BOISE CASCADE Co - Annual Report: 2019 (Form 10-K)

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•	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;

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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;

•	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;

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

•	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;

•	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;

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

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

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

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

•	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;

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

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•	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;

•	Changes in interest rates of our debt;

•	Restrictive covenants contained in our debt agreements; and

•	Fluctuations in the market for our equity.

•	Integrity - We are our word. Integrity goes beyond the lasting structural strength of our products; it is our uncompromising commitment to do the right thing. We nurture long-term relationships every day, in everything we do.

•	Safety - We each have the responsibility for our own safety and the safety of those around us, both at work and at home. Together, we strive to create an injury-free environment by identifying risks, eliminating hazards, and requiring safe behaviors.

•	Respect - We cultivate a climate of mutual respect, camaraderie, and teamwork. We welcome diverse backgrounds, views, and skills because we believe it results in stronger teams, inspired solutions, and greater agility as an organization.

•	Pursuit of Excellence - We are committed to the continuous improvement of people, processes, and the quality of products that we deliver. We apply best practices in our environmental management and forest stewardship. We all have the autonomy to apply our knowledge and experience to solve problems, make decisions, and implement new ideas to drive sustainable results.

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(a)	Estimated annual capacity at the end of each year.

(b)	During the years presented above, approximately one-third of the LVL we produced was utilized internally to produce I-joists. Capacity is based on LVL production only.

(c)	In March 2016, we purchased two EWP facilities, one in Thorsby, Alabama, and one in Roxboro, North Carolina. Thorsby LVL capacity is estimated at 4.0 million cubic feet. We ceased LVL production at Roxboro in November 2018, prior to which its estimated annual capacity was 2.0 million cubic feet. For additional information regarding the Roxboro LVL curtailment, see Note

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(d)	Approximately 23%, 24%, 22%, 21%, and 18%, respectively, of production in 2019, 2018, 2017, 2016, and 2015 was for PLV panels that are utilized internally to produce LVL.

(e)	The years 2015-2018 include 135 million square feet of plywood capacity related to the Moncure facility that was sold in March 2019.

(a)	Segment sales are calculated before elimination of sales to our Building Materials Distribution segment.

(b)

During the year ended December 31, 2018, we recorded a pre-tax loss of $11.5 million related to the sale of two lumber mills and a particleboard plant in Northeast Oregon, as well as a pre-tax impairment loss of $24.0 million on the Moncure plywood facility upon being classified as held for sale. For additional information, see Note 7, Sale of Manufacturing Facilities, of the Notes to the Consolidated Financial Statements in "Item 8, Financial Statements and Supplementary Data" of this Form 10-K.

(c)

The year ended December 31, 2018 includes $55.0 million of accelerated depreciation, $2.6 million of construction in progress and spare parts write-offs, and $0.2 million of severance expenses related to the Roxboro LVL curtailment in November 2018. For additional information regarding the Roxboro LVL curtailment, see Note 6, Curtailment of Manufacturing Facilities, of the Notes to the Consolidated Financial Statements in "Item 8, Financial Statements and Supplementary Data" of this Form 10-K.

(d)	Segment EBITDA is calculated as segment income (loss) before depreciation and amortization. See "Item 6. Selected Financial Data" of this Form 10-K for a description of our reasons for using EBITDA and for a discussion of the limitations of such a measure.

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(a)	Segment EBITDA is calculated as segment income before depreciation and amortization. See "Item 6. Selected Financial Data" of this Form 10-K for a description of our reasons for using EBITDA and for a discussion of the limitations of such a measure.

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•	Chief Operating Officer, November 2014 - March 2015

•	Executive Vice President, Wood Products, June 2014 - November 2014

•	Sr. Vice President, Wood Products, August 2012 - June 2014

•	Sr. Vice President, Engineered Wood Products, Wood Products, February 2011 - August 2012

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•	Senior Vice President of Engineered Wood Products, Wood Products, November 2017 - January 2019

•	Vice President of Engineered Wood Products, Wood Products, February 2016 - November 2017

•	Engineered Wood Products Marketing Manager, Wood Products, Boise Cascade Company, June 2015 - February 2016

•	Prior employment with Weyerhaeuser Company, a New York Stock Exchange-listed timberlands and wood products company, as Vice President of Weyerhaeuser Distribution, February 2011 - June 2015

•	Senior Vice President, Chief Financial Officer, and Treasurer, August 2009 - November 2014

•	Vice President, Treasurer and Investor Relations, February 2008 - August 2009

•	Senior Vice President of Operations, Wood Products, November 2017 - January 2019

•	Vice President of Operations, Wood Products, February 2016 - November 2017

•	Manufacturing Operations Manager, Wood Products, November 2014 - February 2016

•	Senior Vice President, Building Materials Distribution, February 2011 - March 2014

•	Vice President, Building Materials Distribution, October 2004 - February 2011

•	Vice President, Human Resources, Boise Cascade Company, August 2016 - January 2019

•	Senior Vice President, Human Resources, J.R. Simplot Company, a privately held food and agribusiness company, February 2010 - March 2016

•	Vice President, Human Resources, J.R. Simplot Company, March 2006 - February 2010

•	Vice President, Human Resources, Boise Cascade, L.L.C., November 2004 - November 2005

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•	Vice President, Legal and Secretary, August 2017 - January 2019

•	Associate General Counsel, July 2007 - August 2017

•	Director of Strategic Planning and Internal Audit, February 2008 - February 2011

•	Vice President, Sales and Marketing, Building Materials Distribution, October 2013 - February 2016

•	Vice President of Purchasing, Building Materials Distribution, October 2013 - May 2019

•	Purchasing Manager, Building Materials Distribution, July 2013 - October 2013

•	Vice President of Operations, Building Materials Distribution, October 2016 - May 2019

•	Division Operations Manager, Building Materials Distribution, September 2015 - October 2016

•	Pacific Region Manager, Building Materials Distribution, November 2006 - September 2015

•	Director of Engineered Wood Products, March 2019 - January 2020

•	Region Manager, Wood Products, February 2016 - March 2019

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•	Business Optimization Manager, Wood Products, March 2015 - February 2016

•	Business Optimization Engineer, Wood Products, October 2014 - March 2015

•	Director of Operations, Wood Products, February 2019 - January 2020

•	Operations Manager, Wood Products, November 2017 - February 2019

•	Area Manager, Wood Products, February 2015 - November 2017

•	General Manager, Eastern Region, Building Materials Distribution, May 2019 - January 2020

•	Region Manager, Building Materials Distribution, November 2015 - May 2019

•	Branch Manager, Building Materials Distribution, September 2008 - November 2015

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•	equipment failure, particularly a press at one of our major EWP production facilities;

•	fires, floods, earthquakes, hurricanes, or other catastrophes;

•	unscheduled maintenance outages;

•	utility, information technology, telephonic, and transportation infrastructure disruptions;

•	labor difficulties;

•	other operational problems; or

•	ecoterrorism or threats of ecoterrorism.

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•	incur additional debt;

•	declare or pay dividends, redeem stock, or make other distributions to stockholders;

•	make investments;

•	create liens or use assets in security in other transactions;

•	merge or consolidate, or sell, transfer, lease, or dispose of substantially all of our assets;

•	enter into transactions with affiliates;

•	sell or transfer certain assets; and

•	in the case of our revolving credit facility, make prepayments on our senior notes and subordinated indebtedness.

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•	the public's reaction to our press releases, our other public announcements, and our filings with the Securities and Exchange Commission (SEC);

•	changes in key personnel;

•	strategic actions by us, our customers, or our competitors, such as acquisitions or restructurings;

•	changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies in our industry;

•	the failure of research analysts to cover our common stock;

•	general economic, industry, and market conditions;

•	new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•	material litigation or government investigations;

•	changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism, or responses to such events;

•	sales of common stock by us or members of our management team;

•	the granting of equity or equity-based incentives;

•	volume of trading in our common stock (which may be impacted by future sales or repurchases of our common stock);

•	changes in accounting standards, policies, guidance, interpretations, or principles; and

•	the impact of the facts described elsewhere in "Item 1A. Risk Factors" of this Form 10-K.

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•	the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;

•	stockholder action can only be taken at a special or regular meeting and not by written consent;

•	advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings;

•	removal of directors only for cause;

•	allowing only our board of directors the ability to create additional director seats and fill vacancies on our board of directors; and

•	super-majority voting requirements to amend our bylaws and certain provisions of our certificate of incorporation.

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(a)	$100 invested in stock or index on December 31, 2014, including reinvestment of dividends in additional shares of the same class of equity securities.

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ITEM 6.	SELECTED FINANCIAL DATA

(a)	The following items negatively impacted 2018 net income:

•	$23.3 million pre-tax loss from non-cash pension settlement charges. For more information, see Note 12, Retirement and Benefit Plans, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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$11.5 million pre-tax loss from the sale of two lumber mills and a particleboard plant located in Northeast Oregon, as well as $24.0 million of pre-tax impairment and sale related losses on the Moncure plywood facility upon being classified as held for sale. For additional information, see Note 7, Sale of Manufacturing Facilities, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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$55.0 million of accelerated depreciation, $2.6 million of construction in progress and spare parts write-offs, and $0.2 million of severance expenses related to the permanent curtailment of LVL production at our Roxboro, North Carolina facility. For additional information, see Note 6, Curtailment of Manufacturing Facilities, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

(b)

In 2018 and 2017, net income included $3.8 million and $8.1 million, respectively, of income tax benefits associated with the remeasurement of our deferred tax assets and liabilities at the new federal corporate income tax rate of 21% as of December 22, 2017 (date of enactment of the Tax Cuts and Jobs Act). For more information, see Note 4, Income Taxes, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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(c)	The following items impacted 2016 net income:

•	$8.5 million of income tax benefit primarily associated with the reversal of a valuation allowance on foreign deferred tax assets, net of other tax adjustments.

•	$14.3 million pre-tax loss on extinguishment of debt.

•	$3.9 million pre-tax settlement expense associated with voluntary lump-sum payments to pension plan participants.

(e)	For more information regarding our dividends declared, including supplemental dividends of $1.00 per share of our common stock during each fourth quarter 2019 and third quarter 2018, see Note 14, Stockholders' Equity, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

(f)

On January 1, 2019, we adopted Accounting Standards Update 2016-02, Leases (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. 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. For more information regarding our adoption of Topic 842, see Note 11, Leases, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(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 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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Impairment and sale related losses of $24.0 million upon classifying the Wood Products facility in Moncure, North Carolina, as held for sale (Moncure Impairment Loss) and a loss of $11.5 million related to the sale of Wood Products facilities in Northeast Oregon (NEO Impairment Loss). For additional information, related to the sale of our manufacturing facilities, see Note 7, Sale of Manufacturing Facilities, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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Construction in progress and spare parts write-offs of $2.6 million, as well as $0.2 million of severance-related expenses, due to the permanent curtailment of LVL production at our Roxboro, North Carolina, facility. For additional information, see Note 6, Curtailment of Manufacturing Facilities, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

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•	A $4.4 million increase in income tax expense, or an effect of 4.1%, from state income taxes.

•	A $1.7 million increase in income tax expense, or an effect of 1.6%, from permanent differences, including meals and entertainment and nondeductible executive compensation.

•	A $1.3 million reduction in income tax expense, or an effect of 1.2%, from tax credits and excess tax benefits of share-based payment awards.

•	A $3.8 million reduction in income tax expense, or an effect of 17.2%, resulting from the remeasurement of deferred income taxes to the new federal statutory rate of 21%, which mostly relates to a $20.0 million discretionary pension contribution made during 2018, for which we received a tax deduction at the 2017 federal income tax rate.

•	A $1.7 million reduction in income tax expense, or an effect of 7.8%, from excess tax benefits of share-based payment awards.

•	A $0.7 million increase in income tax expense, or an effect of 3.4%, from state income taxes.

•	A $1.5 million increase in income tax expense, or an effect of 6.9%, from permanent differences, including meals and entertainment and nondeductible executive compensation.

•	An $8.1 million reduction in income tax expense, or an effect of 6.9%, resulting from the remeasurement of deferred income taxes to the new federal statutory rate of 21%.

•	A $3.7 million increase in income tax expense, or an effect of 3.2%, from state income taxes.

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•

A $47.4 million decrease in working capital during 2019, compared with a $41.7 million increase in working capital during 2018. Working capital is subject to cyclical operating needs, seasonal buying patterns for inventory purchased for resale and logs, the timing of the collection of receivables, and the timing of payment of payables and expenses. The decrease in working capital in 2019 was primarily attributable to decreased inventories and higher accounts payable. The decrease in inventories provided $40.2 million of cash during 2019, compared with a use of cash of $64.2 million in the same period a year ago. Inventories decreased during 2019 as inventory in our Building Materials Distribution segment did not increase at the same rate as the comparative prior year period as a result of weaker commodity pricing in 2019. In addition, inventory levels at the end of 2018 were seasonally higher than normal with slower sales in the second half of 2018 due to slower housing activity and concerns regarding further commodity price declines impacting our customers purchasing patterns. The increase in accounts payable and accrued liabilities provided $5.2 million of cash during 2019, compared with a use of cash of $14.5 million in the same period a year ago. The increase in working capital in 2018 was primarily attributable to higher inventories and a decrease in

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•	A decrease in cash contributions to our pension plans of $20.8 million. During 2019, we used $5.2 million of cash to make pension contributions, compared with $26.1 million during 2018.

•	A $15.9 million decrease in cash paid for income taxes, net of refunds. The decrease in cash paid for income taxes is primarily due to an overpayment of taxes in 2018 which was applied to 2019 tax payment requirements.

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A decrease in cash generated by our Wood Products operations. Although operating income in our Wood Products segment increased $64.2 million, the 2018 results include approximately $90 million of non-cash charges including the accelerated depreciation of curtailed LVL production assets at our Roxboro, North Carolina facility, the Moncure Impairment Loss, and the NEO Impairment Loss. See "Operating Results" above for a discussion on our results for 2019 and 2018.

•	An improvement in cash generated by our Wood Products operations. Although operating income in our Wood Products segment decreased $63.7 million, the 2018 results include approximately $90 million of non-cash charges, discussed above. See "Operating Results" above for a discussion on our results for 2018.

•	A $21.6 million decrease in cash paid for income taxes, net of refunds. The decrease in cash paid for income taxes is primarily due to a decrease in income from operations and a reduction in the federal income tax rate.

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A $41.7 million increase in working capital during 2018, compared with a $17.8 million increase in working capital during 2017. Working capital is subject to cyclical operating needs, seasonal buying patterns for inventory purchased for resale and logs, the timing of the collection of receivables, and the timing of payment of payables and expenses. The increase in working capital in 2018 was primarily attributable to higher inventories and a decrease in accounts payable and accrued liabilities, offset partially by a decrease in receivables. Inventories increased in 2018 primarily due to an increase in finished goods inventory in our BMD segment. The decrease in receivables and increase in inventory in 2018 primarily reflects decreased sales of approximately 12%, comparing sales for the month of December 2018 with sales for the month of December 2017. Accounts payable and accrued liabilities decreased in 2018 primarily due to lower inventory purchases in our BMD segment in December 2018, compared with December 2017. The increase in working capital in 2017 was primarily attributable to higher receivables and inventories, offset partially by an increase in accounts payable and accrued liabilities. The increase in receivables in 2017 primarily reflects increased sales of approximately 18%, comparing sales for the month of December 2017 with sales for the month of December 2016. Inventories increased in 2017 primarily due to an increase in finished goods inventory in our BMD segment. The increase in accounts payable and accrued liabilities in 2017 was greater than the 2016 increase, reflecting the increase in inventories as of December 31, 2017, and higher incentive compensation accruals.

•	An increase in cash contributions to our pension plans of $23.9 million. During 2018, we used $26.1 million of cash to make pension contributions, compared with $2.2 million during 2017.

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(a)	These borrowings are further explained in Note 10, Debt, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. The table assumes our long-term debt is held to maturity.

(b)	Amounts represent estimated interest payments on the 2024 Notes, ABL Term Loan, and Term Loan as of December 31, 2019, assuming these instruments are held to maturity. Unused commitment fees and letter of credit fees payable under the Revolving

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(c)

We enter into operating and finance leases in the normal course of business. We lease a portion of our distribution centers as well as other property and equipment under operating and finance leases. Some lease agreements provide us with the option to renew the lease or purchase the leased property. The lease term includes any renewal option periods we are reasonably certain of exercising. Our operating and finance lease obligations could change based on whether we actually exercise these renewal options and/or if we entered into additional lease agreements. Excludes the minimum lease commitment amount for operating leases signed but not yet commenced as of December 31, 2019 of $3.9 million. For more information, see Note 11, Leases, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

(d)

Amounts represent contracts to purchase approximately $170 million of logs, approximately $48 million of which will be purchased pursuant to fixed-price contracts and approximately $122 million of which will be purchased pursuant to variable-price contracts. The $122 million is estimated using current contractual index pricing, but actual prices depend on future market prices. Under certain log agreements, we have the right to cancel or reduce our commitments in the event of a mill curtailment or shutdown. Future purchase prices under most of the variable-price agreements will be set quarterly or semiannually based on regional market prices. Our log requirements and our access to supply, as well as the cost of obtaining logs, are subject to change based on, among other things, the effect of governmental laws and regulations, our manufacturing operations not operating in the normal course of business, log availability, and the status of environmental appeals. Except for deposits required pursuant to log supply contracts, these obligations are not recorded in our consolidated financial statements until contract payment terms take effect.

(e)	Long-term deferred income tax liabilities and unrecognized tax benefits are excluded from this table, because the timing of future cash outflows related to these items are uncertain. For more information, see Note 4, Income Taxes, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

(f)

Amounts consist of our pension and deferred compensation liabilities, including the current portion of those obligations of $3.0 million. Actuarially determined liabilities related to pension benefits are recorded based on estimates and assumptions. Key factors used in developing estimates of these liabilities include assumptions related to discount rates, expected rate of compensation increases, retirement and mortality rates, and other factors. Changes in estimates and assumptions related to the measurement of funded status could have a material impact on the amount reported. In the table above, we allocated our pension obligations by year based on the future required minimum pension contributions, as determined by our actuaries.

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(a)	These obligations are further explained in Note 10, Debt, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. The table assumes our long-term debt is held to maturity.

(b)	We estimated the fair value using quoted market prices of our debt in inactive markets.

(a)	Represents the weighted average actual fixed interest rate payable on our interest rate swaps.

(b)	Represents the weighted average variable interest rate receivable on our interest rate swaps at December 31, 2019.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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(a)	As of December 31, 2018, capital lease assets were included in the "Buildings" asset class. For additional information related to leases, see Note 11, Leases.

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3.	Revenues

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(a)	On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was enacted by the U.S. government. The most significant impact to our financial statements was the reduction of the corporate federal income tax rate from 35% to 21%.

(b)

As of December 31, 2018, we completed our assessment of the effects of the Tax Act on our financial statements. In connection with our analysis of the Tax Act, we recorded discrete tax benefits of $3.8 million and $8.1 million, respectively, during the years ended December 31, 2018 and 2017. The $3.8 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21%, which mostly relates to a $20.0 million discretionary pension contribution made during 2018, for which we received a tax deduction at the 2017 federal income tax rate. The $8.1 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21%.

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5.	Net Income Per Common Share

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9.	Goodwill and Intangible Assets

(a)	Represents the acquisition of a wholesale building material distribution location. For additional information, see Note 8, Acquisitions.

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10.	Debt

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On September 30, 2019, we transferred $19.8 million of our Pension Plan assets to The Prudential Insurance Company of America (Prudential) for the purchase of a group annuity contract. Under the arrangement, Prudential assumed ongoing responsibility for administration and benefit payments for approximately 10% of our U.S. qualified pension plan projected benefit obligations at the time of the transaction. As a result of the transaction, we recognized a non-cash settlement charge of $1.3 million in third quarter 2019.

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On April 25, 2018, and August 10, 2018, we transferred $151.8 million and $124.8 million, respectively, of our Pension Plan assets to Prudential for the purchase of group annuity contracts. Under the arrangements, Prudential assumed ongoing responsibility for administration and benefit payments for over 60% of our U.S. qualified pension plan projected benefit obligations. As a result of the transfers of pension plan assets, we recorded settlement expense in second and third quarters 2018 of $12.0 million and $11.3 million, respectively. See "Assumptions" below for the impact on our discount rate and expected return on plan asset assumptions.

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(a)	See Defined Benefits Plans above for description of group annuity transactions.

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(a)	Plan settlement expense during the years ended December 31, 2019 and 2018 includes $1.3 million and $23.3 million, respectively, of settlement charges related to the transfers of pension plan assets to Prudential for the purchase of group annuity contracts.

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(a)	Prior to the remeasurements of our qualified defined benefit pension plan on April 25, 2018, and August 10, 2018, the discount rates were 3.40% and 4.05%, respectively, and the expected rates of return on plan assets were 4.75% and 4.50%, respectively. The discount rate and expected rate of return on plan assets after the August 10, 2018 remeasurement were 3.95% and 3.85%, respectively.

(b)	Pension benefits for all salaried employees are frozen, resulting in an assumption for the rate of compensation increase of zero. In addition to the salaried benefits being frozen, there are currently no scheduled increases in pension benefit rates applicable to past service covering the minimal number of hourly employees who continue to accrue benefits.

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(a)

Securities represent common collective trusts managed and valued by Russell Trust Company, the administrator of the funds. While the underlying assets are actively traded on an exchange, the funds are not. The investments in equity and fixed-income securities are considered to have a readily determinable fair value because the fair value per share (unit) is determined and published and is the basis for current transactions. We have the ability to redeem these securities with a 1 day notice.

(b)

Invested in the Russell Long Duration Fixed Income Fund at December 31, 2019 and 2018, which is designed to provide current income and capital appreciation through diversified strategies including sector rotation, modest interest rate timing, security selection, and tactical use of high-yield, emerging market bonds and other non-index securities. In addition, at December 31, 2019 and 2018, our investments in this category included the Russell 14 Year LDI Fixed Income Fund. We also were invested in the Russell 8 Year LDI Fixed Income Fund at December 31, 2019. These LDI funds invest primarily in investment grade bonds that closely match those found in discount rate curves used to value U.S. pension liabilities and seeks to provide additional incremental return through modest interest rate timing, security selection, and tactical use of non-credit sectors. In addition, at December 31, 2019 and 2018, our investments in this category included Russell STRIPS Fixed Income Funds with duration profiles of 10, 15, and 28 years. These funds invest in a subset of the STRIPS universe with a similar duration profile as their respective Bloomberg Barclays U.S. STRIPS Index.

(c)	Invested in the Russell Multi-Asset Core Plus Fund, which is designed to provide long-term growth by providing a diversified portfolio of investments that has an overall strategic allocation of 75% global equity, 15% marketable real assets, and 10% global fixed income.

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

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(a)	Includes payments of dividend equivalents on RSUs and PSUs which vested in first quarter of each year.

(b)	During each fourth quarter 2019 and third quarter 2018, our board of directors declared and paid a supplemental dividend of $1.00 per share of our common stock.

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(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 12, Retirement and Benefit Plans.

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(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 (including distributors, retail lumberyards, and professional builders). For the year ended December 31, 2019, approximately 77% of Wood Products' EWP sales volumes were to our Building Materials Distribution segment.

(b)	In fourth quarter 2018, we sold two lumber mills and our particleboard plant located in Northeast Oregon. For additional information, see Note 7, Sale of Manufacturing Facilities.

(c)	As discussed in Note 3, Revenues, upon adoption of ASC Topic 606, Revenue from Contracts with Customers, under the modified retrospective method on January 1, 2018, amounts recorded in 2017 have not been adjusted.

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(a)	Primarily represents intersegment sales from our Wood Products segment to our Building Materials Distribution segment. During 2019, 2018, and 2017, approximately 60%, 54%, and 52%, respectively, of Wood Products' overall sales were to our Building Materials Distribution segment.

(b)

Wood Products segment operating loss for the year ended December 31, 2018, includes pre-tax facility impairment and sales related losses of $35.5 million, as well as $57.8 million of accelerated depreciation and other curtailment costs related to the permanent curtailment of LVL production at our Roxboro, North Carolina facility. For more information, see Note 6, Curtailment of Manufacturing Facilities and Note 7, Sale of Manufacturing Facilities.

(c)	Depreciation and amortization for Wood Products includes $55.0 million of accelerated depreciation to fully depreciate the curtailed LVL production assets at our Roxboro, North Carolina facility during fourth quarter 2018. For more information, see Note 6, Curtailment of Manufacturing Facilities.

(d)	Capital spending in 2019 and 2018 for Building Materials Distribution includes $15.7 million and $25.5 million, respectively, for the acquisition of wholesale building material distribution locations. For more information, see Note 8, Acquisitions.

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(a)	Third quarter 2019 results include $1.3 million of pre-tax losses, or $0.03 per share after-tax, from a non-cash pension settlement charge as discussed in Note 12, Retirement and Benefit Plans.

(b)	Second quarter 2018 results include $12.0 million of pre-tax losses, or $0.23 per share after-tax, from a non-cash pension settlement charge as discussed in Note 12, Retirement and Benefit Plans.

(c)	Third quarter 2018 results include $11.3 million of pre-tax losses, or $0.21 per share after-tax, from a non-cash pension settlement charge and $11.0 million of pre-tax losses, or $0.21 per share after-tax, from impairment losses on assets held for sale in Northeast Oregon. For additional information, see Note 12, Retirement and Benefit Plans and Note 7, Sale of Manufacturing Facilities.

(d)

Fourth quarter 2018 results include $57.8 million of pre-tax expenses, or $1.11 per share after-tax, for accelerated depreciation and other curtailment costs related to the permanent curtailment of LVL production at our Roxboro, North Carolina facility as discussed in Note 6, Curtailment of Manufacturing Facilities. Fourth quarter 2018 also includes $24.0 million of pre-tax losses, or $0.46 per share after-tax, from an impairment loss and other sale related costs on our hardwood plywood facility in Moncure, North Carolina upon being classified as held for sale, as discussed in Note 7, Sale of Manufacturing Facilities.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;

•	provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.

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ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

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-	Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017.

-	Consolidated Statements of Stockholders' Equity for the years ended December 31, 2019, 2018, and 2017.

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+	Indicates exhibits that constitute management contracts or compensatory plans or arrangements.

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