UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998
( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Transition Period From ___________ to _____________
Commission file number 1-5057
BOISE CASCADE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0100960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 West Jefferson Street
P.O. Box 50
Boise, Idaho 83728-0001
(Address of principal executive offices) (Zip Code)
(208) 384-6161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class as of July 31, 1998
Common stock, $2.50 par value 56,329,859
PART I - FINANCIAL INFORMATION
STATEMENTS OF LOSS
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(expressed in thousands, except per share data)
Item 1. Financial Statements
Three Months Ended
June 30
________________________
1998 1997
__________ __________
(unaudited)
Sales $1,538,450 $1,333,010
__________ __________
Costs and expenses
Materials, labor, and other operating expenses 1,220,030 1,099,970
Depreciation and cost of company timber
harvested 71,110 59,410
Selling and distribution expenses 160,230 130,650
General and administrative expenses 37,540 34,120
Other (income) expense, net 81,170 200
__________ __________
1,570,080 1,324,350
__________ __________
Equity in net loss of affiliates (1,810) (1,610)
__________ __________
Income (loss) from operations (33,440) 7,050
__________ __________
Interest expense (40,860) (31,680)
Interest income 570 1,740
Foreign exchange loss (40) (40)
__________ __________
(40,330) (29,980)
__________ __________
Loss before income taxes, minority interest,
and cumulative effect of accounting change (73,770) (22,930)
Income tax benefit 12,280 8,940
__________ __________
Loss before minority interest and cumulative
effect of accounting change (61,490) (13,990)
Minority interest, net of income tax (2,460) (2,240)
__________ __________
Loss before cumulative effect of accounting change (63,950) (16,230)
Cumulative effect of accounting change, net
of income tax - -
__________ __________
Net loss $ (63,950) $ (16,230)
========== ==========
Net loss per common share
Basic and diluted net loss before
cumulative effect of accounting change $ (1.20) $ (.53)
Cumulative effect of accounting change - -
__________ __________
Basic and diluted net loss $ (1.20) $ (.53)
========== ==========
SEGMENT INFORMATION
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(expressed in thousands)
Three Months Ended
June 30
_______________________
1998 1997
_________ __________
(unaudited)
Segment sales
Office products $ 732,863 $ 600,470
Building products 449,169 431,310
Paper and paper products 455,431 385,500
Intersegment eliminations and other (99,013) (84,270)
__________ __________
$1,538,450 $1,333,010
========== ==========
Segment operating income (loss)
Office products $ 31,507 $ 24,855
Building products (52,927) 17,591
Paper and paper products (1,638) (18,804)
Equity in net loss of affiliates (1,810) (1,610)
Corporate and other (8,572) (14,982)
__________ __________
Income (loss) from operations $ (33,440) $ 7,050
========== ==========
The accompanying notes are an integral part of these Financial Statements.
PART I - FINANCIAL INFORMATION
STATEMENTS OF LOSS
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(expressed in thousands, except per share data)
Item 1. Financial Statements
Six Months Ended
June 30
________________________
1998 1997
__________ __________
(unaudited)
Sales $3,027,950 $2,606,620
__________ __________
Costs and expenses
Materials, labor, and other operating expenses 2,392,950 2,147,400
Depreciation and cost of company timber
harvested 141,390 119,870
Selling and distribution expenses 321,930 259,250
General and administrative expenses 74,130 65,610
Other (income) expense, net 81,510 470
__________ __________
3,011,910 2,592,600
__________ __________
Equity in net loss of affiliates (5,350) (1,580)
__________ __________
Income from operations 10,690 12,440
__________ __________
Interest expense (80,960) (59,380)
Interest income 1,170 3,830
Foreign exchange loss (90) (50)
__________ __________
(79,880) (55,600)
__________ __________
Loss before income taxes, minority interest,
and cumulative effect of accounting change (69,190) (43,160)
Income tax benefit 10,380 16,830
__________ __________
Loss before minority interest and cumulative
effect of accounting change (58,810) (26,330)
Minority interest, net of income tax (5,590) (5,110)
__________ __________
Loss before cumulative effect of accounting
change (64,400) (31,440)
Cumulative effect of accounting change, net
of income tax (8,590) -
__________ __________
Net loss $ (72,990) $ (31,440)
========== ==========
Net loss per common share
Basic and diluted net loss before
cumulative effect of accounting change $ (1.37) $ (1.04)
Cumulative effect of accounting change (.15) -
__________ __________
Basic and diluted net loss $ (1.52) $ (1.04)
========== ==========
SEGMENT INFORMATION
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(expressed in thousands)
Six Months Ended
June 30
________________________
1998 1997
__________ __________
(unaudited)
Segment sales
Office products $1,492,671 $1,198,341
Building products 817,847 808,692
Paper and paper products 913,725 756,054
Intersegment eliminations and other (196,293) (156,467)
__________ __________
$3,027,950 $2,606,620
========== ==========
Segment operating income (loss)
Office products $ 69,099 $ 53,370
Building products (52,133) 27,983
Paper and paper products 20,498 (41,471)
Equity in net loss of affiliates (5,350) (1,580)
Corporate and other (21,424) (25,862)
__________ __________
Income from operations $ 10,690 $ 12,440
========== ==========
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
ASSETS
June 30 December 31
_______________________ ___________
1998 1997 1997
__________ __________ ___________
(unaudited)
Current
Cash $ 82,668 $ 80,538 $ 56,429
Cash equivalents 4,357 168,284 7,157
__________ __________ __________
87,025 248,822 63,586
Receivables, less allowances
of $8,815, $6,030, and $9,689 620,461 516,931 570,424
Inventories 586,758 501,865 633,290
Deferred income tax benefits 57,808 60,910 54,312
Other 33,870 32,760 32,061
__________ __________ __________
1,385,922 1,361,288 1,353,673
__________ __________ __________
Property
Property and equipment
Land and land improvements 55,542 47,995 57,260
Buildings and improvements 573,819 492,006 554,712
Machinery and equipment 4,148,885 4,032,427 4,055,065
__________ __________ __________
4,778,246 4,572,428 4,667,037
Accumulated depreciation (2,187,540) (1,967,638) (2,037,352)
__________ __________ __________
2,590,706 2,604,790 2,629,685
Timber, timberlands, and
timber deposits 276,714 291,802 273,001
__________ __________ __________
2,867,420 2,896,592 2,902,686
__________ __________ __________
Goodwill, net of amortization
of $30,995, $17,701, and $24,020 444,525 338,359 445,722
Investments in equity affiliates 25,739 31,566 32,848
Other assets 221,138 233,892 234,995
__________ __________ __________
Total assets $4,944,744 $4,861,697 $4,969,924
========== ========== ==========
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands, except share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31
_______________________ ___________
1998 1997 1997
__________ __________ ___________
(unaudited)
Current
Notes payable $ 214,400 $ 53,200 $ 94,800
Current portion of long-term debt 25,241 170,720 30,176
Income taxes payable - 1,788 3,692
Accounts payable 476,279 443,096 470,445
Accrued liabilities
Compensation and benefits 124,267 117,072 126,780
Interest payable 42,478 31,889 39,141
Other 179,940 151,061 128,714
__________ __________ __________
1,062,605 968,826 893,748
__________ __________ __________
Debt
Long-term debt, less current
portion 1,752,170 1,513,061 1,725,865
Guarantee of ESOP debt 171,513 191,868 176,823
__________ __________ __________
1,923,683 1,704,929 1,902,688
__________ __________ __________
Other
Deferred income taxes 210,285 233,631 230,840
Other long-term liabilities 224,364 242,337 224,663
__________ __________ __________
434,649 475,968 455,503
__________ __________ __________
Minority interest 112,781 91,454 105,445
__________ __________ __________
Shareholders' equity
Preferred stock -- no par value;
10,000,000 shares authorized;
Series D ESOP: $.01 stated
value; 5,485,292; 5,658,513;
and 5,569,684 shares
outstanding 246,838 254,633 250,636
Deferred ESOP benefit (171,513) (191,868) (176,823)
Series F: $.01 stated value;
115,000 shares outstanding
in 1997 - 111,043 111,043
Series G: $.01 stated value;
862,500 shares outstanding
in 1997 - 175,314 -
Common stock -- $2.50 par value;
200,000,000 shares authorized;
56,329,030; 48,717,500; and
56,223,923 shares outstanding 140,823 121,794 140,560
Additional paid-in capital 420,556 239,818 416,691
Retained earnings 781,697 912,694 879,043
Accumulated other comprehensive
income (loss) (7,375) (2,908) (8,610)
__________ __________ __________
Total shareholders' equity 1,411,026 1,620,520 1,612,540
__________ __________ __________
Total liabilities and shareholders'
equity $4,944,744 $4,861,697 $4,969,924
========== ========== ==========
The accompanying notes are an integral part of these Financial Statements
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(expressed in thousands)
Six Months Ended
June 30
________________________
1998 1997
_________ _________
(unaudited)
Cash provided by (used for) operations
Net loss $ (72,990) $ (31,440)
Cumulative effect of accounting change, net of
income tax 8,590 -
Items in net loss not using (providing) cash
Equity in net loss of affiliates 5,350 1,580
Depreciation, amortization, and cost of
company timber harvested 141,390 119,870
Deferred income tax benefit (14,704) (19,348)
Minority interest, net of income tax 5,590 5,110
Writedown of assets 46,103 -
Other 33,691 1,009
Receivables (54,526) (18,986)
Inventories 47,721 53,488
Accounts payable and accrued liabilities 21,991 (4,389)
Current and deferred income taxes (13,015) (1,609)
Other 10,293 (3,444)
_________ _________
Cash provided by operations 165,484 101,841
_________ _________
Cash provided by (used for) investment
Expenditures for property and equipment (121,609) (151,721)
Expenditures for timber and timberlands (8,275) (3,776)
Investments in equity affiliates, net (429) (15,227)
Purchases of facilities (4,042) (92,530)
Other (4,371) (17,366)
_________ _________
Cash used for investment (138,726) (280,620)
_________ _________
Cash provided by (used for) financing
Cash dividends paid
Common stock (16,875) (14,474)
Preferred stock (12,867) (21,708)
_________ _________
(29,742) (36,182)
Notes payable 119,600 16,500
Additions to long-term debt 239,672 211,000
Payments of long-term debt (218,289) (14,534)
Series F Preferred Stock redemption (115,033) -
Other 473 (10,034)
_________ _________
Cash provided by (used for) financing (3,319) 166,750
_________ _________
Increase (decrease) in cash and cash equivalents 23,439 (12,029)
Balance at beginning of the year 63,586 260,851
_________ _________
Balance at June 30 $ 87,025 $ 248,822
========= =========
The accompanying notes are an integral part of these Financial Statements.
NOTES TO QUARTERLY FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION. We have prepared the quarterly financial
statements pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These statements should be read together with the
statements and the accompanying notes included in our 1997 Annual Report.
The quarterly financial statements have not been audited by independent public
accountants, but in the opinion of management, all adjustments necessary to
present fairly the results for the periods have been included. The net loss
for the three and six months ended June 30, 1998 and 1997, necessarily
involved estimates and accruals. Except as may be disclosed within these
"Notes to Quarterly Financial Statements," the adjustments made were of a
normal, recurring nature. Quarterly results are not necessarily indicative of
results that may be expected for the year.
(2) Late in the second quarter of 1998, we adopted a plan to restructure our
wood products manufacturing business by permanently closing four facilities,
including sawmills in Elgin, Oregon; Horseshoe Bend, Idaho; and Fisher,
Louisiana; and a plywood plant in Yakima, Washington. These closures will
occur before the end of this year. Employment for 494 workers at these
locations will end when the plants close. Related to these closures, our
Building Products segment recorded pretax losses in the second quarter of 1998
of $27.0 million for the write-down of assets, $14.0 million for severance and
other employee related costs, and $21.0 million for other exit costs, for a
total of $62.0 million. These charges are recorded in "Other (income)
expense, net" in the accompanying statement of loss. These facilities had
sales of $22.1 million and $44.0 million for the three and six months ended
June 30, 1998, and sales of $24.6 million and $48.6 million for the same
periods in 1997. Operating losses for these facilities were $3.1 million and
$7.2 million for the three and six months ended June 30, 1998, and $.8 million
and $4.1 million for the three and six months ended June 30, 1997.
Also in the second quarter of 1998, our Paper and paper products segment
recorded a pretax charge of $19.0 million for the revaluation of certain
paper-related assets. Included in the revaluation is an $8.0 million write-
down of a 60% owned joint venture in China that produces carbonless paper.
This charge is also recorded in "Other (income)expense, net" in the
accompanying statement of loss.
(3) NET LOSS PER COMMON SHARE. Net loss per common share was determined by
dividing net loss, as adjusted, by applicable shares outstanding. For the
three and six months ended June 30, 1998 and 1997, the computation of diluted
net loss per share was antidilutive; therefore, amounts reported for basic and
diluted loss were the same.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
____________________ ____________________
1998 1997 1998 1997
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
Net loss as reported before cumulative
effect of accounting change $(63,950) $(16,230) $(64,400) $(31,440)
Preferred dividends(a) (3,518) (9,584) (8,579) (19,297)
Excess of Series F Preferred Stock
redemption price over carrying value(b) - - (3,958) -
________ ________ ________ ________
Basic and diluted loss before cumulative
effect of accounting change (67,468) (25,814) (76,937) (50,737)
Cumulative effective of accounting change,
net of income tax - - (8,590) -
________ ________ ________ ________
$(67,468) $(25,814) $(85,527) $(50,737)
======== ======== ======== ========
Average shares outstanding used to
determine basic and diluted loss per
common share 56,316 48,601 56,279 48,557
</TABLE>
(a) Dividend attributable to our Series D convertible preferred stock held by
our ESOP (Employee Stock Ownership Plan) is net of a tax benefit.
(b) Six months ended June 30, 1998, included a negative seven cents related
to the redemption of the Series F Preferred Stock. The loss used in the
calculation of loss per share was increased by the excess of the amount paid
to redeem the preferred stock over its carrying value.
(4) COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) for the periods
include the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
____________________ ____________________
1998 1997 1998 1997
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
Net loss $(63,950) $(16,230) $(72,990) $(31,440)
Other comprehensive income (loss)
Cumulative foreign currency translation
adjustment, net of income taxes (480) (91) 1,235 (1,562)
________ ________ ________ ________
Comprehensive income (loss), net of income
taxes $(64,430) $(16,321) $(71,755) $(33,002)
======== ======== ======== ========
</TABLE>
Accumulated other comprehensive income (loss) for each period ended was
as follows:
June 30 December 31
__________________ ___________
1998 1997 1997
________ ________ ___________
(expressed in thousands)
Balances at beginning of period
Minimum pension liability
adjustment, net of income taxes $(1,995) $(2,866) $(2,866)
Cumulative foreign currency
translation adjustment, net of
income taxes (6,615) 1,520 1,520
Changes within periods
Minimum pension liability
adjustment, net of income taxes - - 871
Cumulative foreign currency
translation adjustment, net of
income taxes 1,235 (1,562) (8,135)
_______ _______ _______
Balance at end of period $(7,375) $(2,908) $(8,610)
======= ======= =======
(5) DEFERRED SOFTWARE COSTS. We defer purchased and internally developed
software and related installation costs for computer systems that are used in
our businesses. Deferral of costs begins when technological feasibility of
the project has been established and it is determined that the software will
benefit future years. These costs are amortized on the straight-line method
over a maximum of five years or the useful life of the product, whichever is
less. If the useful life of the product is shortened, the amortization period
is adjusted. "Other assets" in the Balance Sheets includes deferred software
costs of $34.5 million, $20.7 million, and $31.1 million at June 30, 1998 and
1997, and December 31, 1997.
(6) INVENTORIES. Inventories include the following:
June 30 December 31
__________________ ___________
1998 1997 1997
________ ________ ___________
(expressed in thousands)
Finished goods and work in process $454,363 $395,284 $453,268
Logs 60,610 46,955 107,625
Other raw materials and supplies 149,858 140,886 149,870
LIFO reserve (78,073) (81,260) (77,473)
________ ________ ________
$586,758 $501,865 $633,290
======== ======== ========
(7) CUMULATIVE EFFECT OF ACCOUNTING CHANGE. As of January 1, 1998, we
adopted the provisions of a new accounting standard, AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities," which required
the write-off of previously capitalized preoperating costs. Adoption of this
standard resulted in a charge for the cumulative effect of accounting change,
net of tax, of $8.6 million, or 15 cents per basic and diluted loss per share,
for the six months ended June 30, 1998.
(8) INCOME TAXES. In the second quarter of 1998, the company's estimated
annual tax benefit rate was reduced to 15%, compared with an estimated tax
provision rate of 42% for the first three months of 1998 and an actual annual
1997 tax benefit rate of 32%. The fluctuations in the tax rate are due
primarily to the sensitivity of the rate to lower income levels, including the
impact of the restructuring and revaluation charges, and the mix of income
sources.
For the three and six months ended June 30, 1998, we paid income taxes, net of
refunds received, of $6.6 million and $9.1 million, and $6.4 million and
$7.5 million for the same periods in 1997.
(9) DEBT. At June 30, 1998, we had a revolving credit agreement with a
group of banks that permitted us to borrow as much as $600 million at variable
interest rates based on customary indices. This agreement expires in June
2002. The revolving credit agreement contains financial covenants relating to
minimum net worth, minimum interest coverage ratios, and ceiling ratios of
debt to capitalization. Under this agreement, the payment of dividends is
dependent upon the existence of and the amount of net worth in excess of the
defined minimum. Our net worth at June 30, 1998, exceeded the defined minimum
by $120 million. At June 30, 1998, there were $185 million of borrowings
outstanding under this agreement.
Our majority-owned subsidiary, Boise Cascade Office Products Corporation
("BCOP"), has a $450 million revolving credit agreement with a group of banks
that expires in June 2001 and provides variable interest rates based on
customary indices. The BCOP revolving credit facility contains customary
restrictive financial and other covenants, including a negative pledge and
covenants specifying a minimum fixed charge coverage ratio and a maximum
leverage ratio. BCOP may, subject to the covenants contained in the credit
agreement and to market conditions, raise additional funds through the
agreement and through other external debt or equity financings in the future.
Borrowings under BCOP's agreement were $140 million at June 30, 1998.
Also at June 30, 1998, we had $132.2 million of short-term borrowings
outstanding and BCOP had $82.2 million of short-term borrowings outstanding.
At June 30, 1997, we had no short-term borrowings outstanding, while BCOP had
$53.2 million of short-term borrowings outstanding. The maximum amount of
short-term borrowings outstanding during the six months ended June 30, 1998
and 1997, was $275.3 million and $294.8 million. The average amount of short-
term borrowings outstanding during the six months ended June 30, 1998 and
1997, was $214.9 million and $37.9 million. The average interest rate for
these borrowings was 5.9% for 1998 and 5.8% for 1997.
We filed a registration statement with the Securities and Exchange Commission
for an additional $400 million of shelf capacity for debt securities. The
effective date of our filing was March 25, 1998. Our total shelf capacity was
$489.4 million at June 30, 1998.
BCOP filed a registration statement with the Securities and Exchange
Commission to register $300 million of shelf capacity for debt securities.
The effective date of the filing was April 22, 1998. On May 12, 1998, BCOP
issued $150.0 million of 7.05% Notes under this registration statement. The
Notes are due May 15, 2005. Proceeds from the issuance were used to repay
borrowings under BCOP's revolving credit agreement. BCOP has $150.0 million
of shelf capacity remaining under this registration statement. In December
1997, BCOP entered into agreements to hedge against a rise in Treasury rates.
BCOP entered into the transactions in anticipation of their issuance of these
debt securities. The hedge agreements had a notional amount of $70 million.
The settlement rate, based on the yield on 10-year U.S. Treasury bonds, was
less than the agreed upon initial rate and BCOP made a cash payment of
$0.6 million. The amount paid will be recognized as an increase in interest
expense over the life of the debt securities issued.
Cash payments for interest, net of interest capitalized, were $33.9 million
and $77.6 million for the three and six months ended June 30, 1998, and
$27.3 million and $59.7 million for the three and six months ended June 30,
1997.
(10) BOISE CASCADE OFFICE PRODUCTS CORPORATION. During the first six months
of 1998, BCOP completed two acquisitions, and during the first six months of
1997, BCOP completed six acquisitions, all of which were accounted for under
the purchase method of accounting. Accordingly, the purchase prices were
allocated to the assets acquired and liabilities assumed based upon their
estimated fair values. The initial purchase price allocations may be adjusted
within one year of the date of purchase for changes in estimates of the fair
values of assets and liabilities. Such adjustments are not expected to be
significant to our results of operations or our financial position. The
excess of the purchase price over the estimated fair value of the net assets
acquired was recorded as goodwill and is being amortized over 40 years. The
results of operations of the acquired businesses are included in our
operations subsequent to the dates of acquisition.
On January 12, 1998, BCOP acquired the direct marketing business of Fidelity
Direct, based in Minneapolis, Minnesota. On February 28, 1998, BCOP acquired
the direct marketing business of Sistemas Kalamazoo, based in Vizcaya, Spain.
These transactions were completed for cash of $4.0 million, debt assumed of
$0.2 million, and the recording of $3.8 million of acquisition liabilities.
On January 31, February 28, and April 17, 1997, BCOP acquired contract
stationer businesses in Montana, Florida, and the United Kingdom. On
April 30, and May 30, 1997, we acquired computer consumables businesses in
North Carolina and Canada. On May 31, 1997, we acquired the promotional
products business of OstermanAPI, Inc., based in Maumee, Ohio. In conjunction
with the acquisition of Osterman, we formed a majority-owned subsidiary, Boise
Marketing Services, Inc. ("BMSI"), of which BCOP owns 88%. BCOP's previously
acquired promotional products company, OWNCO, also became part of BMSI. Also
in January 1997, BCOP completed a joint venture with Otto Versand to direct
market office products in Europe. These transactions, including the joint
venture and the formation of the majority-owned promotional products
subsidiary, were completed for cash of $99.7 million, $2.9 million of BCOP's
common stock, and the recording of $14.2 million of acquisition liabilities.
On July 7, 1997, we acquired 100% of the shares of Jean-Paul Guisset S.S.
("JPG"), a French Corporation. JPG is a direct marketer of office products in
France. The negotiated purchase price was FF850.0 million (US$144.0 million)
plus a price supplement payable in the year 2000, if certain earnings and
sales growth targets are reached. No liability has been recorded for the
price supplement as the amount of payment, if any, is not assured beyond a
reasonable doubt. In addition to the cash paid, BCOP recorded $5.8 million of
acquisition liabilities and assumed US$10.1 million of long-term debt.
Unaudited pro forma results of operations reflecting the acquisitions would
have been as follows. If the 1998 acquisitions had occurred on January 1,
1998, sales for the first six months of 1998 would have been unchanged, net
loss would have decreased $100,000, and basic and diluted loss per share would
have been unchanged. If the 1998 and 1997 acquisitions had occurred on
January 1, 1997, sales for the first six months of 1997 would have increased
by $100 million, net loss would have decreased by $200,000, and basic and
diluted loss per share would have been unchanged. This unaudited pro forma
financial information does not necessarily represent the actual results of
operations that would have occurred if the acquisitions had taken place on the
dates assumed.
(11) SHAREHOLDERS' EQUITY. We have a shareholder rights plan which was
adopted in December 1988, amended in September 1990, and renewed in September
1997. The Renewed Rights Agreement becomes operative upon the expiration of
the existing Rights Agreement.
(12) NEW ACCOUNTING STANDARDS. In 1997, the Financial Accounting Standards
Board issued SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," which establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
We will adopt the statement at year-end 1998. We are still evaluating what
impact it will have on our reportable segments. Adoption of this statement
will have no impact on net income.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This Statement standardizes the disclosure requirements for
pensions and other postretirement benefits. This Statement is effective for
fiscal years beginning after December 15, 1997. This Statement will have no
impact on net income.
In March 1998, the American Institute of Certified Public Accountants (AICPA),
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP is
effective for financial statements for fiscal years beginning after
December 15, 1998, with earlier application encouraged. We currently account
for software costs generally in accordance with this SOP. In April 1998, the
AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." This
SOP provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998, with earlier
application encouraged. Unamortized costs are required to be expensed at the
time of adoption of the SOP. We adopted this standard as of January 1, 1998
(see note 7).
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
Statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. This Statement is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. We plan to adopt this
Statement in the first quarter of 2000. We are in the process of reviewing
this new standard. We currently have no derivative financial instruments.
Adoption of this Statement is not expected to have a significant impact on our
results of operations or financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998, COMPARED WITH THREE MONTHS ENDED JUNE 30,
1997
Our net loss for the second quarter of 1998 was $64.0 million, compared with a
net loss of $16.2 million for the second quarter of 1997. Basic loss and
diluted loss per common share for the second quarter of 1998 were $1.20. For
the same quarter in 1997, basic loss and diluted loss per common share were
53 cents. Sales for the second quarter of 1998 were $1.5 billion and
$1.3 billion in the second quarter of 1997.
Late in the second quarter of 1998, we adopted a plan to restructure our wood
products manufacturing business by permanently closing four facilities,
including sawmills in Elgin, Oregon; Horseshoe Bend, Idaho; and Fisher,
Louisiana; and a plywood plant in Yakima, Washington. These closures will
occur before the end of this year. Employment for 494 workers at these
locations will end when the plants close. Related to these closures, our
Building products segment recorded pretax losses in the second quarter of 1998
of $27.0 million for the write-down of assets, $14.0 million for severance and
other employee related costs, and $21.0 million for other exit costs, for a
total of $62.0 million. These charges are recorded in "Other (income)
expense, net" in the accompanying statement of loss. These facilities had
sales of $22.1 million for the three months ended June 30, 1998, and sales of
$24.6 million for the same period in 1997. Operating losses for these
facilities were $3.1 million for the three months ended June 30, 1998, and
$0.8 million for the three months ended June 30, 1997.
Also in the second quarter of 1998, our Paper and paper products segment
recorded a pretax charge of $19.0 million for the revaluation of certain
paper-related assets. Included in the revaluation is an $8.0 million write-
down of a 60% owned joint venture in China that produces carbonless paper.
This charge is also recorded in "Other (income)expense, net" in the
accompanying statement of loss.
Excluding these write-offs, we would have had second quarter net income of
$1.2 million, or a loss of 4 cents per basic and diluted share.
Operating income in the office products segment in the second quarter of 1998
was $31.5 million, compared to $24.9 million in the second quarter 1997. Net
sales in the second quarter of 1998 increased 22% to $732.9 million, compared
with $600.5 million in the second quarter of 1997. The growth in sales
resulted from both acquisitions and same-location sales growth. Same-location
sales increased 11% in the second quarter of 1998, compared with sales in the
second quarter of 1997. Gross margins were 25.7% in the second quarter of
1998, compared to 24.8% in the year-ago second quarter. The increase in the
second quarter of 1998 was primarily because of improvements in BCOP's
domestic contract stationer gross margins and the gross margin contributions
from BCOP's foreign direct marketing acquisitions. BCOP's operating expenses
were 21.4% of net sales in the second quarter of 1998, compared with 20.6% in
the second quarter of 1997. The increase in the second quarter of 1998 was
due, in part, to BCOP's direct marketing acquisitions, which have both higher
gross margins and higher operating expenses. Direct marketing acquisitions
made in the last half of 1997, increased BCOP's cost average compared to the
prior year. BCOP's operating margin was 4.3% in 1998 and 4.2% in 1997.
Our Building products segment had an operating loss of $52.9 million in the
second quarter of 1998. This loss includes $62.0 million for the restructuring
charge for the closure of our four manufacturing facilities. Excluding this
restructuring charge, this segment earned $9.1 million, compared with
operating income of $17.6 million in the second quarter of 1997. Sales
increased 4% to $449.2 million compared to $431.3 million a year ago.
Performance declined as a result of continuing weaknesses in wood products
markets. Average lumber prices in the second quarter declined 16% from year-
ago levels, plywood prices declined 8%, I-joist prices declined 4%,
particleboard prices declined 6%, and laminated veneer lumber prices were
about flat. Offsetting the lower prices were improved sales volumes for
almost all of our building products. Sales volume for plywood was up 21
million square feet, lumber sales volume was down 10 million board feet,
laminated veneer lumber sales volume was up 0.3 million cubic feet, I-joist
sales volume was up 7 million equivalent lineal feet, and particleboard sales
volume was about flat. Our building materials distribution business increased
sales 16% to $228.2 million in the second quarter of 1998 compared with
$196.7 million in the second quarter of 1997, more than offsetting the weakening
lumber and plywood prices.
Our Paper and paper products segment reported an operating loss of
$1.6 million in the second quarter of 1998. The second quarter results
included $19.0 million of charges for the revaluation of assets. Excluding
these charges, this segment would have earned $17.4 million. For the second
quarter of 1997, this segment recorded an operating loss of $18.8 million.
Sales increased 18% to $455.4 million in the second quarter of 1998 from
$385.5 million in the second quarter of 1997. Performance improved, compared
with a year ago, because average paper prices increased for all of the grades
we produce. Uncoated free sheet prices increased 5%, containerboard prices
increased 35%, newsprint prices increased 11%, and pulp prices increased 10%.
Sales volumes for the second quarter of 1998 increased as well, up 30,000 tons
to 651,000 tons, compared with 621,000 tons in the second quarter of 1997.
Uncoated free sheet volumes increased 25,000 tons as our new world-class
uncoated free sheet paper machine in Jackson, Alabama, is now operating at
close to rated capacity. Containerboard sales volumes increased 3,000 tons
and market pulp sales volumes increased 4,000 tons. These increases were
offset by a 2,000 ton sales volume reduction in newsprint.
Paper segment manufacturing costs per ton in the second quarter of 1998 were
2% lower than in the comparison quarter. The decrease from quarter to quarter
was due primarily to lower wood costs.
Interest expense was $40.9 million in the second quarter of 1998, compared
with $31.7 million in the same period last year. Capitalized interest in the
second quarter of 1998 was $64,000, compared to $3.9 million in the second
quarter of 1997. With the start-up of the expansion of the Jackson pulp and
paper mill in April 1997, the amount of interest capitalized has decreased
significantly. The balance of the increase in interest expense was due to
higher debt levels.
SIX MONTHS ENDED JUNE 30, 1998, COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
We had a net loss of $73.0 million, or $1.52 per basic and diluted share, for
the first six months of 1998. For the first six months of 1997, we lost
$31.4 million. Basic loss and diluted loss per common share were $1.04. Sales
for the first six months of 1998 were $3.0 billion, compared with $2.6 billion
for the same period in the prior year.
Late in the second quarter of 1998, we adopted a plan to restructure our wood
products manufacturing business by permanently closing four facilities,
including sawmills in Elgin, Oregon; Horseshoe Bend, Idaho; and Fisher,
Louisiana; and a plywood plant in Yakima, Washington. These closures will
occur before the end of this year. Employment for 494 workers at these
locations will end when the plants close. Related to these closures, our
Building Products segment recorded pretax losses in the second quarter of 1998
of $27.0 million for the write-down of assets, $14.0 million for severance
costs, and $21.0 million for other exit costs, for a total of $62.0 million.
These charges are recorded in "Other (income) expense, net" in the
accompanying statement of loss. These facilities had sales of $44.0 million
for the six months ended June 30, 1998, and sales of $48.6 million for the
same period in 1997. Operating losses for these facilities were $7.2 million
for the six months ended June 30, 1998, and $4.1 million for the six months
ended June 30, 1997.
In addition, our Paper and paper products segment recorded a pretax charge of
$19.0 million for the revaluation of certain paper-related assets. Included
in the revaluation is an $8.0 million write-down of a 60% owned joint venture
in China that produces carbonless paper. This charge is also recorded in
"Other (income) expense, net" in the accompanying statement of loss.
Also included in the $73.0 million loss is a net of tax charge of
$8.6 million, or 15 cents per basic and diluted loss per share, for the adoption
of the provisions of a new accounting standard, AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities," which required
the write-off of previously capitalized preoperating costs. This was adopted as
of January 1, 1998.
Excluding these write-offs and charges, net income for the first six months of
1998 would have been $0.5 million, or a loss of 21 cents per basic and diluted
share.
Our office products segment had operating income of $69.1 million for the
first six months of 1998, compared with $53.4 million for the first six months
of 1997. Sales increased 25% to $1.5 billion, compared with $1.2 billion.
The increase was due to a combination of acquisitions and same-location sales
growth. Same location sales increased 12% year to year. Gross margins were
25.7% in the first six months of 1998, compared to 25.0% a year ago. The
increase was primarily due to increases in BCOP's domestic contract stationer
and direct marketing gross margins, offset slightly by lower margins in our
other businesses. Operating expenses were 21.1% of net sales in the first six
months of 1998, compared with 20.5% in the first six months of 1997. This
increase was due, in part, from BCOP's direct marketing acquisitions, which
have both higher gross margins and higher operating expenses. Direct
marketing acquisitions made in the last half of 1997 increased our cost
average compared to the prior year. BCOP's operating margin was 4.6% in 1998
and 4.5% in 1997.
Our Building products segment had an operating loss of $52.1 million in the
first six months of 1998. This includes $62.0 million of restructuring
reserves. Excluding these reserves this segment earned $9.9 million, compared
with income of $28.0 million in the prior year. Sales for the first six months
of 1998 were $817.8 million, up slightly from the $808.7 million reported in
the prior year. The decline in operating results is due to continuing
weaknesses in wood products markets. Average lumber prices declined 11% in
1998, compared with 1997 prices, while plywood prices declined 7%.
Particleboard prices were down 5%, I-joist prices were down 4%, and laminated
veneer lumber prices were about flat. Offsetting the lower prices were
improved sales volumes for nearly all of our building products. Sales volume
for plywood was up 18 million square feet, sales volume for laminated veneer
lumber was up 0.4 million cubic feet, I-joist sales volume was up 9 million
equivalent lineal feet, while particleboard sales volume was about flat.
Lumber sales volume declined 36 million board feet. Building materials
distribution sales were up 12% to $395.9 million, compared to $352.5 million
for the first six months of 1997.
Our Paper and paper products segment had operating income of $20.5 million for
the first six months of 1998. This includes a charge taken in the second
quarter of $19.0 million for the revaluation of assets. Excluding this
charge, this segment would have earned $39.5 million compared with a loss of
$41.5 million for the first six months of 1997. Sales increased 21% to $913.7
million, compared with $756.1 million a year ago. The increase is due to
improved average paper prices for all of the grades we produce. Uncoated free
sheet average prices increased 8%, containerboard average prices increased
29%, newsprint average prices increased 14%, and pulp average prices increased
7%. In addition, sales volumes increased 48,000 tons to 1,303,000 tons
compared with 1,255,000 tons a year ago.
Paper segment manufacturing costs per ton in the first six months of 1998 were
about flat compared with the comparison period.
Total long- and short-term debt outstanding was $2.2 billion at June 30, 1998,
compared with $1.9 billion at June 30, 1997. Total long- and short-term debt
outstanding was $2.0 billion at December 31, 1997. The increase is due
primarily to higher short-term borrowings.
FINANCIAL CONDITION
At June 30, 1998, we had working capital of $323.3 million. Working capital
was $392.5 million at June 30, 1997, and $459.9 million at December 31, 1997.
Cash provided by operations was $165.5 million for the first six months of
1998, compared with $101.8 million for the same period in 1997.
At June 30, 1998, we had a revolving credit agreement with a group of banks
that permitted us to borrow as much as $600 million at variable interest rates
based on customary indices. This agreement expires in June 2002. The
revolving credit agreement contains financial covenants relating to minimum
net worth, minimum interest coverage ratios, and ceiling ratios of debt to
capitalization. Under this agreement, the payment of dividends is dependent
upon the existence of and the amount of net worth in excess of the defined
minimum. Our net worth at June 30, 1998, exceeded the defined minimum by
$120 million. At June 30, 1998, there were $185 million of borrowings
outstanding under this agreement.
Our majority-owned subsidiary, Boise Cascade Office Products Corporation
("BCOP"), has a $450 million revolving credit agreement with a group of banks
that expires in June 2001 and provides variable interest rates based on
customary indices. The BCOP revolving credit facility contains customary
restrictive financial and other covenants, including a negative pledge and
covenants specifying a minimum fixed charge coverage ratio and a maximum
leverage ratio. BCOP may, subject to the covenants contained in the credit
agreement and to market conditions, raise additional funds through the
agreement and through other external debt or equity financings in the future.
Borrowings under BCOP's agreement were $140 million at June 30, 1998.
At June 30, 1998, we and BCOP met all of the financial covenants related to
our debt.
Also at June 30, 1998, we had $132.2 million of short-term borrowings
outstanding and BCOP had $82.2 million of short-term borrowings outstanding.
At June 30, 1997, we had no short-term borrowings outstanding, while BCOP had
$53.2 million of short-term borrowings outstanding. The maximum amount of
short-term borrowings outstanding during the six months ended June 30, 1998
and 1997, were $275.3 million and $294.8 million. The average amount of
short-term borrowings outstanding during the six months ended June 30, 1998
and 1997, were $214.9 million and $37.9 million. The average interest rate
for these borrowings was 5.9% for 1998 and 5.8% for 1997.
We filed a registration statement with the Securities and Exchange Commission
for an additional $400 million of shelf capacity for debt securities. The
effective date of our filing was March 25, 1998. Our total shelf capacity was
$489.4 million at June 30, 1998.
BCOP filed a registration statement with the Securities and Exchange
Commission to register $300 million of shelf capacity for debt securities.
The effective date of the filing was April 22, 1998. On May 12, 1998, BCOP
issued $150.0 million of 7.05% Notes under this registration statement. The
Notes are due May 15, 2005. Proceeds from the issuance will be used to repay
borrowings under BCOP's revolving credit agreement. BCOP has $150.0 million
of shelf capacity remaining under this registration statement. In December
1997, BCOP entered into agreements to hedge against a rise in Treasury rates.
BCOP entered into the transactions in anticipation of their issuance of these
debt securities. The hedge agreements had a notional amount of $70 million.
The settlement rate, based on the yield on 10-year U.S. Treasury bonds, was
less than the agreed upon initial rate and BCOP made a cash payment of
$0.6 million. The amount paid will be recognized as an increase in interest
expense over the life of the debt securities issued.
Capital expenditures for the first six months of 1998 and 1997 were
$138.4 million and $270.3 million. Capital expenditures for the year ended
December 31, 1997, were $578.6 million. The decrease in capital expenditures
quarter to quarter is primarily due to the completion of the Jackson pulp and
paper mill expansion in May 1997.
An expanded discussion and analysis of financial condition is presented on
pages 18 and 19 of the Company's 1997 Annual Report under the captions
"Financial Condition" and "Capital Investment."
MARKET CONDITIONS
The Asian economic turmoil has clearly had a negative impact on the near-term
outlook for paper and wood products markets. U.S. exports of these products
have declined, and imports have increased; conditions that are expected to
worsen later this year. We view the Asian economic trouble as a temporary
phenomenon, and once it is past, the long-term fundamentals of these
businesses should be quite positive.
We expect continued profitable growth in our office products distribution
business and increasing benefits from our new engineered wood products
facilities and our growing presence in value-added uncoated free sheet papers.
NEW ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. We will adopt
the statement at year-end 1998. We are still evaluating what impact it will
have on our reportable segments. Adoption of this statement will have no
impact on net income.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This Statement standardizes the disclosure requirements for
pensions and other postretirement benefits. This Statement is effective for
fiscal years beginning after December 15, 1997. This Statement will have no
impact on net income.
In March 1998, the American Institute of Certified Public Accountants (AICPA),
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP is
effective for financial statements for fiscal years beginning after
December 15, 1998, with earlier application encouraged. We currently account
for software costs generally in accordance with this SOP. In April 1998, the
AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." This
SOP provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998, with earlier
application encouraged. Unamortized costs are required to be expensed at the
time of adoption of the SOP. We implemented this SOP effective January 1,
1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
Statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. This Statement is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. We plan to adopt this
Statement in the first quarter of 2000. We are in the process of reviewing
this new standard. We currently have no derivative financial instruments.
Adoption of this Statement is not expected to have a significant impact on our
results of operations or financial position.
TIMBER SUPPLY
The amount of public timber available for harvest in the Pacific Northwest has
declined due to environmental litigation and changes in government policy. We
expect these constraints on the available public timber to increase. In
addition, federal laws, such as the Endangered Species Act, can impact the
supply of timber from privately owned lands, increasing the cost of forest
management and harvesting operations. In Oregon, the November ballot will
include a measure seeking to ban certain forest management and timber
harvesting activities on all public and private lands. We cannot predict
whether the ballot measure will be passed by Oregon voters or, if passed,
whether it will survive threatened legal challenges. Nevertheless, taken
together, these factors make it extremely difficult to accurately predict
future timber supplies in the Pacific Northwest.
YEAR 2000 COMPUTER ISSUE
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00." This could cause many computer applications
to fail completely or to create erroneous results unless corrective measures
are taken. We utilize software and related computer technologies that will be
affected by this issue. We have established a senior information system
management team to monitor our activities in the development of Year 2000
compliant systems across our entire company. This team is responsible for
evaluating our compliance with Year 2000 requirements and implementing
changes. Over the last two years we have been replacing many of our business
computer systems in order to realize cost savings and process improvements.
These replacements, all of which are year 2000 compliant, will be completed
before the year 2000. Many of the costs associated with these replacements
have been and will be deferred. (See Note 5 in "Notes to Quarterly Financial
Statements.") A Year 2000 compliance inventory of business computer systems
that will not be replaced was completed first quarter 1998. While some
reprogramming will be required, costs are not expected to be material, and we
expect to complete all necessary changes by year-end 1999. These costs will
be expensed as incurred.
During the first half of 1998, we inventoried our manufacturing computer
systems in our Building products and Paper and paper products segments for
year 2000 compliance. In the less complex Building Products process control
systems, we identified the reprogramming necessary and are in the process of
making the appropriate modifications. Costs are not material and will be
expensed as incurred. In the more complex Paper and paper products segment
process control systems we have concluded our initial inventory and are doing
further evaluation and development of an implementation plan. We expect to
complete all necessary changes by year-end 1999. The costs associated with
making these systems compliant will be determined later in 1998, but are not
expected to be material. We are currently identifying and surveying our
suppliers and customers to determine if critical processes may be impacted by
their lack of year 2000 compliance.
While we believe that our computer systems will be year 2000 compliant and
that the costs required to achieve this will not materially impact our
financial position, results of operations, or cash flows, there can be no
guarantee that all systems will be compliant by the year 2000 or that the
systems of other companies on which we rely will be converted within the same
time frame.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis includes forward-looking statements.
Because these forward-looking statements include risks and uncertainties,
actual results may differ materially from those expressed in or implied by the
statements. Factors that could cause actual results to differ include, among
other things, changes in domestic or foreign competition, prolonged economic
turmoil in Asia, increases in capacity through construction of new mills or
conversion of older facilities to produce competitive products, variations in
demand for our products, changes in our cost for or the availability of raw
materials, particularly market pulp and wood, the cost of compliance with new
environmental laws and regulations, the pace of acquisitions, same-location
sales, cost structure improvements, the success of new initiatives,
integration of systems, the success of computer-based system enhancements, and
general economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Changes in interest rates and currency rates expose us to financial market
risk. Our debt is predominantly fixed-rate. We experience only modest
changes in interest expense when market interest rates change. Most foreign
currency transactions have been conducted in the local currency, limiting our
exposure to changes in currency rates. Consequently, our market risk
sensitive instruments do not subject us to material market risk exposure.
Changes in our debt and our continued international expansion could increase
these risks. To manage volatility relating to these exposures, we may enter
into various derivative transactions such as interest rate swaps, rate hedge
agreements, and forward exchange contracts. Interest rate swaps and rate
hedge agreements are used to hedge underlying debt obligations or anticipated
transactions. For qualifying hedges, the interest rate differential is
reflected as an adjustment to interest expense over the life of the swap or
underlying debt. Gains and losses related to qualifying hedges of foreign
currency firm commitments and anticipated transactions are deferred and are
recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs. All other forward exchange contracts are marked to
market, and unrealized gains and losses are included in current period net
income. We had no material exposure to losses from derivative financial
instruments held at June 30, 1998. We do not use derivative financial
instruments for trading purposes.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to our annual report on Form 10-K for the year ended
December 31, 1997, for information concerning legal proceedings.
ITEM 2. CHANGES IN SECURITIES
The payment of dividends is dependent upon the existence of and the amount of
net worth in excess of the defined minimum under our revolving credit
agreement. Our net worth at June 30, 1998, exceeded the defined minimum by
$120 million. At June 30, 1998, there were $185 million of borrowings
outstanding under the agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At June 30, 1998, there were no existing defaults.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Required exhibits are listed in the Index to Exhibits and are
incorporated by reference.
(b) Reports on Form 8-K.
No Form 8-Ks were filed during the second quarter of 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOISE CASCADE CORPORATION
As Duly Authorized Officer and
Chief Accounting Officer: /s/ Tom E. Carlile
Tom E. Carlile
Vice President and
Controller
Date: August 13, 1998
<PAGE>
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 1998
Number Description Page Number
______ ___________ ___________
11 Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
Boise Cascade Corporation
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
_______________________ _______________________
1998 1997 1998 1997
_________ _________ _________ _________
(expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net loss as reported, before cumulative effect
of accounting change $ (63,950) $ (16,230) $ (64,400) $ (31,440)
Preferred dividends (3,518) (9,584) (8,579) (19,297)
Excess of Series F Preferred Stock redemption
price over carrying value - - (3,958) -
_________ _________ _________ _________
Basic loss before cumulative effect of
accounting change (67,468) (25,814) (76,937) (50,737)
Cumulative effect of accounting change - - (8,590) -
_________ _________ _________ _________
Basic loss $ (67,468) $ (25,814) $ (85,527) $ (50,737)
========= ========= ========= =========
Basic loss before cumulative effect of
accounting change $ (67,468) $ (25,814) $ (76,937) $ (50,737)
Preferred dividends eliminated 3,486 6,882 7,106 13,892
Supplemental ESOP contribution (2,979) (2,988) (6,073) (6,067)
_________ _________ _________ _________
Diluted loss before cumulative effect of
accounting change (66,961) (21,920) (75,904) (42,912)
Cumulative effect of accounting change - - (8,590) -
_________ _________ _________ _________
Diluted loss $ (66,961) $ (21,920) $ (84,494) $ (42,912)
========= ========= ========= =========
Average shares outstanding used to determine
basic loss per common share 56,316 48,601 56,279 48,557
Stock options, net 304 448 274 415
Series G conversion preferred stock - 6,898 - 6,903
Series D convertible preferred stock 4,418 4,560 4,439 4,592
_________ _________ _________ _________
Average shares used to determine diluted
loss per common share 61,038 60,507 60,992 60,467
========= ========= ========= =========
Net loss per common share
Basic loss before cumulative affect of
accounting change $(1.20) $ (.53) $(1.37) $(1.04)
Cumulative affect of accounting change - - $ (.15) -
______ ______ ______ ______
Basic net loss per common share $(1.20) $ (.53) $(1.52) $(1.04)
====== ====== ====== ======
Diluted loss before cumulative effect of
accounting change $(1.10) $ (.36) $(1.24) $ (.71)
Cumulative affect of accounting change - - $ (.14) -
______ ______ ______ ______
Diluted net loss per common share $(1.10) $ (.36) $(1.38) $ (.71)
====== ====== ====== ======
</TABLE>
(1) Because the computation of diluted loss per common share was antidilutive,
the diluted loss per common share reported for the three and six months ended
June 30, 1998 and 1997, was the same as basic loss per common share.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months
Year Ended December 31 Ended June 30
_________________________________________________________ ______________________
1993 1994 1995 1996 1997 1997 1998
_________ _________ _________ _________ _________ _________ _________
(dollar amounts expressed in thousands)
<C> <S> <S> <S> <S> <S> <S> <S>
Interest costs $ 172,170 $ 169,170 $ 154,469 $ 146,234 $ 153,691 $ 67,640 $ 88,407
Interest capitalized
during the period 2,036 1,630 3,549 17,778 10,575 10,223 132
Interest factor related to
noncapitalized leases(1) 7,485 9,161 8,600 12,982 11,931 6,139 6,141
_________ _________ _________ _________ _________ _________ _________
Total fixed charges $ 181,691 $ 179,961 $ 166,618 $ 176,994 $ 176,197 $ 84,002 $ 94,680
Income (loss) before
income taxes, minority
interest, and cumulative
effect of accounting change $(125,590) $ (64,750) $ 589,410 $ 31,340 $(28,930) $ (43,160) $ (69,190)
Undistributed (earnings)
losses of less than 50%
owned persons, net of
distributions received (922) (1,110) (36,861) (1,290) 5,180 1,581 5,350
Total fixed charges 181,691 179,961 166,618 176,994 176,197 84,002 94,680
Less: Interest capitalized (2,036) (1,630) (3,549) (17,778) (10,575) (10,223) (132)
Guarantee of interest
on ESOP debt (22,208) (20,717) (19,339) (17,874) (16,341) (8,260) (7,447)
_________ _________ _________ _________ _________ _________ _________
Total earnings (losses)
before fixed charges $ 30,935 $ 91,754 $ 696,279 $ 171,392 $ 125,531 $ 23,940 $ 23,261
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to
fixed charges(2) - - 4.18 - - - -
</TABLE>
(1) Interest expense for operating leases with terms of one year or longer is
based on an imputed interest rate for each lease.
(2) Earnings before fixed charges were inadequate to cover total fixed
charges by $150,756,000, $88,207,000, $5,602,000, and $50,666,000 for
the years ended December 31, 1993, 1994, 1996, and 1997 and $60,062,000
and $71,419,000 for the six months ended June 30, 1997 and 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data schedule contains summary financial information extracted from Boise
Cascade Corporation's Balance Sheet at June 30, 1998, and from its Statement of
Income for the six months ended June 30, 1998. The information presented is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 82,668
<SECURITIES> 4,357
<RECEIVABLES> 620,461
<ALLOWANCES> 8,815
<INVENTORY> 586,758
<CURRENT-ASSETS> 1,385,922
<PP&E> 5,054,960
<DEPRECIATION> 2,187,540
<TOTAL-ASSETS> 4,944,744
<CURRENT-LIABILITIES> 1,062,605
<BONDS> 1,923,683
0
246,838
<COMMON> 140,823
<OTHER-SE> 1,023,365
<TOTAL-LIABILITY-AND-EQUITY> 4,944,744
<SALES> 3,027,950
<TOTAL-REVENUES> 3,027,950
<CGS> 2,534,340
<TOTAL-COSTS> 3,011,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,960
<INCOME-PRETAX> (69,190)
<INCOME-TAX> 10,380
<INCOME-CONTINUING> (64,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (8,590)
<NET-INCOME> (72,990)
<EPS-PRIMARY> (1.52)
<EPS-DILUTED> (1.52)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The restated data schedule contains summary financial information extracted from
Boise Cascade Corporation's Balance Sheet at March 31, 1998, and from its
Statement of Loss for the three months ended March 31, 1998. The information
presented is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 86,002
<SECURITIES> 8,840
<RECEIVABLES> 630,448
<ALLOWANCES> 8,874
<INVENTORY> 614,772
<CURRENT-ASSETS> 1,426,744
<PP&E> 5,037,596
<DEPRECIATION> 2,130,519
<TOTAL-ASSETS> 5,036,922
<CURRENT-LIABILITIES> 1,077,092
<BONDS> 1,919,315
0
248,465
<COMMON> 140,695
<OTHER-SE> 1,088,379
<TOTAL-LIABILITY-AND-EQUITY> 5,036,922
<SALES> 1,489,500
<TOTAL-REVENUES> 1,489,500
<CGS> 1,243,200
<TOTAL-COSTS> 1,441,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,100
<INCOME-PRETAX> 4,580
<INCOME-TAX> (1,900)
<INCOME-CONTINUING> (450)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (8,590)
<NET-INCOME> (9,040)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
