BOISE CASCADE Co

The following tables set forth our operating results in dollars and as a percentage of sales for the years ended December 31, 2023 and 2022:

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 BMD segment for the years ended December 31, 2023 and 2022.

(a) Actual U.S. housing starts as 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 BMD segment are for inventory purchased for resale. Gross margin percentage is gross margin as a percentage of segment sales.

2023 Compared With 2022

Sales

For the year ended December 31, 2023, total sales decreased $1,549.1 million, or 18%, to $6,838.2 million from $8,387.3 million during the year ended December 31, 2022. As described below, the decrease in sales was driven by the changes in sales prices and volumes for the products we manufacture and distribute with single-family residential construction activity being the key demand driver for our sales. During 2023, total U.S. housing starts and single-family housing starts decreased 9% and 6%, respectively, compared with 2022. For the year ended December 31, 2023, average composite lumber and average composite panel prices were 47% and 32% lower, respectively, compared with the same period in the prior year, as reflected by Random Lengths composite lumber and panel pricing. These decreases in composite commodity pricing impacted our sales prices in both of our segments, as noted below.

Wood Products. During the year ended December 31, 2023, sales, including sales to our BMD segment, decreased $183.3 million, or 9%, to $1,932.6 million from $2,115.9 million in 2022. The decrease in sales was driven by lower plywood sales prices of 29%, resulting in decreased sales of $242.0 million. In addition, lower sales prices for I-joists and LVL (collectively referred to as EWP) of 4% and 2%, respectively, resulted in decreased sales of $19.8 million and $9.7 million, respectively. Lower sales volumes for I-joists and LVL of 4% and 1%, respectively, resulted in decreased sales of $20.9 million and $6.7 million, respectively. EWP sales volumes decreased due to a decline in housing starts. I-joist volumes were also impacted by the availability of product substitutes and construction methods in certain geographies that reduce the wood floor opportunity. In addition, other sales, including byproducts and laminated beams, decreased sales by $16.1 million. These decreases were offset partially by higher sales volumes for plywood of 21%, resulting in increased sales of $146.4 million. Plywood sales volumes increased from the prior year due to the Coastal Plywood acquisition, as well as downtime taken in 2022 to replace an existing dryer at our Chester, South Carolina, plywood facility. In addition, plywood sales volumes increased as we shifted a higher proportion of our internally produced veneer into plywood production, given the change in demand for EWP.

Building Materials Distribution. During the year ended December 31, 2023, sales decreased $1,464.9 million, or 19%, to $6,178.7 million from $7,643.6 million in 2022. Compared with the prior year, the overall decrease in sales was driven by sales price and sales volume decreases of 16% and 3%, respectively. By product line, commodity sales decreased 32%, or $1,096.6 million, general line product sales decreased 4%, or $99.3 million, and sales of EWP (substantially all of which is sourced through our Wood Products segment) decreased 16%, or $269.0 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) decreased $1,063.2 million, or 16%, to $5,409.3 million for the year ended December 31, 2023, compared with $6,472.5 million during the prior year. In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs, as well as the Coastal Plywood acquisition. These increases were offset partially by lower per-unit costs of OSB (used in the manufacture of I-joists) and logs of approximately 9% and 4%, respectively, compared with 2022. Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 770 basis points, which was due primarily to lower plywood and EWP sales prices, resulting in decreased leveraging of labor and other manufacturing costs. In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of a decrease in product prices and lower sales volumes compared with 2022. However, the BMD segment MLO rate increased 80 basis points compared to 2022 due primarily to lower margin percentages on EWP.

Depreciation and amortization expenses increased $30.9 million, or 30%, to $132.5 million for the year ended December 31, 2023, compared with $101.6 million during the prior year. The increase was due primarily to the Coastal Plywood acquisition on July 25, 2022, accelerated depreciation of $6.2 million in fourth quarter 2023 for the indefinite curtailment of lumber production at our Chapman, Alabama facility, as well as other capital expenditures. These increases were offset partially by decreases in depreciation related to fully depreciated assets.

Selling and distribution expenses increased $6.2 million, or 1%, to $559.5 million for the year ended December 31, 2023, compared with $553.3 million for the prior year. The increase was due primarily to higher employee-related expenses of $17.0 million and increased shipping and handling and occupancy costs of $5.2 million and $2.1 million, respectively. These increases were offset partially by lower sales commissions of $19.5 million.

General and administrative expenses increased $10.6 million, or 10%, to $114.4 million for the year ended December 31, 2023, compared with $103.8 million for the prior year. The increase was due primarily to higher employee- related expenses, including base pay increases and incentive compensation of $7.3 million. In addition, for the year ended December 31, 2023 we incurred $5.1 million of acquisition-related expenses for the acquisition of BROSCO, compared to $1.3 million incurred for the year ended December 31, 2022 for the acquisition of Coastal Plywood.

For the years ended December 31, 2023 and 2022 other (income) expense, net, was $1.9 million of income and $1.7 million of income, respectively. In both periods other income primarily included earn-out income related to a previous asset sale in our Wood Products segment.

Income From Operations

Income from operations decreased $533.4 million to $624.4 million for the year ended December 31, 2023, compared with $1,157.8 million for the year ended December 31, 2022.

Wood Products. For the year ended December 31, 2023, segment income decreased $238.1 million to $337.1 million from $575.2 million for the year ended December 31, 2022. The decrease in segment income was due primarily to lower plywood and EWP sales prices, as well as lower EWP sales volumes. In addition, segment income was negatively impacted by an increase in depreciation and amortization expense related to the Coastal Plywood acquisition and accelerated depreciation of $6.2 million in fourth quarter 2023 for the indefinite curtailment of lumber production at our Chapman, Alabama facility. These decreases in segment income were offset partially by lower wood fiber costs and higher plywood sales volumes.

Building Materials Distribution. For the year ended December 31, 2023, segment income decreased $291.3 million to $335.8 million from $627.1 million for the year ended December 31, 2022. The decline in segment income was driven by a gross margin decrease of $276.0 million, resulting primarily from gross margin declines on EWP and commodity products and lower sales volumes across all product lines compared with 2022. In addition, general and administrative expenses increased $7.8 million, due partially to acquisition-related costs. Depreciation and amortization expenses also increased $5.3 million due primarily to increased capital expenditures, as well as the BROSCO Acquisition.

Corporate. Unallocated corporate expenses increased $4.2 million to $48.6 million for the year ended December 31, 2023, from $44.4 million for the year ended December 31, 2022. The increase was due primarily to higher employee-related and incentive compensation expenses.

Other

Interest Income. Interest income increased $35.8 million to $48.1 million for the year ended December 31, 2023, from $12.3 million for the year ended December 31, 2022. The increase was due primarily to higher interest rates on cash equivalents and increases in the average balances of cash equivalents.

Change in fair value of interest rate swaps. For information related to our interest rate swap, see the discussion under "Disclosures of Financial Market Risks" and "Financial Instruments" included in this "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K.