BOISE CASCADE Co

The following tables set forth our operating results in dollars and as a percentage of sales for the three months ended March 31, 2024 and 2023:

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 three months ended March 31, 2024 and 2023:

(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 BMD segment are for inventory purchased for resale. Gross margin percentage is gross margin as a percentage of segment sales.

Sales

For the three months ended March 31, 2024, total sales increased $101.1 million, or 7%, to $1,645.4 million from $1,544.3 million during the three months ended March 31, 2023. As described below, the increase 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 of our sales. In first quarter 2024, total U.S. housing starts and single-family housing starts increased 1% and 27%, respectively, compared with the same period in 2023. Average composite panel prices for the three months ended March 31, 2024 were 23% higher than in the same period in the prior year, as reflected by Random Lengths composite panel pricing. Average composite lumber prices for the three months ended March 31, 2024 were 2% lower than in the same period in the prior year, as reflected by Random Lengths composite lumber pricing.

Wood Products. Sales, including sales to our BMD segment, increased $31.5 million, or 7%, to $468.9 million for the three months ended March 31, 2024, from $437.4 million for the three months ended March 31, 2023. The increase in sales was driven by higher sales volumes for I-joists and LVL (collectively referred to as EWP) of 46% and 31%, respectively, resulting in increased sales of $38.8 million and $35.5 million, respectively. EWP sales volumes increased due to an increase in housing starts. In addition, higher plywood sales prices of 3% resulted in increased sales of $3.8 million. These increases were offset partially by decreased sales prices for LVL and I-joists of 8% and 7%, respectively, resulting in decreased sales of $11.6 million and $8.5 million, respectively, as well as decreased plywood sales volumes of 8% resulting in decreased sales of $12.6 million. Plywood sales volumes decreased as we shifted a higher proportion of our internally produced veneer into EWP production, given the change in demand for EWP. In addition, other sales, including residual byproducts and lumber, decreased $14.5 million.

Building Materials Distribution. Sales increased $125.8 million, or 9%, to $1,505.0 million for the three months ended March 31, 2024, from $1,379.2 million for the three months ended March 31, 2023. Compared with the same quarter in the prior year, the overall increase in sales was driven by a sales volume increase of 12%, offset partially by a sales price decrease of 3%. By product line, commodity sales increased 1%, or $5.5 million; general line product sales increased 16%, or $83.3 million; and EWP sales (substantially all of which are sourced through our Wood Products segment) increased 12%, or $37.0 million.

Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) increased $76.8 million, or 6%, to $1,307.4 million for the three months ended March 31, 2024, compared with $1,230.6 million during the same period in the prior year. In our Wood Products segment, materials, labor, and other operating expenses increased due to higher EWP sales volumes and higher per-unit costs of OSB (used in the manufacture of I-joists) of approximately 24%, compared with first quarter 2023, as well as increased other manufacturing and labor costs. Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 140 basis points. The increase in the MLO rate was primarily the result of lower EWP sales prices, resulting in decreased leveraging of other manufacturing costs. In BMD, the increase in materials, labor, and other operating expenses was driven by higher purchased materials costs as a result of an increase in sales volumes compared with first quarter 2023. However, the BMD segment MLO rate improved 30 basis points compared with first quarter 2023, driven by a greater mix of general line and EWP sales, which have higher margins than commodity products. In addition, margin percentages for our commodity and general line product sales improved, offset partially by lower margin percentages on our EWP sales.

Depreciation and amortization expense increased $4.7 million, or 15%, to $35.9 million for the three months ended March 31, 2024, compared with $31.2 million during the same period in the prior year. The increase was due primarily to the BROSCO acquisition on October 2, 2023, accelerated depreciation of $2.2 million in first quarter 2024 for the indefinite curtailment of lumber production at our Chapman, Alabama facility, as well as other capital expenditures. These increases were offset partially be decreases in depreciation related to fully depreciated assets.

Selling and distribution expenses increased $15.3 million, or 12%, to $144.1 million for the three months ended March 31, 2024, compared with $128.8 million during the same period in the prior year. The increase was due primarily to higher employee-related expenses of $6.6 million and increased shipping and handling and occupancy costs of $2.2 million and $1.0 million, respectively. In addition, expenses related to advertising and professional services increased $1.5 million.

General and administrative expenses decreased $1.4 million, or 5%, to $25.1 million for the three months ended March 31, 2024, compared with $26.5 million for the same period in the prior year, primarily due to a decrease in professional fees and incentive compensation, offset partially by an increase in employee-related expenses.

Income From Operations

Income from operations increased $5.4 million to $133.0 million for the three months ended March 31, 2024, compared with $127.6 million for the three months ended March 31, 2023.

Wood Products. Segment income increased $1.8 million to $71.2 million for the three months ended March 31, 2024, compared with $69.4 million for the three months ended March 31, 2023. The increase in segment income was due primarily to higher EWP sales volumes, as well as higher plywood sales prices. These increases in segment income were offset partially by lower EWP sales prices and higher wood fiber costs. In addition, segment income was negatively impacted by accelerated depreciation of $2.2 million in first quarter 2024 for the indefinite curtailment of lumber production at our Chapman, Alabama facility.

Building Materials Distribution. Segment income increased $2.8 million to $72.5 million for the three months ended March 31, 2024, from $69.7 million for the three months ended March 31, 2023. The increase in segment income was driven by a gross margin increase of $22.9 million, resulting primarily from higher sales volumes and improved margins on general line and commodity products. The gross margin improvement was offset partially by increased selling and distribution expenses and depreciation and amortization expense of $16.5 million and $4.0 million, respectively.

Corporate. Unallocated corporate expenses decreased $0.8 million to $10.7 million for the three months ended March 31, 2024, from $11.5 million for the same period in the prior year. The decrease was due primarily to a decrease in professional fees.

Other

Interest Income. Interest income increased $0.9 million to $10.6 million for the three months ended March 31, 2024, from $9.7 million for the three months ended March 31, 2023. The increase was due primarily to higher interest rates on cash equivalents.

Change in fair value of interest rate swaps. For information related to our interest rate swap, see the discussion under "Interest Rate Risk and Interest Rate Swap" 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

For the three months ended March 31, 2024 and 2023, we recorded $32.8 million and $33.3 million, respectively, of income tax expense and had an effective rate of 24.0% and 25.6%, respectively. For both periods, 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.