 Form 10-K.

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Our Operating Results

The following tables set forth our operating results in dollars and as a percentage of sales for the three months ended March 31, 2019 and 2018 :



	Three Months Ended March 31
	2019			2018
	(millions)
Sales	$	1,042.1		$	1,182.8

Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)	897.8			1,009.8
Depreciation and amortization	19.2			22.1
Selling and distribution expenses	87.0			83.4
General and administrative expenses	16.7			15.9
Other (income) expense, net	(0.3		)	(0.1		)
	1,020.4			1,131.0

Income from operations	$	21.7		$	51.8

	(percentage of sales)
Sales	100.0		%	100.0		%

Costs and expenses
Materials, labor, and other operating expenses (excluding depreciation)	86.2		%	85.4		%
Depreciation and amortization	1.8			1.9
Selling and distribution expenses	8.4			7.0
General and administrative expenses	1.6			1.3
Other (income) expense, net	—			—
	97.9		%	95.6		%

Income from operations	2.1		%	4.4		%

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Sales Volumes and Prices

Set forth below are historical U.S. housing starts data, segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment, and sales mix and gross margin information for our Building Materials Distribution segment for the three months ended March 31, 2019 and 2018 .



	Three Months Ended March 31
	2019			2018
	(thousands)
U.S. Housing Starts (a)
Single-family	184.5			194.8
Multi-family	76.0			93.7
	260.5			288.5

	(thousands)
Segment Sales
Wood Products	$	319,523		$	397,991
Building Materials Distribution	907,708			992,381
Intersegment eliminations	(185,145		)	(207,531		)
Total sales	$	1,042,086		$	1,182,841

	(millions)
Wood Products
Sales Volumes
Laminated veneer lumber (LVL) (cubic feet)	4.3			4.8
I-joists (equivalent lineal feet)	52			63
Plywood (sq. ft.) (3/8" basis)	336			360
Lumber (board feet)	20			47

	(dollars per unit)
Wood Products
Average Net Selling Prices
Laminated veneer lumber (LVL) (cubic foot)	$	18.87		$	17.30
I-joists (1,000 equivalent lineal feet)	1,266			1,179
Plywood (1,000 sq. ft.) (3/8" basis)	287			356
Lumber (1,000 board feet)	653			556

	(percentage of Building Materials Distribution sales)
Building Materials Distribution
Product Line Sales
Commodity	43.9		%	49.4		%
General line	35.6		%	31.8		%
Engineered wood	20.5		%	18.8		%

Gross margin percentage (b)	11.8		%	11.8		%

_______________________________________


(a)	Actual U.S. housing starts data reported by the U.S. Census Bureau.


(b)	We define gross margin as "Sales" less "Materials, labor, and other operating expenses (excluding depreciation)." Substantially all costs included in "Materials, labor, and other operating expenses (excluding depreciation)" for our Building Materials Distribution segment are for inventory purchased for resale. Gross margin percentage is gross margin as a percentage of segment sales.

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Sales

For the three months ended March 31, 2019 , total sales decreased $140.8 million , or 12% , to $1,042.1 million from $1,182.8 million during the three months ended March 31, 2018 . As described below, the decline in sales was driven by the decreases in sales volumes and prices for the products we manufacture and distribute with single-family residential construction activity being the key demand driver of our sales. In first quarter 2019 , total U.S. housing starts decreased 10% , with single-family starts down 5% from the same period in 2018 . In particular, single-family housing starts in the Western United States reflected significant weakness, with the Census Bureau reporting year-over-year declines in that region in excess of 20%. Average composite lumber and average composite panel prices for the three months ended March 31, 2019 , were 27% and 26% lower, respectively, than in the same period in the prior year, as reflected by Random Lengths composite lumber and panel pricing. These declines in composite commodity pricing resulted in lower sales in both of our segments, as noted below.

Wood Products. Sales, including sales to our BMD segment, decreased $78.5 million , or 20% , to $319.5 million for the three months ended March 31, 2019 , from $398.0 million for the three months ended March 31, 2018 . The decrease in sales was driven primarily by lower sales prices and sales volumes for plywood of 19% and 7%, respectively, resulting in decreased sales of $23.3 million and $8.5 million, respectively. The lower sales volume for plywood reflects modest downtime in response to weaker market conditions and the sale of the Moncure plywood facility on March 1, 2019. In addition, sales volumes for I-joists and LVL decreased 17% and 10%, respectively, resulting in decreased sales of $12.2 million and $8.3 million, respectively. The decrease in sales was also attributable to lower sales volumes of lumber and particleboard of $15.0 million and $10.6 million, respectively, due to the sale or closure of three lumber mills and a particleboard plant during 2018. These decreases were offset partially by increases in sales prices for LVL and I-joists of 9% and 7%, respectively, resulting in increased sales of $6.8 million and $4.5 million, respectively.

Building Materials Distribution. Sales decreased $84.7 million , or 9% , to $907.7 million for the three months ended March 31, 2019 , from $992.4 million for the three months ended March 31, 2018 . Compared with the same quarter in the prior year, the overall decrease in sales was driven by sales price and sales volume decreases of 6% and 3% , respectively. Excluding the impact of the acquisition of wholesale building material distribution locations in Nashville, Tennessee, Medford, Oregon, and Cincinnati, Ohio during 2018 (BMD Acquisitions), BMD sales would have decreased 11%. By product line, commodity sales decreased 19%, or $92.2 million; general line product sales increased 3%, or $8.2 million; and sales of EWP (substantially all of which are sourced through our Wood Products segment) decreased less than 1%, or $0.7 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) decreased $112.0 million , or 11% , to $897.8 million for the three months ended March 31, 2019 , compared with $1,009.8 million during the same period in the prior year. In our Wood Products segment, the decrease in materials, labor, and other operating expenses was primarily driven by lower sales volumes, as well as lower per-unit costs of OSB (used in the manufacture of I-joists) of 32%, compared with first quarter 2018 . However, materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 250 basis points, which was primarily due to lower plywood sales prices, resulting in decreased leveraging of labor and other manufacturing costs, offset partially by lower wood fiber costs. In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of lower sales volumes and lower commodity prices. BMD's MLO rate was flat compared with first quarter 2018 .

Depreciation and amortization expenses decreased $2.9 million , or 13% , to $19.2 million for the three months ended March 31, 2019 , compared with $22.1 million during the same period in the prior year. The decrease was due primarily to discontinued depreciation on certain manufacturing facilities upon curtailment and sale in the third and fourth quarters of 2018, offset partially by capital expenditures.

Selling and distribution expenses increased $3.7 million , or 4% , to $87.0 million for the three months ended March 31, 2019 , compared with $83.4 million during the same period in the prior year, due primarily to higher shipping and handling costs and employee-related expenses of $1.7 million and $0.6 million, respectively, which includes the impact of the BMD Acquisitions.

General and administrative expenses increased $0.8 million , or 5% , to $16.7 million for the three months ended March 31, 2019 , compared with $15.9 million for the same period in the prior year. The increase was primarily a result of higher employee-related expenses due to higher base compensation expenses, offset partially by lower incentive compensation expenses.

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Income From Operations

Income from operations decreased $30.2 million to $21.7 million for the three months ended March 31, 2019 , compared with $51.8 million for the three months ended March 31, 2018 .

Wood Products. Segment income decreased $14.5 million to $11.6 million for the three months ended March 31, 2019 , compared with $26.1 million for the three months ended March 31, 2018 . The decrease in segment income was due primarily to lower sales prices of plywood and lower sales volumes of EWP and plywood, as well as higher per-unit conversion costs. These decreases were offset partially by higher EWP sales prices and lower costs of OSB used in the manufacture of I-joists. In addition, depreciation and amortization expense decreased $3.8 million due primarily to discontinued depreciation on manufacturing facilities curtailed and sold in 2018.

Building Materials Distribution. Segment income decreased $14.9 million to $17.5 million for the three months ended March 31, 2019 , from $32.4 million for the three months ended March 31, 2018 . The decline in segment income was driven primarily by a gross margin decrease of $10.0 million , resulting from lower average commodity prices and lower sales volumes compared with first quarter 2018. In addition, selling and distribution expenses increased by $4.1 million .

Corporate and Other. Unallocated corporate expenses increased $0.8 million to $7.5 million for the three months ended March 31, 2019 , from $6.7 million for the three months ended March 31, 2018 , primarily due to higher employee-related expenses and other general administrative expenses.

Other

Change in fair value of interest rate swaps. For information related to our interest rate swaps, see the discussion under "Interest Rate Risk and Interest Rate Swaps" of Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q.

Income Tax Provision

Liquidity and Capital Resources

We ended first quarter 2019 with $136.2 million of cash and cash equivalents and $439.7 million of debt. At March 31, 2019 , we had $501.6 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability). We used $55.5 million of cash during the three months ended March 31, 2019 , principally to fund seasonal working capital increases and capital spending. Further descriptions of our cash sources and uses for the three month comparative periods are noted below.

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, funding of acquisitions, lease obligations, working capital, pension contributions, and to pay cash dividends to holders of our common stock over the next 12 months. We expect to fund our seasonal and intra-month working capital requirements in 2019 from cash on hand and, if necessary, borrowings under our revolving credit facility.

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Sources and Uses of Cash

We generate cash primarily from sales of our products, as well as short-term and long-term borrowings. Our primary uses of cash are for expenses related to the manufacture and distribution of building products, including inventory purchased for resale, wood fiber, labor, energy, and glues and resins. In addition to paying for ongoing operating costs, we use cash to invest in our business, service our debt and pension obligations, pay dividends, repurchase our common stock, and meet our contractual obligations and commercial commitments. Below is a discussion of our sources and uses of cash for operating activities, investing activities, and financing activities.



	Three Months Ended March 31
	2019			2018
	(thousands)
Net cash used for operations	$	(36,959	)	$	(21,759	)
Net cash used for investment	(10,705		)	(13,179		)
Net cash used for financing	(7,803		)	(7,518		)

Operating Activities

For the three months ended March 31, 2019 , our operating activities used $37.0 million of cash, compared with $21.8 million of cash used in the same period in 2018 . The $15.2 million increase in cash used for operations was due primarily to a $30.2 million decline in income from operations, partially offset by a lesser year-over-year increase in working capital. Working capital increased $87.2 million during the three months ended March 31, 2019 , compared with a $106.7 million increase for the same period in the prior year. See "Our Operating Results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations for more information related to factors affecting our operating results.

The change in working capital in both periods was primarily attributable to higher receivables and inventories, offset by an increase in accounts payable and accrued liabilities. The increases in receivables in both periods primarily reflect increased sales of approximately 19% and 31%, comparing sales for the months of March 2019 and 2018 with sales for the months of December 2018 and 2017, respectively. The increase in accounts payable and accrued liabilities provided $29.8 million of cash during the three months ended March 31, 2019 , compared with $48.6 million in the same period a year ago. During both periods, seasonal increases in inventory in preparation for the spring building season and extended terms offered by major vendors to our Building Materials Distribution segment led to the increase in accounts payable. This increase in accounts payable was offset partially by decreases in accrued liabilities, most notably annual employee incentive compensation payouts made during both periods.

Investment Activities

During the three months ended March 31, 2019 and 2018 , we used $14.3 million and $13.3 million , respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance. For the three months ended March 31, 2019 , we received asset sale proceeds of $2.5 million, from the sale of a hardwood plywood facility located in Moncure, North Carolina.

Excluding acquisitions, we expect capital expenditures in 2019 to total approximately $85 million to $95 million. This includes spending to improve the efficiency of our veneer production at our Chester, South Carolina, and Florien, Louisiana, facilities. This level of capital expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, and timing of equipment purchases. On April 29, 2019, BMD completed the acquisition of the assets of American Lumber Distributors, which operates a single-location wholesale distribution business in Birmingham, Alabama.

Financing Activities

During the three months ended March 31, 2019 , our financing activities used $7.8 million of cash, including $4.1 million for common stock dividend payments and $3.6 million of tax withholding payments on stock-based awards. During the three months ended March 31, 2019 , we did not borrow under our revolving credit facility.

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During the three months ended March 31, 2018 , our financing activities used $7.5 million of cash, including $5.1 million of tax withholding payments on stock-based awards and $2.8 million for common stock dividend payments. During the three months ended March 31, 2018 , we also borrowed $2.8 million under our revolving credit facility to fund intra-month working capital needs, which were subsequently repaid during the same period with cash on hand.

For more information related to our debt structure and dividend policy, see the discussion in Note 6, Debt, and Note 10, Stockholders' Equity, respectively, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" of this Form 10-Q.

Contractual Obligations

For information about contractual obligations, see Contractual Obligations in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K. There have been no material changes in contractual obligations outside the ordinary course of business since December 31, 2018 .

Off-Balance-Sheet Activities

At March 31, 2019 , and December 31, 2018 , we had no material off-balance-sheet arrangements with unconsolidated entities.

Guarantees

Note 10, Debt, and Note 18, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" in our 2018 Form 10-K describe the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make. As of March 31, 2019 , there have been no material changes to the guarantees disclosed in our 2018 Form 10-K.

Seasonal Influences

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products industry. Seasonal changes in levels of building activity affect our building products businesses, which are dependent on housing starts, repair-and-remodeling activities, and light commercial construction activities. We typically report lower sales in the first and fourth quarters due to the impact of poor weather on the construction market, and we generally have higher sales in the second and third quarters, reflecting an increase in construction due to more favorable weather conditions. We typically have higher working capital in the first and second quarters in preparation and response to the building season. Seasonally cold weather increases costs, especially energy consumption costs, at most of our manufacturing facilities.

Employees

As of April 21, 2019 , we had approximately 6,040 employees. Approximately 23% of these employees work pursuant to collective bargaining agreements. As of April 21, 2019 , we had nine collective bargaining agreements. None of our employees are working pursuant to a collective bargaining agreement that is expired or will expire within the next 12 months. We could experience a material labor disruption, strike, or significantly increased labor costs at one or more of our facilities, either in the course of negotiations of a labor agreement or otherwise. In addition, the ongoing recovery in the U.S. economy and our industry, when coupled with low unemployment rates, has made it difficult to acquire and retain the skilled labor necessary to successfully operate our facilities. Labor disruptions or shortages could prevent us from meeting customer demands or result in increased costs, thereby reducing our sales and profitability.

Disclosures of Financial Market Risks

In the normal course of business, we are exposed to financial risks such as changes in commodity prices, interest rates, and foreign currency exchange rates. As of March 31, 2019 , there have been no material changes to financial market risks disclosed in our 2018 Form 10-K.

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Environmental

For additional information about environmental issues, see Environmental in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K.

Critical Accounting Estimates

Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments, often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our board of directors. For information about critical accounting estimates, see Critical Accounting Estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K. At March 31, 2019 , there have been no material changes to our critical accounting estimates from those disclosed in our 2018 Form 10-K.

New and Recently Adopted Accounting Standards

For information related to new and recently adopted accounting standards, see "New and Recently Adopted Accounting Standards" in Note 2, Summary of Significant Accounting Policies, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1. Financial Statements" in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information relating to quantitative and qualitative disclosures about market risk, see the discussion under "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" and under the headings "Disclosures of Financial Market Risks" and "Financial Instruments" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K. As of March 31, 2019 , there have been no material changes in our exposure to market risk from those disclosed in our 2018 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) under the Exchange Act. We have designed these controls and procedures to reasonably assure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We have also designed our disclosure controls to provide reasonable assurance that such information is accumulated and communicated to our senior management, including our chief executive officer (CEO) and our chief financial officer (CFO), as appropriate, to allow them to make timely decisions regarding our required disclosures. Based on an evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that as of March 31, 2019 , our disclosure controls and procedures were effective in meeting the objectives for which they were designed.

Limitations on the Effectiveness of Controls and Procedures

In designing and evaluating our disclosure and/or internal controls and procedures, we recognized that no matter how well conceived and well operated, a control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, a control system, no matter how well designed, may not prevent or detect misstatements due to error or fraud. Additionally, in designing a control system, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have also designed our disclosure and internal controls and procedures based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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Changes in Internal Control Over Financial Reporting

Effective January 1, 2019, we adopted Accounting Standards Codification 842, Leases (Topic 842). As a result, we have made changes to certain internal controls over financial reporting to address risks associated with the required lease accounting and disclosure requirements. This includes the enhancement of our lease evaluation processes and the implementation of controls to address risks associated with the calculation of right-of-use assets and corresponding lease liabilities. We also implemented a new lease accounting system to track our leasing portfolio, process accounting transactions, and report on activity and balances. There were no other changes in our internal control over financial reporting that occurred during the three months ended March 31, 2019 , that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

This report on Form 10-Q contains forward-looking statements. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results, projected capital expenditures, and future business prospects, are forward-looking statements. You can identify these statements by our use of words such as "may," "will," "expect," "believe," "should," "plan," "anticipate," and other similar expressions. You can find examples of these statements throughout this report, including "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." We cannot guarantee that our actual results will be consistent with the forward-looking statements we make in this report. You should review carefully the risk factors listed in "Item 1A. Risk Factors" in our 2018 Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission and the risk factor below related to the impairment of long-lived assets. We do not assume an obligation to update any forward-looking statement.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Filed With the Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2019



Number		Description

10.1		Form of 2019 Restricted Stock Unit Agreement

10.2		Form of 2019 Performance Stock Unit Agreement

31.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BOISE CASCADE COMPANY


		/s/ Kelly E. Hibbs
		Kelly E. Hibbs Vice President and Controller
		(As Duly Authorized Officer and Chief Accounting Officer)

Date: May 6, 2019

TABLE OF CONTENTS

Part I Financial Informationprint Item 1. Financial Statementsprint Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II Other Informationprint Item 1. Legal Proceedingsprint Item 1A. Risk Factorsprint Item 2. Unregistered Sales Of Equity Securities and Use Of Proceedsprint Item 3. Defaults Upon Senior Securitiesprint Item 4. Mine Safety Disclosuresprint Item 5. Other Informationprint Item 6. Exhibitsprint

Exhibits

10.1 Form of 2019 Restricted Stock Unit Agreement 10.2 Form of 2019 Performance Stock Unit Agreement 31.1 CEO Certification pursuant to Section302 of the Sarbanes-Oxley Act of 2002 31.2 CFO Certification pursuant to Section302 of the Sarbanes-Oxley Act of 2002 32.1 CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Supplier name	Ticker
Caterpillar Inc.	CAT
DuPont de Nemours, Inc.	DD
Deere & Company	DE
Ecolab Inc.	ECL
Illinois Tool Works Inc.	ITW
Honeywell International Inc.	HON
3M Company	MMM
PPG Industries, Inc.	PPG

BCC 10-Q Quarter ended March 31, 2019

Exhibits