Boise Cascade Co

NYSE:BCC

Earnings Call Analysis

Boise Cascade's Strong 2023 Results Amid Challenges

Despite market challenges, Boise Cascade reported a solid 2023 with a net income of $483.7 million on $6.8 billion in sales. Strong results came amidst a robust housing market, particularly a 23% rise in single-family starts. However, Q4 saw a slight dip with a net income of $97.5 million, down from the previous year's $117.4 million, partly due to expenses related to acquisitions and depreciation. Wood Products faced lower sales prices but increased volumes, affecting segment EBITDA, while the Building Materials Distribution (BMD) segment increased by 3%. Looking ahead, the company expects continued strong single-family starts to drive high single-digit sales growth for engineered wood products.

Corporate Updates and Financial Stewardship Set Strong Tone for Boise Cascade

In the recent earnings call, Boise Cascade, a leading manufacturer and distributor of building materials, presented a narrative of strength and strategic focus. The company's solid balance sheet and generous shareholder returns evidenced their financial health. During 2023, they distributed $346 million in dividends, equaling $8.70 per share, and repurchased $6.4 million worth of shares. The board approved a $0.20 per share quarterly dividend, reiterating their commitment to invest in growth while providing consistent returns to shareholders.

Capitalizing on a Stable Housing Market and Internal Growth

Even as U.S. housing starts hover around 1.42 million, mirroring 2023's actual figures, the company is preparing for a steady demand in new residential construction, which remains crucial for homebuyers in a resilient economy. Amid broader market challenges like affordability and variable mortgage rates, Boise Cascade is banking on demographic trends and a shortage in housing to support its long-term outlook. This positivism is reflected in their planned investments, particularly in expanding their distribution footprint and enhancing product lines for higher margins.

Products and Procurement: Strategies to Drive Margin Improvement

Executives outlined the focus on expanding general line products, especially millwork items, which command higher margins. Improvements in product range should contribute to earnings stability, continuing a trend of margin enhancement compared to 2019. The current business mix is viewed as the new norm, distancing from the extraordinary market conditions experienced between 2020 and 2022.

Navigating Industry Headwinds with Optimism and Experienced Leadership

Boise Cascade applauded the service of retiring leaders and announced fresh talent stepping into crucial roles. Despite mid-single-digit price erosion in engineered wood products (EWP) and certain market pressures, there's cautious optimism for stabilization and upside as the building season approaches. The executive team's strategic pricing adjustments and competitive positioning, bolstered by product and market cycles, support confidence in sustaining pricing power amid fluctuating demand.

Closing Remarks Emphasize Conviction in Strategy and Market Foundations

The company concluded the call on an affirmative note, emphasizing the robustness of their balance sheet and the strength of underlying market conditions. Their narrative remained consistent and confident, derived from both historical achievements and the anticipation of persistent demand for new residential construction and home improvement, supporting Boise Cascade's growth trajectory into 2024.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. My name is Lisa, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your conference.

[Kelly Hibbs, executive]

Thank you, Lisa, and good morning, everyone. I would like to welcome you to Boise Cascade's Fourth Quarter 2023 Earnings Call and Business Update. Joining me on today's call are Nate Jorgensen, our CEO; Jeff Strom, Head of our Building Materials Distribution Operations; and Mike Brown, Head of our Wood Products operations, who will be retiring May 1 after an outstanding 25 years of service to Boise Cascade.

Turning to Slide 2. This call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA.

I will now turn the call over to Nate.

[Nathan Jorgensen, executive]

Thanks, Kelly. Good morning, everyone. Thank you for joining us for our earnings call today. I'm on Slide #3. A few highlights as I reflect on our 2023 results. We reported full year net income of $483.7 million or $12.12 per diluted share on sales of $6.8 billion. We further executed our growth strategy through organic and acquisition initiatives, and we also provided meaningful returns to our shareholders through share price gains and dividends. I want to thank our associates across the company who continue to execute our strategy that position us to serve and support our vendor and customer partners.

Let me now turn to fourth quarter results. Total U.S. housing starts increased a modest 4%. However, the rebound in single-family housing starts was evident, reflecting a 23% increase compared to the prior year quarter. Both of our businesses again delivered strong operating and financial results. Our consolidated fourth quarter sales of $1.6 billion were up 1% from fourth quarter 2022. Our net income was $97.5 million or $2.44 per share compared to net income of $117.4 million or $2.95 per share in the year ago quarter.

Fourth quarter 2023 results included $6.2 million of pretax accelerated depreciation related to the curtailment of lumber production in Chapman, Alabama, and approximately $3 million of transaction expenses related to the BROSCO acquisition. I'm pleased with the status of our BROSCO integration efforts and the financial results thus far delivered by our new teammates.

As we start 2024, our balance sheet remains very strong and remain committed to our balanced approach to capital allocation. We look forward to executing our reinvestment and growth projects included in our expanded capital plan.

Kelly will now walk through our segment financial results and provide an update on our capital allocation in more detail, after which I'll provide an outlook before we take your questions.

Kelly?

[Kelly Hibbs, executive]

Thank you, Nate. Wood Products sales in the fourth quarter, including sales to our distribution segment were $449.7 million compared to $425.6 million in the fourth quarter of 2022. Wood Products reported segment EBITDA of $92.7 million, down from EBITDA of $99.7 million reported in the year ago quarter. The decrease in segment EBITDA was due primarily to lower EWP and plywood sales prices and an increase in other manufacturing costs.

These decreases were offset partially by higher EWP sales volumes and lower wood fiber costs. The previously mentioned $6.2 million of pretax accelerated depreciation from our Chapman lumber curtailment did not affect our EBITDA, but did negatively impact our earnings per share in the quarter by approximately $0.12 per share.

BMD sales in the quarter were $1.5 billion, up 3% from fourth quarter 2022. BMD reported segment EBITDA of $80.6 million in the fourth quarter compared to segment EBITDA of $99.4 million in the prior year quarter. The decline in segment EBITDA was driven by increased selling and distribution expenses of $12.9 million compared to the same quarter in the prior year.

In addition, general and administrative expenses increased $5.7 million, approximately $3 million of which were BROSCO acquisition-related costs, which had a negative impact on our reported earnings per share of approximately $0.06 per share.

We expect total company depreciation and amortization in 2024 to be approximately $140 million. This includes the incremental depreciation and amortization from the assets acquired in our recent BROSCO transaction. In addition, our anticipated effective tax rate remains at 25%.

Turning to Slide 5. On a year-over-year basis, fourth quarter volumes for I-joists and LVL were up 79% and 29%, respectively, driven by the sharp improvement in single-family housing starts. Sequential pricing for both I-joists and LVL was up 3% due to better-than-expected market conditions and fourth quarter rebate adjustments that had a positive impact on net price realizations.

Looking forward to the first quarter, good momentum in single-family starts is a nice setup for EWP sales volumes, where we expect high single-digit growth in LVL volumes and modestly higher I-joist volumes on a sequential basis. On pricing, we expect to experience mid-single-digit sequential declines.

Turning to Slide 6. Our fourth quarter plywood sales volumes in Wood Products was 363 million feet compared to 393 million feet in fourth quarter 2022. Plywood volumes decreased during the current quarter as we shifted a higher proportion of our internally produced veneer into EWP production, given the change in demand for EWP.

The $375 per 1,000 average plywood net sales price in fourth quarter was down 5% from fourth quarter 2022 and down 2% sequentially. Thus far in the first quarter of 2024, plywood price realizations were consistent with our fourth quarter average.

Moving to Slide 7 and 8. BMD's fourth quarter sales were $1.5 billion, up 3% from fourth quarter 2022, driven by sales volume increases of 13%, offset partially by sales price decreases of 10%. Excluding the impact of the BROSCO acquisition, BMD sales were flat.

By product line, commodity sales decreased 8%. general line product sales increased 13% and sales of EWP increased 10%. Gross margin dollars were flat when compared to the same quarter last year, as lower margin dollars on EWP were offset by higher margin dollars generated on general line products.

In addition, BMD's overall gross margin percentage was 15.2%, down 60 basis points from the 15.8% reported in fourth quarter 2022.

EMD's EBITDA margin, including the previously mentioned acquisition-related costs, was 5.6 -- excuse me, 5.4% for the quarter, down from the 6.9% reported in the year ago quarter and down 90 basis points sequentially. As we typically do, we have grown our inventory since year-end and are well positioned to support the upcoming spring building season.

Broadly speaking, we view inventory in the channel as lean for most product lines, providing a good backdrop for 2-step distribution. BMD's sales pace thus far in the first quarter of 2024 is approximately 10% below fourth quarter daily sales averages with extreme weather across most of the country in January, delaying many shipments to job sites.

We anticipate our daily sales pace will accelerate as we move through the quarter and expect our first quarter 2024 EBITDA margins to be around 5%.

Moving to Slides 9 and 10. These slides show the generally stable pricing environment for lumber and panel pricing during fourth quarter of 2023 compared with the downward trajectory during the prior year quarter. As we entered 2024, commodity and lumber pricing has remained stable. While future commodity pricing volatility is always a possibility, we will maintain our approach to having inventory on hand to support our customer base.

I'm now on Slide 11. We had capital expenditures of $215 million in 2023, with $59 million of spending in Wood Products and $156 million of spending in BMD. In Wood Products, our capital spending included veneer related projects at mills that support EWP production. In BMD, our capital spending included new door and millwork facilities in Kansas City and Denver, the build-out and start-up of a new distribution center in Marion, Ohio, and the purchase of distribution centers in West Palm Beach, Florida and Modesto, California.

We are excited about our expanded capital expenditure plan in 2024. In Wood Products, our 2024 capital plan includes spending on previously announced projects to add I-joists production capabilities at our Thorsby, Alabama, EWP mill and convert the layup line to a parallel laminated veneer line in our Chapman, Alabama, plywood facility.

At our Oakdale, Louisiana facility, multiple investment projects are planned over the next 2 years, which will include upgrade and redesign of the log utilization center, a new veneer drier and press and modification of an existing veneer driver.

In BMD, our 2024 capital expenditure plan includes additional spending on the new West Palm Beach and Modesto locations. Progress on permits, site work and design for our greenfield distribution centers in Texas and South Carolina has been slow, but we expect spending to gain notable momentum in 2024, as we work towards anticipated start-up of those locations in '25 and '26, respectively.

As we've noted before, the availability of engineering and construction resources and the timing and availability of equipment purchases will influence our ability to execute upon our plan for $250 million to $270 million of capital expenditures in 2024.

Speaking to shareholder returns in 2023, we paid $346 million or a combined $8.70 per share in regular and special dividends and also completed $6.4 million of share repurchases. We have approximately 1.9 million shares still available for repurchase under our share repurchase program.

In addition, our Board of Directors recently approved a $0.20 per share quarterly dividend for shareholders of record as of February 23, payable March 15.

In summary, our balance sheet remains very strong and our principal capital allocation focus is to invest in our existing asset base and organic growth projects while remaining committed to our fixed dividend through this business cycle. We will also evaluate M&A as it aligns with our strategy and opportunistically return additional capital to shareholders as deemed appropriate by our Board of Directors via special dividends and share repurchases.

I will turn it back over to Nate to discuss our business outlook.

[Nathan Jorgensen, executive]

Thanks, Kelly. I'm now on Slide #12. Recent industry forecasts for 2024 U.S. housing starts are generally consistent with actual housing starts of $1.42 million in 2023 as reported by the U.S. Census Bureau. Despite recent declines in mortgage rates and homebuilders responding with various mechanisms to attract buyers, home affordability remains a challenge for consumers. However, with a resilient economy and elevated mortgage rates, which limits existing home inventory for sale, new residential construction is expected to remain an important source of supply for homebuyers.

With new residential construction, the recent reduction in rates and potential for future rate reductions has created optimism that single-family starts will reflect year-over-year growth. However, there's reservation that multifamily starts may pull back from recent record highs due to capital cost for developers combined with cooling rents and elevated supply.

Regarding home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity have provided a favorable backdrop of repair and remodel spending. While improvement spending is expected to remain robust compared to history, recent industry forecasts project mid-single declines in 2024.

As Kelly mentioned, we remain well positioned to invest in our existing asset base and organic growth opportunities in both businesses as reflected in our robust 2024 capital spending plans. Our longer-term view on housing fundamentals is favorable, supported by demographic trends and underbilled housing stock. As such, we remain clearly focused on execution of our strategies and have great conviction around our investments to grow the company.

Finally, I would like to take this opportunity to thank and congratulate 3 members of our leadership team on their upcoming retirements. As communicated in January, Tom Hoffmann will be retiring after 43 years of outstanding service and dedication to Boise Cascade. As we announced yesterday afternoon, Erin, our Senior Vice President of Human Resources, retired on May 3, after 30 years of service and numerous accomplishments across the company.

We are excited that Angella Broesch will be stepping into the role of Vice President of Human Resources for the company. And finally, Mike Brown will be retiring from Boise Cascade after 25 years of dedicated service. Mike grateful for your work and impact of Boise Cascade and those that we serve and support. Among a number of achievements delivered by Mike, he helps establish a safety culture and systems that we benefit from today across our organization. Further, his leadership was fundamental in building our conviction and passion on safety as an organization, both in terms of what's expected and in what is possible. We are safer and better organization as a result.

Mike has set a very high bar for our Wood Products division. I have complete confidence Troy Little and the team will continue to build on that momentum and success. We move forward with great clarity on what has made the Wood Products division successful, and we'll maintain that same approach and consistency as we move forward. Mike, all the best of you as he moved into your well-deserved retirement.

At this time, we'd welcome any questions. Lisa, would you please open the phone lines?

[Operator]

[Operator Instructions] The first question today that we have is coming from Kurt Yinger of D.A. Davidson.

[Kurt Yinger, analyst]

Great. I was hoping we could just start on EWP capacity. Can you just level set us on how much capacity you're kind of adding between what you've already outlined with Coastal and some of the recent announcements.

And second, I mean, outside of your own moves, we haven't really seen a whole lot of capacity added within the industry as a whole. How do you think that positions you from a competitive standpoint? Should we continue to see single-family starts momentum grow over the coming years?

[Kelly Hibbs, executive]

Yes. Thanks for the question, Kurt. This is Kelly, and I'll let Mike jump in here as well. I guess let me start by -- it's the right question around capacity. And so what we spoke to when we did the Coastal acquisition was that, that provided us relief constraints we had around veneer so that we would have a better opportunity to be able to run volumes that were closer to our nameplate capacity.

And you'll see our nameplate capacity list in our and shown in our 10-K that we filed yesterday. And so we talked about 5% and 12%, I believe, by '23 and '25 was kind of the capacity numbers we talked about. So it's important to note that we're not talking increases specifically in nameplate, but our ability to run much closer to our nameplate capacity to be what we weren't able to before.

And then some of the capacity additions we've talked about in terms of the I-joist line and some of the other things we've referenced in terms of growing our ability to produce more product, that certainly helps us through the cycle and very much helps us through the -- when we get into the peak building seasons that we see in the summertime and be able to meet demand, the seasonal demands there. Anything you'd add, Mike?

[Dean Brown, executive]

Good. I could. So the only point I'd probably make relative to our position compared to, say, some of the other manufacturers is we've had this strategy for a long time to have a very high level of veneer self-sufficiency and to be prepared when the market requires product. And I think that puts us in a really strong position, not only today, but for the future because as far as I'm aware, we have the highest level of veneer self-sufficiency as it relates to EWP production.

So should we see and we sort of actually did see this during the pandemic when we had an uptick in housing starts, we were able to respond very, very quickly to that demand. And I think that's the point also Kelly is making about the seasonal nature of housing starts where we see, obviously, the majority of the housing starts really in the summer -- spring and summer period.

[Kurt Yinger, analyst]

Got it. Okay. And then second, sticking with EWP, we have seen some choppiness in the last couple of years in terms of volumes, but if you were to take a step back, how would you say share has shifted over the last couple of years between I-joist, solid-sawn and Open Web Trusses and how big of a factor is substitution risk going forward as you think about pricing decisions?

[Dean Brown, executive]

Yes. Okay. So I'll take a stab at that one, too, Kurt. So yes, I think you saw or we saw some sort of changes in the dynamic during the pandemic, where because of the, I'll say, the relatively constrained supply of I-joist mainly due to the lack of people, open web prices gained some favor. And I don't think that's changed in terms of the capacity of Open Web Trusses in the marketplace. However, when you think about where we put ourselves relative to the product line, specifically I-joist, it is a very, very favorable product line because of the ease of installation and the ability to transport it significantly longer distances.

And when you think about what's been happening, I'll say, in recent times, we are starting to see our I-joist demand improved, not insignificantly compared to times gone by. So open web prices are not going to disappear, but we can make a lot more per unit time, particularly during the peak building season.

[Nathan Jorgensen, executive]

Kurt, it's Nate. Maybe just one other data point on as you look at the competitive backdrop in terms of point of floor trusses or dimensional lumber versus I-joists, the other theme that's certainly out there with our builders is they're looking to reduce cycle times on the job side.

And so if you look at, okay, what are the products and tools and solutions that help kind of drive lower cycle time or improve cycle time performance, I-joists are very much part of that answer. So as you think about, again, what the expectations are and the needs are on the job side, I think we feel really good about I-joist being an important answer to reducing cycle times for the builder.

[Kurt Yinger, analyst]

Got it. Thanks to that, Nate, and thanks, Mike. Got on the retirement, and good luck here in Q1, guys.

[Operator]

Our next question will be coming from Susan Maklari of Goldman Sachs.

[Susan Maklari, analyst]

My first question is, I want to kind of build on this discussion around your increasing capacity in EWP. When you think about the builders increasingly using I-joist in order to realize the labor and the efficiencies that they're getting with those products, does that mean that the absolute level of starts that the industry is operating at, is perhaps not as impactful?

Or do you think about that differently when you're considering the capacity that you're adding or the level of capacity that you want to achieve eventually? So I guess how do you think about the trade-off between the actual volume of starts or the actual level of starts relative to the mix shift that's coming through on the ground and builder preferences?

[Kelly Hibbs, executive]

So I guess to kind of rephrase your question, make sure we understand it. So are you saying -- I guess there's 2 components to your point. There is what is the absolute level of starts. And then there's the penetration opportunity for whether it be LVL or I-joist into those starts.

As we talk -- yes, okay, good. So as we've talked before, it really depends on where that start is created. So if you have slab on grain construction like you do in many parts of the Southeast, that's really not a floor opportunity for I-joist, but it's still very much a good opportunity for LVL, whereas in Denver, for example, a lot of opportunity for systems because you have crawl spaces there.

So I may not be directly answering your question, but yes, there is 2 components and we feel really good about our position. We feel good about the medium to long term around single-family housing and gives us conviction around the projects we're doing to make sure we have product available.

[Dean Brown, executive]

So I might add -- this is Mike. I might add just one other point. So kind of sort of thinking about your question, the projects that we've announced recently really aim to do a couple of things. So as I sort of indicated in my -- one of my prior answers to Kurt, you have to have product available. And you don't want to be running your machinery at attempting to run it at a 100% of capacity.

So when we think about what we're doing in our strategy, it is related to housing starts, clearly because more housing starts is good for us. And Kelly's point is correct, particularly in the South, Texas is a good example, maybe there's not as many linear feed of I-joist use for staff because of the nature of that construction type.

But our view is that if we have capacity available and we make it as efficiently as we can and we have the geographical footprint now with the projects we're going to be doing in the foreseeable future at Thorsby, we will be able to get the product to the market as fast or faster than anybody else at a very competitive pricing level.

And I think that puts us in a very good position because as I reiterated earlier, in the middle of the building season, we need to get product to the site very quickly. And I think that -- even though it may not be 100% correlated with housing starts, I think there is still a very strong correlation that demand for I-joist will go up as housing starts to increase.

[Susan Maklari, analyst]

Yes. Okay. So it's a service level component to it. And it sounds like from what you're saying then, even if the level of starts is on a relative basis, incrementally slightly lower, let's say, than where we currently are or where steady state is, you could still see that benefit on the volume side because you've got those higher service levels and you're able to get the units out during that busy season?

[Dean Brown, executive]

Yes. I think that's fair. And I think that's part of the relationship that Wood Products as a manufacturer and BMD as the distributor has. We have inventory at our manufacturing sites as well as our distribution sites, and we can get it there very quickly. We have a very high service level compared to, I'll say, the remainder of the industry.

[Susan Maklari, analyst]

Yes. Okay.

[Kelly Hibbs, executive]

I think maybe one other thing to think about, too, is yes, single is the big driver for EWP. But multifamily also is certainly an opportunity for us to further attack for EWP as well.

[Susan Maklari, analyst]

Yes. Okay. All right. That's all helpful color. And then I do want to shift to BMD as well. So when you think about the investments that you're making on that side of the business with the doors and the distribution centers and those things, how do you think about the upside in terms of volume there over time? And I guess, any thoughts on your existing capacity today? And how much these investments will support? And how do you think about the growth there over time?

[Kelly Hibbs, executive]

Yes. Good question, Su. And so as you've seen in -- over many years and particularly in recent years, we have -- we've made a lot of organic investment in the BMD and that is very purposeful as we look to grow the earnings and earnings stability of the company. And so -- and included in our IR deck actually that will be published shortly after this call, you'll see where we've shown some sales per start over a period of time.

And you'll see that we're growing across all those product lines pretty nicely. So that's been very purposely that we said all along, we really like the distribution business, we've been shifting the mix to rich in that product mix to be able to continue to grow that business. And looks like Nate has a comment here as well.

[Nathan Jorgensen, executive]

Su, it's Nate. Just maybe as you think about the context and the backdrop for BMD in the marketplace, part of our really important responsibility is how do we serve and support all of our suppliers. And as you think about what they're focused on and what some of the things that they'll be working -- have been working on and will continue to roll out as new products and new services.

So as you think about the importance of BMD to help execute our supplier strategy in terms of their new products, new services. In many cases, there's the SKU intensity is probably getting bigger, not smaller. Those are all really important opportunities for us to support both our supply partners and obviously, our customers downstream. So I think that narrative will still -- has been in place and will continue to grow as we go through 2024 and into next year.

[Susan Maklari, analyst]

Okay. Okay. I just want to squeeze one more question in. I'm not trying to make this a one-on-one for me, but I just want to get one more in. Which is that the gross margin in the Wood Products came down in the fourth quarter, but pricing held across most of those products. And so any thoughts on what drove that decrease? Is it the volumes that were coming through? Did you take more maintenance or downtime in there? And then any thoughts on where that could go for the first quarter?

[Kelly Hibbs, executive]

Yes. So in the fourth quarter, it is typical that we do take some downtime for projects around the holidays and whatnot. And so we did see that in the fourth quarter. As we go forward from here, I mean, we highlighted a couple of key things, which will be out of the spring building season play out in terms of what kind of volume growth do we expect to see in the first quarter and then there's continued competitive pressures around EWP pricing. So those are probably the key things I'd highlight. So...

[Operator]

[Operator Instructions] Our next question will be coming from Ketan Mamtora of BMO.

[Ketan Mamtora, analyst]

Maybe to start with on the BMD side, commodity prices have normalized and EWP prices have also come in a fair bit in the last 4 or 5 quarters, yet the margins have held up quite well. So 2-part question here. One, can you talk a little bit about performance in the general line category and where sort of you are seeing ability to get sort of higher margins than what you've done historically? And the second part to it is kind of what you highlighted for Q1 target. Is that what you would consider now in sort of this business mix that you have to be more normalized margins in the distribution business?

[Kelly Hibbs, executive]

Yes. Let me have -- I'll have -- Ketan, this is Kelly. I'll let Jeff maybe take the question around kind of general line and kind of the mix there, and then I'll come back and speak to the margin profile. Go ahead, Jeff.

[Jeff Strom, executive]

Okay. On the general line, what I would say to you is every investment we made, and if you go back to the previous question about our growth, the intention of there has been to expand our general line products to get deeper and wider with everything along with the millwork items. And so what you're seeing with that expansion there, those are higher-margin profile items of the growth, and it's working very well for us exactly what we're trying to do.

[Kelly Hibbs, executive]

Yes. And then -- so Ketan, on your normalized margin question, it's a good question. And so I guess I would start that conversation by probably having us all exclude 2020 through 2022 because I think we would all recognize there was a number of very extraordinary events and circumstances during those periods of time.

But I think a more reasonable comparison would be if you look at 2023 versus 2019. And in that period of time, you'll see starts is only up call it, 10% in 2023 compared to 2019. And we've seen meaningful growth in both our earnings and EBITDA margins in both of our business over that time frame.

So how and why is that? Well, we think it's because of the focus and execution of our strategy to grow earnings and grow earnings stability. And so while I'm not going to put a fine point on an EBITDA margin percentage for either business, we do feel really good about our strategy, our focus and our ability for our earnings to continue to look meaningfully better than they did in 2019.

[Ketan Mamtora, analyst]

Understood. That's helpful. And just one follow-up on that. Within the general line category, can you provide a little more color in terms of how some of these categories are performing, not -- obviously, not all of the product categories, but maybe a couple of big ones for you in terms of what you are seeing activity levels as you move into '24?

[Jeff Strom, executive]

Yes. The general line is really -- is doing well and is really holding up. Like I said that the one thing that we have seen this year, maybe a little bit different than last year when we went through all the destocking on some things, inventory in the channel. I'd tell you, still lean, but we're seeing a willingness this year that we didn't see last year on some of these winter buys or price increases for people to buy into them a little bit and put a little bit more on the ground for those certain items. And then just -- it's a reflection of the confidence they have on what's coming down the pike.

[Ketan Mamtora, analyst]

Got it. That's helpful. And then just one last one from me. You talked about mid-single-digit price erosion in EWP in Q1. Would you say at this point that prices are stabilizing post that? Or is there kind of more incremental downward pressure as we move through 2024? Or is it too early to say at this point?

[Dean Brown, executive]

So Ketan, it's Mike. Thanks for the question. Well, I think maybe it's a bit too early in the year to have a definitive view of what's going to happen. I can tell you that there are still pricing pressures in specific geographies. And I think the time that we'll have a better idea is clearly once we get into the start of the building season. So historically, February has not been the best month of the year for EWP demand just as a generalized statement, excluding the last few years, which have been a bit crazy.

But generally speaking, in times gone by, we start to see an uptick in demand going from -- starting in March and further out into April and May. If that comes to pass, as it historically has, then I would hope that some of the pricing pressure will be alleviated, but we really don't know yet halfway through February. It's a bit early to say exactly what's going to happen in the peak building season.

[Operator]

Our next question will be coming from Reuben Garner of Benchmark.

[Reuben Garner, analyst]

Congrats, Mike, on your retirement. It's been great hearing for me in the last few years. So I appreciate your support over that time. So I guess, Kelly, this is kind of a follow-up to your comment about comparing today to 2019. One of the biggest things that's changed has been, I think, the pricing power that you've shown, especially in some of the EWP -- in the 2 EWP categories.

Can you talk about what's kind of changed today versus 4, 5 years ago that gives you confidence that these levels will hold, whether it's from a competitive standpoint or things you guys have done internally to adjust your pricing methodology? I think the starts are up 10%, I think pricing is obviously up a lot more than that over that time frame. So any kind of color on how you -- how confident you are and what's changed internally to kind of make that happen?

[Kelly Hibbs, executive]

Yes, good question, Reuben. So yes, my 2019 to 2023 framework, let's break that into a few buckets. If you think about commodities, they looked a lot like -- today it looks a lot -- '23 looks a lot like '19 did if you go back and look at the composite averages. So the pricing there is similar. Now have we seen growth in EWP pricing? Yes. Have we seen growth in general line pricing? Yes. Today, general line pricing is pretty sticky and holding up.

We are seeing some pricing pressures we've alluded to in EWP. But if you if you bundle that all together, I think it really comes back to the strategy in BMD in terms of looking to rich in that product mix, i.e., grow EWP, grow general line, but very much stay in commodities. And we've done all that. And we've also just continued to scale the business.

And so we think capture market share over time as well. So I think it's been a combination of all those things, Reuben. That makes us pretty confident that we think we have set a higher bar.

[Nathan Jorgensen, executive]

Yes, Reuben, it's Nate. Maybe just to -- certainly, I think Kelly outlined the BMD strategy and our plan. And again, we feel good about how that's showing up in the marketplace each and every day, both for our customers and our suppliers. Maybe just on the Wood Products front, just to reinforce that, obviously, the EWP franchise and the veneer that supports that and Plywood is really -- continues to be the focal point for us.

So as you think about that earnings, performance and stability, maybe as compared to where we were 5 plus years ago, I think we've strengthened our EWP franchise in terms of our capabilities, our overall footprint in terms of our volume and also, in some cases, we've taken out some products that we simply no longer produce.

So I think that clarity and that focus in Wood Products has been an important part of the answer as well. And we feel good about, obviously, where we're going, given our investments that will be taking place in Alabama and Louisiana here over the next couple of years.

[Reuben Garner, analyst]

Okay. Great. And since Su took all my questions, I'm going to jump to the capital allocation one. I'm just good too. The last few years, you guys have obviously built a bit of a fortress of a balance sheet. I'm just curious if there's been any change or if you anticipate any change in maybe the philosophy and returning cash to shareholders, whether it's be a ramping share repurchases versus the way you guys have paid out a dividend in the past? Or if you think you'll stick to a similar philosophy going forward for assuming that you don't have places to put it to work for organic growth or M&A?

[Kelly Hibbs, executive]

Yes, sure. Thanks, Reuben. Good question. So the overarching capital allocation strategy is unchanged. We're going to focus on reinvestment and growth and via organic or M&A opportunities and obviously, we have a big capital spend ahead of us here in '24 and '25.

And so I guess in terms of then returned to shareholders, we'll look to continue to grow the regular dividend over time. But as I look forward here into 2024 a little bit, absent M&A, my expectation would be that we will be speaking to further shareholder returns as we work our way through 2024, and those could be in the form of special dividends or stock repurchases or frankly, a combination of the 2. I don't want to get ahead of my board on that topic in terms of the puts and takes and how we think about it, but that's our expectation sitting here today.

[Operator]

We have a follow-up question coming from Kurt Yinger of D.A. Davison.

[Kurt Yinger, analyst]

Great. Not to beat a dead horse on EWP, but Mike, I wanted to go back to your comment around pockets of pricing pressure kind of persisting in certain geographies. Is that primarily competitors buying to pick up some share and secure a bit more volume ahead of the building season, general pushback from builders or dealers, potentially some import competition? I mean what would you say are kind of the biggest underlying drivers of kind of this trickle down and slow discounting that we've seen, I guess, late into 2023 and maybe even here to start 2024?

[Dean Brown, executive]

Yes., sure, Kurt. So maybe part of the answer you asked around imports, that's really not much of a thing, okay? They show up and disappear. They are a little bit of an annoyance in certain geographies at certain times, but that tends to be very spasmodic. The kind of sort of the overarching issue is the manufacturing. And so in certain geographies, and I won't go into, obviously, specifics, there are some folks that think the answer is lead with price.

And -- as a result, we respond accordingly. It's not in one particular producer necessarily in all geographies. It's sort of a combination of things. And we have, as I know you know this, but we have a particular way of going to market where we bring a variety of items in the package that we supply. So there's the product, there's the service, obviously, the BMD provides.

We have obviously software as well as outsource systems. So we look at it that over the longer term, the value that we bring is different to others. And hence, our pricing structure is different to others. But in the intermediary times, sometimes we just have to react because that's what we need to do because we have product that we would like to sell into those geographies. And we have very good partners that are in those geographies that we wish to support.

[Nathan Jorgensen, executive]

Kurt, it's Nate. Maybe just to add to Mike's comments. I think if you look at kind of a pricing conversation of EWP, this time of the year, this is not unusual when you kind of go back through time. So the fact we hadn't had that maybe during the COVID period was represented something maybe that was different. This is, I think, a typical environment in terms of some of the competitive conversations.

And as Mike described, we'll look at those case by case, market by market. I think as we move -- transition to the building season, I think the conversation then always have to be competitive, but it always comes down to, can you serve and support the marketplace. And it's really critical, obviously, during the building season that you have that provide that great capability and experience for both obviously the lumber yard side of things as well as the homebuilders.

And so that execution and making sure our team stays very focused on that is going to be -- can be front and center for us. And to the extent we do that well, we feel that we'll continue to earn the business that's out there, again, both from our dealer partners as well as our builder partners.

So again, not unusual that we're in this moment today. But as things kind of tension of the conversation will be who can serve and support my business, and again, as Mike described, we feel good about how we're positioned to do that.

[Operator]

Thank you. This concludes today's Q&A session. I would now like to turn the call back over to Nate Jorgensen for closing remarks.

[Nathan Jorgensen, executive]

Great. Thanks, Lisa. Just we appreciate everyone joining us on the call this morning and for our update, and we thank you for your continued interest and support of Boise Cascade. With that, be well, be safe. Thank you.

[Operator]

Thank you all for joining today's conference call. This concludes today's conference. You all may disconnect.