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 September 30, 1999
( ) 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 October 31, 1999
Common stock, $2.50 par value 57,138,591
<PAGE>
PART I - FINANCIAL INFORMATION
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
(expressed in thousands, except per share data)
Item 1. Financial Statements
<TABLE>
<CAPTION>
Three Months Ended
September 30
________________________
1999 1998
__________ __________
(unaudited)
<S> <C> <C>
Sales $1,789,237 $1,597,990
__________ __________
Costs and expenses
Materials, labor, and other operating expenses 1,385,602 1,268,120
Depreciation, amortization, and cost of company
timber harvested 73,257 69,930
Selling and distribution expenses 179,988 164,860
General and administrative expenses 30,647 37,390
Other (income) expense, net 1,802 (51,860)
__________ __________
1,671,296 1,488,440
__________ __________
Equity in net income of affiliates 2,066 1,630
__________ __________
Income from operations 120,007 111,180
__________ __________
Interest expense (35,839) (40,970)
Interest income 700 620
Foreign exchange gain (loss) 60 (210)
__________ __________
(35,079) (40,560)
__________ __________
Income before income taxes and
minority interest 84,928 70,620
Income tax provision (32,868) (21,430)
__________ __________
Income before minority interest 52,060 49,190
Minority interest, net of income tax (3,012) (2,140)
__________ __________
Net income $ 49,048 $ 47,050
========== ==========
Net income per common share
Basic $ 0.80 $ 0.77
========== ==========
Diluted $ 0.74 $ 0.72
========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
(expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
________________________
1999 1998
__________ __________
(unaudited)
<S> <C> <C>
Sales $5,078,398 $4,625,940
__________ __________
Costs and expenses
Materials, labor, and other operating expenses 3,929,618 3,661,070
Depreciation, amortization, and cost of company
timber harvested 213,735 211,320
Selling and distribution expenses 546,953 486,790
General and administrative expenses 94,310 111,520
Other (income) expense, net (30,904) 29,650
__________ __________
4,753,712 4,500,350
__________ __________
Equity in net income (loss) of affiliates 6,024 (3,720)
__________ __________
Income from operations 330,710 121,870
__________ __________
Interest expense (107,598) (121,930)
Interest income 1,878 1,790
Foreign exchange gain (loss) 133 (300)
__________ __________
(105,587) (120,440)
__________ __________
Income before income taxes, minority interest,
and cumulative effect of accounting change 225,123 1,430
Income tax provision (91,175) (11,050)
__________ __________
Income (loss) before minority interest
and cumulative effect of accounting change 133,948 (9,620)
Minority interest, net of income tax (9,695) (7,730)
__________ __________
Income (loss) before cumulative effect of
accounting change 124,253 (17,350)
Cumulative effect of accounting change, net
of income tax - (8,590)
__________ __________
Net income (loss) $ 124,253 $ (25,940)
========== ==========
Net income (loss) per common share
Basic before cumulative
effect of accounting change $ 2.01 $ (0.60)
Cumulative effect of accounting change - (0.15)
__________ __________
Basic $ 2.01 $ (0.75)
========== ==========
Diluted before cumulative effect of
accounting change $ 1.88 $ (0.60)
Cumulative effect of accounting change - (0.15)
__________ __________
Diluted $ 1.88 $ (0.75)
========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
<TABLE>
<CAPTION>
ASSETS
September 30 December 31
________________________ ___________
1999 1998 1998
__________ __________ ___________
(unaudited)
<S> <C> <C> <C>
Current
Cash $ 67,891 $ 69,048 $ 66,469
Cash equivalents 2,226 3,615 7,899
__________ __________ __________
70,117 72,663 74,368
Receivables, less allowances of
$11,722, $9,821, and $10,933 698,027 653,491 526,359
Inventories 652,825 601,967 625,218
Deferred income tax benefits 72,171 74,114 92,426
Other 48,536 27,101 50,035
__________ __________ __________
1,541,676 1,429,336 1,368,406
__________ __________ __________
Property
Property and equipment
Land and land improvements 67,301 55,586 63,307
Buildings and improvements 600,934 568,045 575,509
Machinery and equipment 4,231,362 4,109,958 4,082,724
__________ __________ __________
4,899,597 4,733,589 4,721,540
Accumulated depreciation (2,344,495) (2,152,326) (2,150,385)
__________ __________ __________
2,555,102 2,581,263 2,571,155
Timber, timberlands, and
timber deposits 272,868 271,212 270,570
__________ __________ __________
2,827,970 2,852,475 2,841,725
__________ __________ __________
Goodwill, net of amortization
of $48,750, $34,091, and $37,327 505,088 449,385 501,691
Investments in equity affiliates 37,336 27,223 27,162
Other assets 232,424 227,706 232,115
___________ __________ __________
Total assets $5,144,494 $4,986,125 $4,971,099
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands, except share amounts)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30 December 31
_______________________ __________
1999 1998 1998
__________ __________ __________
(unaudited)
<S> <C> <C> <C>
Current
Short-term borrowings $ 152,171 $ 167,465 $ 129,512
Current portion of long-term debt 107,951 57,143 161,473
Income taxes payable 687 - -
Accounts payable 575,773 501,085 499,489
Accrued liabilities
Compensation and benefits 153,589 137,730 130,480
Interest payable 27,566 39,999 36,166
Other 186,633 219,868 172,980
__________ __________ __________
1,204,370 1,123,290 1,130,100
__________ __________ __________
Debt
Long-term debt, less current
portion 1,571,116 1,667,855 1,578,136
Guarantee of ESOP debt 149,506 171,513 155,731
__________ __________ __________
1,720,622 1,839,368 1,733,867
__________ __________ __________
Other
Deferred income taxes 301,384 243,493 257,360
Other long-term liabilities 252,170 219,339 301,920
__________ __________ __________
553,554 462,832 559,280
__________ __________ __________
Minority interest 126,814 114,935 116,753
__________ __________ __________
Shareholders' equity
Preferred stock -- no par value;
10,000,000 shares authorized;
Series D ESOP: $.01 stated
value; 5,032,492; 5,406,548;
and 5,356,648 shares
outstanding 226,462 243,295 241,049
Deferred ESOP benefit (149,506) (171,513) (155,731)
Common stock -- $2.50 par value;
200,000,000 shares authorized;
57,136,920; 56,333,984; and
56,338,426 shares outstanding 142,842 140,835 140,846
Additional paid-in capital 448,267 420,724 420,890
Retained earnings 883,329 817,013 791,618
Accumulated other comprehensive
income (loss) (12,260) (4,654) (7,573)
__________ __________ __________
Total shareholders' equity 1,539,134 1,445,700 1,431,099
__________ __________ __________
Total liabilities and shareholders'
equity $5,144,494 $4,986,125 $4,971,099
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(expressed in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
________________________
1999 1998
_________ _________
(unaudited)
<S> <C> <C>
Cash provided by (used for) operations
Net income (loss) $ 124,253 $ (25,940)
Cumulative effect of accounting change,
net of income tax - 8,590
Items in net income (loss) not using
(providing) cash
Equity in net (income) loss of affiliates (6,024) 3,720
Depreciation, amortization, and cost of
company timber harvested 213,735 211,320
Deferred income tax provision 77,929 6,277
Minority interest, net of income tax 9,695 7,730
Restructuring activity (36,322) 80,903
Other (133) (47,399)
Receivables (128,018) 4,444
Inventories 25,892 28,112
Accounts payable and accrued liabilities 49,358 49,151
Current and deferred income taxes (5,623) (15,667)
Other 10,100 20,437
_________ _________
Cash provided by operations 334,842 331,678
_________ _________
Cash provided by (used for) investment
Expenditures for property and equipment (161,032) (175,805)
Expenditures for timber and timberlands (2,855) (6,973)
Investments in equity affiliates, net (80) (429)
Purchases of assets (97,842) (4,042)
Other (16,728) (18,995)
_________ _________
Cash used for investment (278,537) (206,244)
_________ _________
Cash provided by (used for) financing
Cash dividends paid
Common stock (25,438) (25,324)
Preferred stock (8,796) (12,911)
_________ _________
(34,234) (38,235)
Short-term borrowings 22,659 72,665
Additions to long-term debt 143,834 179,672
Payments of long-term debt (206,220) (212,308)
Series F preferred stock redemption - (115,005)
Other 13,405 (3,146)
_________ _________
Cash used for financing (60,556) (116,357)
_________ _________
Increase (decrease) in cash and cash equivalents (4,251) 9,077
Balance at beginning of the year 74,368 63,586
_________ _________
Balance at September 30 $ 70,117 $ 72,663
========= =========
</TABLE>
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 1998 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 income (loss) for the three and nine
months ended September 30, 1999 and 1998, 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) OTHER (INCOME) EXPENSE, NET. "Other (income) expense, net" includes
gains and losses on the sale and disposition of property and other
miscellaneous income and expense items. The components of "Other
(income) expense, net" in the Statements of Income (Loss) are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
___________________ _____________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
Restructuring activity $ - $ - $(35,526) $ 80,903
Medford fire - (45,000) - (45,000)
Other, net 1,802 (6,860) 4,622 (6,253)
________ ________ ________ ________
$ 1,802 $(51,860) $(30,904) $ 29,650
======== ======== ======== ========
</TABLE>
On September 6, 1998, our Medford, Oregon, plywood plant was severely
damaged by fire. In the third quarter of 1998, we recorded a net gain
related to an insurance settlement for this fire. For discussion of the
restructuring activity, see Note 13.
(3) NET INCOME (LOSS) PER COMMON SHARE. Net income (loss) per common
share was determined by dividing net income (loss), as adjusted, by
applicable shares outstanding. For the nine months ended
September 30, 1998, 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 Nine Months Ended
September 30 September 30
__________________ __________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
BASIC
Net income (loss) as reported,
before cumulative effect of
accounting change $ 49,048 $ 47,050 $124,253 $(17,350)
Preferred dividends(a) (3,429) (3,515) (10,284) (12,094)
Excess of Series F Preferred
Stock redemption price over
carrying value(b) - - - (3,958)
________ ________ ________ ________
Basic income (loss) before
cumulative effect of
accounting change 45,619 43,535 113,969 (33,402)
Cumulative effect of accounting
change, net of income tax - - - (8,590)
________ ________ ________ ________
Basic income (loss) $ 45,619 $ 43,535 $113,969 $(41,992)
======== ======== ======== ========
Average shares outstanding used
to determine basic income
(loss) per common share 57,078 56,332 56,685 56,297
======== ======== ======== ========
DILUTED
Basic income (loss) before
cumulative effect of
accounting change $ 45,619 $ 43,535 $113,969 $(33,402)
Preferred dividends
eliminated 3,429 3,515 10,284 -
Supplemental ESOP
contribution (2,930) (3,001) (8,790) -
________ ________ ________ ________
Diluted income (loss) before
cumulative effect of
accounting change 46,118 44,049 115,463 (33,402)
Cumulative effect of accounting
change, net of income tax - - - (8,590)
________ ________ ________ ________
Diluted income (loss) $ 46,118 $ 44,049 $115,463 $(41,992)
======== ======== ======== ========
Average shares outstanding used
to determine basic income
(loss) per common share 57,078 56,332 56,685 56,297
Stock options and other 499 134 430 -
Series D conversion preferred
stock 4,090 4,383 4,178 -
________ ________ ________ ________
Average shares used to
determine diluted income
(loss) per common share 61,667 60,849 61,293 56,297
======== ======== ======== ========
</TABLE>
(a) Dividend attributable to the company's Series D convertible
preferred stock held by the company's ESOP (Employee Stock
Ownership Plan) is net of a tax benefit.
(b) Nine months ended September 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 Nine Months Ended
September 30 September 30
___________________ ___________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
Net income (loss) $ 49,048 $ 47,050 $124,253 $(25,940)
Other comprehensive
income (loss)
Cumulative foreign
currency translation
adjustment, net of
income taxes 3,108 2,721 (4,687) 3,956
________ ________ ________ ________
Comprehensive income (loss),
net of income taxes $ 52,156 $ 49,771 $119,566 $(21,984)
======== ======== ======== ========
</TABLE>
(5) RECEIVABLES. In late September 1998, we sold fractional ownership
interests in a defined pool of trade accounts receivable. At
September 30, 1999, and December 31, 1998, $100.0 million and
$79.0 million of sold accounts receivable were excluded from
receivables in the accompanying balance sheets. The portion of
fractional ownership interest retained by us is included in accounts
receivable in the balance sheets. The increase in sold accounts
receivable over the amount at December 31, 1998, also represents an
increase in cash provided by operations for the nine months ended
September 30, 1999. This program represents a revolving sale of
receivables committed to by the purchasers for 364 days and is subject
to renewal. Costs related to the program are included in "Other
(income) expense, net" in the Statements of Income (Loss). Under the
accounts receivable sale agreement, the maximum amount available from
time to time is subject to change based on the level of eligible
receivables, restrictions on concentrations of receivables, and the
historical performance of the receivables we sell.
(6) DEFERRED SOFTWARE COSTS. We defer certain software costs that benefit
future years. These costs are amortized on the straight-line method
over the expected useful life of the product. "Other assets" in the
balance sheets include deferred software costs of $51.3 million,
$36.9 million, and $47.1 million at September 30, 1999 and 1998, and
December 31, 1998.
AICPA Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," became
effective beginning in 1999. We account for software costs in
accordance with this statement. The implementation of this statement
had no financial statement impact on us.
(7) INVENTORIES. Inventories include the following:
<TABLE>
<CAPTION>
September 30 December 31
__________________ ___________
1999 1998 1998
________ ________ ___________
(expressed in thousands)
<S> <C> <C> <C>
Finished goods and work in process $506,614 $458,999 $456,577
Logs 63,246 74,097 87,688
Other raw materials and supplies 145,167 145,144 145,319
LIFO reserve (62,202) (76,273) (64,366)
________ ________ ________
$652,825 $601,967 $625,218
======== ======== ========
</TABLE>
(8) 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 nine months
ended September 30, 1998.
(9) INCOME TAXES. We used an estimated annual tax provision rate of 40.5%
for the nine months ended September 30, 1999. Due to low income
levels, the tax benefit rate for the nine months ended September 30,
1998, was not meaningful. Our actual 1998 benefit rate was 5.7%.
Excluding nonroutine items in 1998, the annual tax provision rate
would have been 44%. Our tax rate is subject to fluctuations due
primarily to the sensitivity of the rate to low income levels, the
impact of nonroutine items, and the mix of income sources.
For the three and nine months ended September 30, 1999, we paid income
taxes, net of refunds received, of $5.2 million and $12.5 million. We
paid $1.2 million and $10.3 million for the same periods in 1998.
(10) DEBT. At September 30, 1999, we had a revolving credit agreement with
a group of banks that permits us to borrow as much as $600.0 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 September 30, 1999, exceeded the defined
minimum by $176.7 million. At September 30, 1999, there were
$195.0 million of borrowings outstanding under this agreement.
Our majority-owned subsidiary, Boise Cascade Office Products
Corporation ("BCOP"), has a $450.0 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 $155.0 million at September 30, 1999.
In October 1998, we entered into an interest rate swap with a notional
amount of $75.0 million and an effective fixed rate of 5.1% with
respect to $75.0 million of our revolving credit agreement borrowings.
BCOP also entered into an interest rate swap with a notional amount of
$25.0 million and an effective fixed interest rate of 5.0% with
respect to $25.0 million of their revolving credit agreement
borrowings. Both swaps expire in 2000. We are exposed to credit-
related gains or losses in the event of nonperformance by
counterparties to these swaps; however, we do not expect any
counterparties to fail to meet their obligations.
Also at September 30, 1999, we had $82.1 million of short-term
borrowings outstanding and BCOP had $70.1 million of short-term
borrowings outstanding. At September 30, 1998, we had $93.5 million
short-term borrowings outstanding, while BCOP had $74.0 million of
short-term borrowings outstanding. The maximum amount of short-term
borrowings outstanding during the nine months ended September 30, 1999
and 1998, was $293.3 million and $279.9 million. The average amount
of short-term borrowings outstanding during the nine months ended
September 30, 1999 and 1998, was $162.2 million and $205.9 million.
The average interest rate for these borrowings was 5.4% for 1999 and
5.9% for 1998.
At September 30, 1999, we had $430.0 million and BCOP had
$150.0 million of unused borrowing capacity registered with the
Securities and Exchange Commission for additional debt securities.
In March 1999, we filed a registration statement covering
$300.0 million in universal shelf capacity with the Securities and
Exchange Commission. We have not yet requested final approval of this
registration statement from the Securities and Exchange Commission.
Once approved, this registration statement allows us to issue debt
and/or equity securities in one or more offerings.
Cash payments for interest, net of interest capitalized, were
$38.5 million and $116.2 million for the three and nine months ended
September 30, 1999, and $43.5 million and $121.1 million for the three
and nine months ended September 30, 1998.
(11) BOISE CASCADE OFFICE PRODUCTS CORPORATION. During the first nine
months of both 1999 and 1998, BCOP completed two 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.
On January 11, 1999, BCOP acquired the office supply business of
Wallace Computer Services, based in Lisle, Illinois. In September
1999, BCOP acquired Supply West, based in Perth, Western Australia.
The transactions were completed for cash of $7.6 million and the
recording of $2.6 million of acquisition liabilities.
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 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.
If the 1999 acquisitions had occurred on January 1, 1999, and if the
1999 and 1998 acquisitions had occurred on January 1, 1998, there
would be no significant change in the results of operations for the
first nine months of either 1999 or 1998. 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.
(12) NEW ACCOUNTING STANDARDS. 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 years beginning after June 15, 2000. We plan to adopt this
statement in the first quarter of 2001. We are in the process of
reviewing this new standard. Adoption of this statement is not
expected to have a significant impact on our results of operations or
financial position.
(13) RESTRUCTURING ACTIVITIES. Late in the second quarter of 1998, we
adopted a plan to restructure our wood products manufacturing business
and announced the permanent closure of four facilities, including
sawmills in Elgin, Oregon; Horseshoe Bend, Idaho; and Fisher,
Louisiana; and a plywood plant in Yakima, Washington. Second quarter
1998 results were negatively impacted by $61.9 million for this
restructuring charge. We closed the sawmills in Horseshoe Bend and
Fisher in 1998. In late May 1999, we decided to indefinitely continue
operations at the Elgin and Yakima mills. This decision was based on
recent changes in wood supply and costs, product prices, improved
plant operations, and the impact of a fire at our Elgin plywood plant
in May 1999. As a result of this decision, in the second quarter of
1999, our building products segment reversed previously recorded
restructuring charges totaling $35.5 million. Of this amount,
$23.5 million reversed restructuring accruals as shown in the table
that follows and $12.0 million related to the restoration of the net
book value of these two facilities. This adjustment is recorded in
"Other (income) expense, net" in the accompanying Statements of Income
(Loss). The two closed plants had sales of $7.6 million and
$30.4 million for the three and nine months ended September 30, 1998.
Operating losses for the three and nine months ended September 30,
1998, totaled $2.4 million and $6.7 million.
Also in the second quarter of 1998, our paper and paper products
segment recorded a pretax charge of $19.0 million related to the
revaluation of paper-related assets. Included in the revaluation was
the $8.0 million write-down to zero of our investment in a now
terminated joint venture in China that produced carbonless paper.
Also written down by approximately $5.0 million were the fixed assets
of a small corrugating facility that was sold in March 1999 for its
approximate remaining book value. We also wrote off $6.0 million in
an investment in a bankrupt recycling joint venture and miscellaneous
equipment that had no future value.
In the fourth quarter of 1998, we announced a company-wide cost-
reduction initiative and the restructuring of certain operations.
Specific actions included the elimination of job positions in our
manufacturing businesses and Boise headquarters through a combination
of early retirements, layoffs, and attrition and the closure of our
paper research and development facility in Portland, Oregon. These
charges totaled $26.9 million. Also in the fourth quarter of 1998,
BCOP announced the closure of eight facilities in the United Kingdom
and the integration of selected functions of the operations with their
other United Kingdom operations. These BCOP closures were expected to
be completed during the first half of 1999 resulting in work force
reductions of approximately 140 employees. BCOP also dissolved an
unprofitable joint venture in Germany at a cost of about $4.0 million.
BCOP restructuring charges totaled $11.1 million.
During the first quarter 1999, we recorded $4.4 million of additional
restructuring expense related to the early retirement program
announced in fourth quarter 1998. The noncash charge was for the
present value of unrecorded early retirement benefits. These charges
were accrued when the retiring individuals legally accepted the early
retirement offer.
During the second quarter of 1999, BCOP revised the amount of the
restructuring reserve established in the fourth quarter of 1998, for
their United Kingdom operations. The restructuring program was less
costly than originally anticipated due to lower legal and professional
fees, a sublease of one of the facilities, a decision to retain a small
printing portion of the business, and fewer terminations of employees.
As a result, BCOP recorded an increase to operating income of
approximately $4.0 million in the second quarter of 1999. The
increase to income included $0.5 million for reduced employee-related
costs and $3.5 million for other exit costs including lower lease
costs and lower-than-expected inventory write-downs. The adjustment
related to inventory of about $0.8 million is included in "Materials,
labor, and other operating expenses" in the accompanying Statements of
Income (Loss). The other adjustments are included in "Other (income)
expense, net."
Our paper and paper products segment also adjusted reserves recorded
in fourth quarter 1998 for the elimination of job positions and the
closure of our research and development facility in Portland, Oregon,
to reflect our actual experience. These adjustments increased this
segment's second quarter income by $1.2 million. These adjustments
are also reflected in "Other (income) expense, net" in the Statements
of Income (Loss). The following table shows that only $0.1 million of
this adjustment reduced our restructuring liability reserve account.
The balance of the adjustment was reflected as additional expense and
pension liability of $1.1 million offset by gains of $2.2 million from
the sale of the research and development building and equipment.
Restructuring activities related to these 1998 charges through
September 30, 1999, are as follows:
<TABLE>
<CAPTION>
Asset Employee- Other
Write- Related Exit
Downs Costs Costs Total
________ ________ ________ ________
(expressed in thousands)
<S> <C> <C> <C> <C>
SECOND QUARTER 1998
BUILDING PRODUCTS
1998 expense recorded $ 27,200 $ 14,000 $ 20,700 $ 61,900
Assets written down (27,200) - - (27,200)
Charges against reserve - (4,500) (1,300) (5,800)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 9,500 19,400 28,900
Reserves credited to
income - (7,300) (16,200) (23,500)
Proceeds from sales of
assets - - 400 400
Charges against reserve - (1,700) (1,000) (2,700)
________ ________ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ 500 $ 2,600 $ 3,100
======== ======== ======== ========
PAPER AND PAPER PRODUCTS
1998 expense recorded $ 18,800 $ 200 $ - $ 19,000
Assets written down (18,800) - - (18,800)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 200 - 200
Charges against reserve - (200) - (200)
________ ________ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ - $ - $ -
======== ======== ======== ========
FOURTH QUARTER 1998
OFFICE PRODUCTS
1998 expense recorded $ 300 $ 1,400 $ 9,400 $ 11,100
Assets written down (300) - - (300)
Charges against reserve - (200) (3,300) (3,500)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 1,200 6,100 7,300
Reserves credited to
income - (500) (3,500) (4,000)
Charges against reserve - (600) (1,100) (1,700)
________ ________ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ 100 $ 1,500 $ 1,600
======== ======== ======== ========
BUILDING PRODUCTS
1998 expense recorded $ - $ 2,800 $ - $ 2,800
Pension liability
recorded - (2,200) - (2,200)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 600 - 600
Charges against reserve - (300) - (300)
________ _______ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ 300 $ - $ 300
======== ======== ======== ========
PAPER AND PAPER PRODUCTS
1998 expense recorded $ 7,200 $ 11,300 $ - $ 18,500
Assets written down (7,200) - - (7,200)
Pension liability
recorded - (4,500) - (4,500)
Charges against reserve - (800) - (800)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 6,000 - 6,000
Reserves credited to
income - (100) - (100)
Charges against reserve - (3,800) - (3,800)
________ ________ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ 2,100 $ - $ 2,100
======== ======== ======== ========
CORPORATE AND OTHER
1998 expense recorded $ - $ 5,200 $ 400 $ 5,600
Pension liability
recorded - (3,200) - (3,200)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 2,000 400 2,400
Expense recorded - 4,400 - 4,400
Pension liability
recorded - (4,400) - (4,400)
Reclass from other
accounts - 500 - 500
Charges against reserve - (2,000) (100) (2,100)
________ ________ ________ ________
Restructuring reserve at
September 30, 1999 $ - $ 500 $ 300 $ 800
======== ======== ======== ========
TOTAL SECOND AND FOURTH QUARTER
1998 expense recorded $ 53,500 $34,900 $ 30,500 $118,900
Assets written down (53,500) - - (53,500)
Pension liability
recorded - (9,900) - (9,900)
Charges against reserve - (5,500) (4,600) (10,100)
________ ________ ________ ________
Restructuring reserve at
December 31, 1998 - 19,500 25,900 45,400
Expense recorded - 4,400 - 4,400
Pension liability
recorded - (4,400) - (4,400)
Reclass from other
accounts - 500 - 500
Reserve credited to
income - (7,900) (19,700) (27,600)
Proceeds from sale of
assets - - 400 400
Charges against reserve - (8,600) (2,200) (10,800)
________ ________ ________ _______
Restructuring reserve at
September 30, 1999 $ - $ 3,500 $ 4,400 $ 7,900
======== ======== ======== =======
</TABLE>
Charges against the reserve in other exit costs included $4.0 million
of costs to dissolve the BCOP joint venture in Germany and the write-
down of contracts to their realizable value.
The impact of the 1999 restructuring charge adjustments described
above increased net income $21.9 million and basic and diluted income
per share $0.39 and $0.36 for the nine months ended September 30,
1999.
Second quarter 1998 results were negatively impacted by the
$61.9 million restructuring charge in the building products segment
described above and a $19.0 million charge in the paper and paper
products segment for the revaluation of paper-related assets. These
charges reduced net income $65.2 million or $1.16 per basic and
diluted share for the nine months ended September 30, 1998.
The estimated number of employees impacted by the 1998 restructuring
activities described above and the number who have left the company as
of September 30, 1999, are as follows:
Employees To Be
Terminated Employees
_____________________ Terminated
Original Revised Through
Estimate Estimate September 30, 1999
________ ________ __________________
Second Quarter 1998
Building products 494 182 182
Fourth Quarter 1998
Office products 140 100 90
Building products 40 40 22
Paper and paper products 212 212 144
Corporate and other 92 92 51
____ ____ ____
Total 978 626 489
==== ==== ====
In addition to the employees discussed above, we have eliminated
approximately another 100 positions by not filling already vacant
positions or through normal attrition. No reserves were established
related to these job eliminations.
(14) ACQUISITION. On September 16, 1999, we completed the acquisition of
Furman Lumber, Inc., a building supplies distributor headquartered in
Billerica, Massachusetts, with 12 locations in the eastern,
Midwestern, and southern states. The purchase price was approximately
$92.7 million, including cash payments of $90.2 million and assumption
of debt.
This acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was 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 business is
included in our operations subsequent to the date of acquisition.
If this acquisition had occurred on January 1, 1999, pro forma sales
for the nine months ended September 30, 1999, would have been
$5.6 billion, pro forma net income would have been $126.0 million, and
pro forma basic and diluted earnings per share would have been $2.04
and $1.91. If this acquisition had occurred January 1, 1998, pro
forma sales for the nine months ended September 30, 1998, would have
been $5.1 billion, pro forma net loss would have been $25.0 million,
and pro forma basic and diluted loss per share would have been $0.73.
This unaudited pro forma financial information does not necessarily
represent the actual results of operations that would have resulted if
the acquisition had occurred on the dates assumed.
(15) SEGMENT INFORMATION. We have had no differences from our last annual
report in our basis of segmentation or in our basis of measurement of
segment profit or loss. An analysis of our operations by segment is
as follows. For a discussion of nonroutine items impacting our
segments, see Note 13, Restructuring Activities.
<TABLE>
<CAPTION>
Income
(Loss)
Before
Taxes,
Minority
Interest,
and Cumu-
Sales lative
______________________________ Effect of
Inter- Accounting
Trade Segment Total Change(a)
________ _______ ________ __________
(expressed in millions)
<S> <C> <C> <C> <C>
Three Months Ended
September 30, 1999
Office products $ 838.4 $ .1 $ 838.5 $ 34.8
Building products 585.2 9.0 594.2 60.2
Paper and paper products 357.6 91.7 449.3 35.3
Corporate and other 8.0 14.1 22.1 (9.6)
________ ________ ________ ________
Total 1,789.2 114.9 1,904.1 120.7
Intersegment eliminations - (114.9) (114.9) -
Interest expense - - - (35.8)
________ ________ ________ ________
Consolidated Totals $1,789.2 $ - $1,789.2 $ 84.9
======== ======== ======== ========
Three Months Ended
September 30, 1998
Office products $ 760.2 $ .2 $ 760.4 $ 28.0
Building products 483.6 10.8 494.4 84.2
Paper and paper products 347.7 87.9 435.6 8.2
Corporate and other 6.5 12.9 19.4 (8.8)
________ ________ ________ ________
Total 1,598.0 111.8 1,709.8 111.6
Intersegment eliminations - (111.8) (111.8) -
Interest expense - - - (41.0)
________ ________ ________ ________
Consolidated Totals $1,598.0 $ - $1,598.0 $ 70.6
======== ======== ======== ========
Nine Months Ended
September 30, 1999
Office products $2,488.1 $ .4 $2,488.5 $ 110.4
Building products 1,555.1 25.2 1,580.3 198.7
Paper and paper products 1,012.0 257.7 1,269.7 57.8
Corporate and other 23.2 40.9 64.1 (34.2)
________ ________ ________ ________
Total 5,078.4 324.2 5,402.6 332.7
Intersegment eliminations - (324.2) (324.2) -
Interest expense - - - (107.6)
________ ________ ________ ________
Consolidated Totals $5,078.4 $ - $5,078.4 $ 225.1
======== ======== ======== ========
Nine Months Ended
September 30, 1998
Office products $2,252.2 $ .9 $2,253.1 $ 94.8
Building products 1,280.8 31.5 1,312.3 30.5
Paper and paper products 1,075.0 274.3 1,349.3 27.2
Corporate and other 17.9 42.4 60.3 (29.2)
________ ________ ________ ________
Total 4,625.9 349.1 4,975.0 123.3
Intersegment eliminations - (349.1) (349.1) -
Interest expense - - - (121.9)
________ ________ ________ ________
Consolidated Totals $4,625.9 $ - $4,625.9 $ 1.4
======== ======== ======== ========
</TABLE>
(a) Interest income has been allocated to our segments in the amounts
of $700,000 and $1,878,000 for the three and nine months ended
September 30, 1999, and $620,000 and $1,790,000 for the three and
nine months ended September 30, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _____________________
1999 1998 1999 1998
________ ________ ________ _________
(expressed in millions, except per share data)
Sales $1,789.2 $1,598.0 $5,078.4 $4,625.9
Net income (loss) $ 49.0 $ 47.1 $ 124.3 $ (25.9)
Net income (loss) per
diluted share $ 0.74 $ 0.72 $ 1.88 $ (0.75)
Net income before
nonroutine items $ 49.0 $ 12.4 $ 102.4 $ 13.2
Net income per diluted
share before
nonroutine items $ 0.74 $ 0.14 $ 1.52 $ 0.01
(percent of sales)
Materials, labor, and other
operating expenses 77.4% 79.4% 77.4% 79.1%
Selling and distribution
expenses 10.1% 10.3% 10.8% 10.5%
General and administrative
expenses 1.7% 2.3% 1.9% 2.4%
In October 1999, we filed an amended 1998 Form 10-K and amended first and
second quarter 1999 Form 10-Qs. The amendments decreased the reported net
loss in the fourth quarter of 1998 by $2.7 million, or 4 cents per diluted
share, and decreased reported net income and diluted income per share in
the first quarter of 1999 and year-to-date 1999 by the same amounts. We
amended our filings following discussions with the Securities and Exchange
Commission concerning the timing of charges related to an early retirement
program announced in the fourth quarter of 1998. Additional disclosure was
also included in the amended filings. The increased 1999 pretax expense of
$4.4 million is recorded in "Other (income) expense, net" in the nine
months ended September 30, 1999, Statement of Income.
Additionally, the results for the nine months ended September 30, 1999,
included $24.6 million, or 43 cents and 40 cents per basic and diluted
share for the reversal of restructuring reserves established in 1998. The
results for the three and nine months ended September 30, 1998, included a
gain of $34.7 million related to an insurance settlement for a fire at our
Medford, Oregon, plywood plant. Basic income per share increased 62 cents
and diluted income per share increased 58 cents for the three months ended
September 30, 1998. Basic and diluted loss per share was reduced 62 cents
for the nine months ended September 30, 1998. The results for the nine
months ended September 30, 1998, included a charge of $65.2 million, or
$1.16 per basic and diluted share for restructuring charges in the building
products segment and the revaluation of paper-related assets in the paper
and paper products segment. See Note 13 in the Notes to Quarterly
Financial Statements for additional information on our restructuring
activities. See also the discussion by segment in this MD&A.
The improvement in materials, labor, and other operating expenses as a
percent of sales for the periods presented is primarily due to the
increased sales prices which increase sales without a corresponding
increase in costs and reduced wood and conversion costs in our building
products segment. The higher percentage in selling and distribution
expenses for the nine months ended September 30, 1999, compared to the same
period in 1998, is due primarily to the increased office products sales
which have higher associated selling and distribution costs. General and
administrative expenses have decreased as a percentage of sales due in part
to our cost reduction efforts as well as leveraging fixed costs over higher
sales.
The restructuring and cost-saving efforts announced in 1998 have improved
our 1999 results. The following table shows the estimated increase in 1999
operating income compared with the same periods in 1998 as a result of our
restructurings and other cost saving initiatives.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
__________________ __________________
Cash Noncash Cash Noncash
_______ _______ _______ ________
(expressed in millions)
<S> <C> <C> <C> <C>
Office products
Improved operating results over 1998
for restructured European locations $ - $ 1.2 $ - $ 3.1
Building products
1998 operating losses for closed
locations 2.4 - 5.7 1.0
Cost savings 1.0 - 2.0 -
Paper and paper products
Cost savings 13.6 .4 33.9 1.1
Corporate and other
Cost savings 5.0 - 8.0 -
_______ _______ _______ ________
Total $ 22.0 $ 1.6 $ 49.6 $ 5.2
======= ======= ======= ========
</TABLE>
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." This statement required the write-off of previously
capitalized preoperating costs, which resulted in an after-tax charge of
$8.6 million, or 15 cents per basic and diluted share for the nine months
ended September 30, 1998. Also included in the nine months ended
September 30, 1998, earnings per share is a negative seven cents per basic
and diluted share related to the redemption of our Series F preferred
stock.
Interest expense was $35.8 million in the third quarter of 1999, compared
with $41.0 million in the same period last year. Interest expense was
$107.6 million for the first nine months of 1999, compared with $121.9
million in the same period last year. The decreases were due primarily to
lower debt levels.
We used an estimated annual tax provision rate of 40.5% for the nine months
ended September 30, 1999. Due to low income levels, the tax benefit rate
for the nine months ended September 30, 1998, was not meaningful. Our
actual 1998 benefit rate was 5.7%. Excluding nonroutine items in 1998, the
annual tax provision rate would have been 44%. Our tax rate is subject to
fluctuations due primarily to the sensitivity of the rate to low income
levels, the impact of nonroutine items, and the mix of income sources.
Office Products Distribution
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _____________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in millions)
Sales $ 838.5 $ 760.4 $2,488.5 $2,253.1
Segment income $ 34.8 $ 28.0 $ 110.4 $ 94.8
Segment income before
nonroutine items $ 34.8 $ 28.0 $ 106.4 $ 94.8
(percent of sales)
Gross profit 24.8% 24.8% 25.7% 25.4%
Operating expenses 20.7% 21.1% 21.3% 21.2%
Operating expenses before
nonroutine items 20.7% 21.1% 21.5% 21.2%
Operating profit 4.1% 3.7% 4.4% 4.2%
Operating profit before
nonroutine items 4.1% 3.7% 4.3% 4.2%
During the second quarter of 1999, BCOP revised the amount of a
restructuring reserve for its United Kingdom operations. The restructuring
program was less costly than originally anticipated due to lower professional
and legal fees, a sublease of one of the facilities, a decision to retain a
small printing portion of the business, and fewer terminations of employees.
As a result, they recorded an increase to operating income of approximately
$4.0 million in the second quarter of 1999. The increase to income included
$0.5 million for reduced employee-related costs and $3.5 million for other
exit costs including lower lease costs and lower-than-expected inventory
write-downs of $0.8 million.
The growth in sales resulted primarily from same-location sales growth.
Same-location sales increased 7% in the third quarter of 1999 and for the
nine months ended September 30, 1999, compared with the same periods in
1998.
Gross profit increased for the first nine months of 1999 due to higher
gross margins in many of BCOP's businesses, with particular strength in
BCOP's domestic operations. BCOP's higher margins were primarily the
result of lower procurement costs. The decrease in operating expenses in
the third quarter resulted, in part, from lower operating costs in Canada
as BCOP resolved the warehouse integration issues in its new distribution
center. Excluding nonroutine items, the year-to-date increase in operating
expenses resulted, in part, from increased investment in growth initiatives
and a modest employee-wide bonus program implemented during the last half
of 1998. The improvement in operations from the restructuring shown in the
previous table was primarily due to the elimination of losses from the
disposed of German joint venture.
Building Products
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _____________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in millions)
Sales $ 594.2 $ 494.4 $1,580.3 $1,312.3
Segment income $ 60.2 $ 84.2 $ 198.7 $ 30.5
Segment income before
nonroutine items $ 60.2 $ 37.7 $ 163.2 $ 45.9
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. Year-to-date
1998 results were negatively impacted by $61.9 million for this
restructuring charge. We closed the sawmills in Horseshoe Bend and Fisher
in 1998. In late May 1999, we decided to indefinitely continue operations
at the Elgin and Yakima mills. This decision was based on recent changes
in wood supply and costs, product prices, improved plant operations, and
the impact of a fire at our Elgin plywood plant in May 1999. As a result
of this decision, in the second quarter of 1999, our building products
segment reversed previously recorded restructuring charges totaling
$35.5 million.
On September 6, 1998, our Medford, Oregon, plywood plant and lumber storage
area were severely damaged by fire. In the third quarter of 1998, the
building products segment recorded a gain of $46.5 million related to an
insurance settlement for this fire.
Excluding these nonroutine items, the increase in results for the three and
nine months ended September 30, 1999, is due to improved sales prices, very
strong structural panel markets, increases in engineered wood products
sales, significant sales growth in building materials distribution, an
improved product mix through a reduction in commodity lumber volume, and
stable log costs. The increase in operating income for the year was also
due to lower wood and conversion costs and our restructuring activities.
(See table in this section showing the estimated increase in 1999 operating
income compared with the same periods in 1998 as a result of our
restructurings and other cost saving initiatives.) The increase in
distribution sales was due to higher prices, expansion, and increased
market share. The tables below present our sales volumes and prices for
selected products.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
___________________ ____________________
1999 1998 1999 1998
________ ________ _________ _________
<S> <C> <C> <C> <C>
Sales Volumes
Plywood (1,000 sq. ft. 3/8" basis) 358,092 480,900 1,137,649 1,427,508
OSB (1,000 sq. ft. 3/8" basis)(a) 96,880 88,409 284,327 253,691
Lumber (1,000 board ft.) 138,398 142,693 395,849 440,834
LVL (100 cubic ft.) 16,086 11,520 43,068 28,783
I-joists (1000 equivalent
lineal ft.) 37,885 32,541 104,628 81,331
Particleboard (1,000 sq. ft.
3/4" basis) 46,367 47,523 142,819 146,226
Building materials distribution
(millions of sales dollars) $ 344 $ 263 $ 874 $ 659
(a) Includes 100% of the sales of Voyageur Panel, of which we own 47%.
Average Net Selling Prices
Plywood (per 1,000 sq. ft. 3/8"
basis) $ 310 $ 260 $ 288 $ 239
OSB (per 1,000 sq. ft. 3/8" basis) 239 214 205 164
Lumber (per 1,000 board ft.) 538 469 521 475
LVL (per 100 cubic ft.) 1,596 1,600 1,594 1,596
I-joists (per 1,000 equivalent
lineal ft.) 1,015 1,001 1,006 995
</TABLE>
On September 16, 1999, we completed the acquisition of Furman Lumber, Inc.,
a privately held building supplies distributor headquartered in Billerica,
Massachusetts. The 12 Furman locations, which are located in the eastern,
Midwestern, and southern states, will bring us closer to our goal of
achieving national coverage in the building distribution business. Had this
acquisition occurred on January 1, 1999, the building products segment pro
forma sales for the nine months ended September 30, 1999, would have
increased approximately $500.0 million. Had the acquisition occurred on
January 1, 1998, pro forma sales for the nine months ended September 30,
1998, would have increased $430.0 million. 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. The purchase price was approximately $92.7 million,
including cash payments of $90.2 million and assumption of debt.
In May 1999, a fire damaged our Elgin plywood plant. The plant is being
rebuilt and is expected to be operating by the end of the year. After
paying a $1.5 million deductible which was recorded in corporate and other,
the loss is fully insured, including coverage for business interruption
losses. This fire and a fire at our Medford plywood plant in September
1998 caused the decrease between periods in plywood sales volume. However,
because of the business interruption insurance, there has not been a
corresponding decrease in operating income. The Medford plant is being
rebuilt and began limited production in September 1999.
Paper and Paper Products
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _____________________
1999 1998 1999 1998
________ ________ ________ ________
(expressed in millions)
Sales $ 449.3 $ 435.6 $1,269.7 $1,349.3
Segment income $ 35.3 $ 8.2 $ 57.8 $ 27.2
Segment income before
nonroutine items $ 35.3 $ 8.2 $ 56.6 $ 46.2
In second quarter 1999, our paper and paper products segment also adjusted
reserves recorded in fourth quarter 1998 for the elimination of job
positions and the closure of our research and development facility in
Portland, Oregon, to reflect our actual experience. These adjustments
increased this segment's year-to-date income $1.2 million. Results for the
nine months ended September 30, 1998, were negatively impacted by a
$19.0 million charge for the revaluation of paper-related assets.
Excluding the nonroutine items, performance improved in the third quarter
due to a 3% increase in unit sales volume and reduced unit costs. Prices,
on average, were about flat quarter to quarter. For the year, lower paper
prices were offset by slightly increased sales volume and reduced unit
costs. Paper segment manufacturing costs per ton in the third quarter of
1999 were 5% lower than in the comparison quarter and 5% lower than in the
prior year. These decreases were due to lower fiber costs and our cost
reduction efforts. (See table in this section showing the estimated
increase in 1999 operating income compared with the same periods in 1998 as
a result of our restructurings and other cost saving initiatives.)
The tables below present our sales volumes and prices for our paper grades.
Three Months Ended Nine Months Ended
September 30 September 30
_____________________ _____________________
1999 1998 1999 1998
________ ________ ________ ________
Sales Volumes
(1,000s of short tons)
Uncoated free sheet 362 354 1,061 1,058
Containerboard 164 154 481 469
Newsprint 110 110 314 319
Market pulp 36 32 111 107
________ ________ ________ ________
Total 672 650 1,967 1,953
======== ======== ======== ========
Average Net Selling Prices
Per Short Ton
Uncoated free sheet $ 709 $ 695 $ 681 $ 722
Containerboard 354 316 322 327
Newsprint 383 485 415 492
Market pulp 372 375 350 368
FINANCIAL CONDITION AND LIQUIDITY
Operating Activities. Cash provided by operations was $334.8 million for
the first nine months of 1999, compared with $331.7 million for the same
period in 1998. Improved operating results provided $383.1 million of cash
flows from net income items in 1999, offset by $48.3 million of unfavorable
changes in working capital items, primarily receivables. In 1998, net
income items provided $245.2 million of positive cash flows, and changes in
working capital items provided another $86.5 million of positive cash
flows. In September 1998, we sold fractional ownership interests in a
defined pool of trade accounts receivable. At September 30, 1999,
$100 million of the sold accounts receivable were excluded from receivables
in the balance sheet. This is an increase of $21.0 million from the
December 31, 1998, balance of $79.0 million. This increase represents an
increase in cash provided by operations. Our working capital ratio was
1.28:1 at September 30, 1999, compared with 1.27:1 at September 30, 1998.
Our working capital ratio was 1.21:1 at December 31, 1998.
Investing Activities. Cash used for investment was $278.5 million and
$206.2 million for the first nine months of 1999 and 1998. Cash
expenditures for property and equipment and timber and timberlands totaled
$163.9 million and $182.8 million for the first nine months of 1999 and
1998. This reduction reflects our focus on reducing our overall level of
non-acquisition capital spending. Cash purchases of assets totaled
$97.8 million for the first nine months of 1999, of which $90.2 million was
for the purchase of Furman Lumber, Inc. Cash purchases of assets totaled
$4.0 million for the first nine months of 1998.
Financing Activities. Cash used for financing was $60.6 million and
$116.4 million for the first nine months of 1999 and 1998. Dividend
payments totaled $34.2 million and $38.2 million for the first nine months
of 1999 and 1998. The decrease is due to the redemption of our Series F
preferred stock in February 1998. In both years, our quarterly dividend
was 15 cents per common share. For the first nine months of 1999, short-
term borrowings, primarily notes payable and commercial paper, provided
cash of $22.7 million compared with $72.7 million for the first nine months
of 1998. The higher short-term borrowings in the first nine months of 1998
were used to fund the redemption of the Series F preferred stock for
$115 million in cash. Net payments of long-term debt used $62.4 million in
the first nine months of 1999 compared with $32.6 million for the same
period in 1998. In February 1999, we redeemed our $100.0 million, 9.875%
notes.
At September 30, 1999 and 1998, we had $2.0 billion and $2.1 billion of
debt outstanding. At December 31, 1998, we had $2.0 billion of debt
outstanding. Our debt-to-equity ratio was 1.29:1 and 1.43:1 at September
30, 1999 and 1998. Our debt-to-equity ratio was 1.41:1 at December 31,
1998.
Our debt and debt-to-equity ratio include the guarantee by the company of
the remaining $149.5 million of debt incurred by the trustee of our
leveraged Employee Stock Ownership Plan. While that guarantee has a
negative impact on our debt-to-equity ratio, it has virtually no effect on
our cash coverage ratios or on other measures of our financial strength.
We have a revolving credit agreement with a group of banks that permits us
to borrow as much as $600.0 million based on customary indices. As of
September 30, 1999, borrowings under the agreement totaled $195.0 million.
When the agreement expires in June 2002, any amount outstanding will be due
and payable. In October 1998, we entered into an interest rate swap with a
notional amount of $75.0 million that expires in 2000. This swap results
in an effective fixed interest rate with respect to $75.0 million of our
revolving credit agreement borrowings. The payment of dividends is
dependent on the existence of and the amount of net worth in excess of the
defined minimum under the agreement. As of September 30, 1999, we were in
compliance with our debt covenants, and our net worth exceeded the defined
minimum by $176.7 million.
BCOP has a $450.0 million revolving credit agreement with a group of banks
that expires in June 2001 and provides variable interest rates based on
customary indices. In October 1998, BCOP entered into an interest rate
swap with a notional amount of $25.0 million that expires in 2000. This
swap results in an effective fixed interest rate with respect to
$25.0 million of BCOP's revolving credit agreement borrowings. As of
September 30, 1999, BCOP had outstanding borrowings of $155.0 million under
this agreement and was in compliance with its debt covenants.
At September 30, 1999, we had $430.0 million and BCOP had $150.0 million of
unused borrowing capacity registered with the Securities and Exchange
Commission.
In March 1999, we filed a registration statement covering $300.0 million in
universal shelf capacity with the Securities and Exchange Commission. We
have not yet requested final approval of this registration statement from
the Securities and Exchange Commission. Once approved, this registration
statement allows us to issue debt and/or equity securities in one or more
offerings.
At September 30, 1999, we had $82.1 million of short-term borrowings
outstanding, and BCOP had $70.1 million of short-term borrowings
outstanding. At September 30, 1998, we had $93.5 million of short-term
borrowings outstanding, while BCOP had $74.0 million of short-term
borrowings outstanding. At December 31, 1998, we had $57.4 million of
short-term borrowings outstanding, while BCOP had $72.1 million of short-
term borrowings outstanding.
During early October 1999, we completed the sale of 56,000 acres of
timberland in Central Washington to U.S. Timberlands Yakima L.L.C., an
affiliate of U.S. Timberlands Company L.P. The pretax gain on the sale
was $47.0 million and will be recorded in fourth quarter 1999. The net
cash proceeds after transaction costs and adjustments for timber
harvested were $50.2 million.
We expect the restructuring programs announced in 1998 to be cash flow
positive in 1999. We estimate that the programs will require cash outlays
before any savings of approximately $12.0 million in 1999. These expected
cash payments in 1999 include $10.0 million for employee-related costs and
$2.0 million for lease and other contract terminations. We spent
approximately $10.0 million in the first nine months of 1999, including
$8.0 million for employee-related costs and $2.0 million for lease and
other contract terminations. Cash requirements related to our
restructuring in 2000 and beyond are expected to total $4.0 million with
most of that occurring in 2000 or early 2001. This and our other cash
requirements will be funded through a combination of cash flows from
operations, borrowings under our existing credit facilities, and issuance
of new debt or equity securities.
Our results of operations are not materially effected by seasonal sales
variances or inflation.
OUTLOOK
Our paper and office products distribution segments should continue to
strengthen over the remainder of the year. Our building products segment
should also perform well but at a lower level than in the third quarter due
to seasonal falloff in product prices.
NEW ACCOUNTING STANDARDS
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. We plan to adopt this
statement in the first quarter of 2001. We are in the process of reviewing
this new standard. Adoption of this statement is not expected to have a
significant impact on our results of operations or financial position.
TIMBER SUPPLY
In recent years, the amount of timber available for commercial harvest in
the United States has declined due to environmental litigation, changes in
government policy, and other factors. More constraints on available timber
supply may be imposed. As a result, we cannot accurately predict future
log supply. In 1998, we closed sawmills in Fisher, Louisiana, and
Horseshoe Bend, Idaho, partly because of reductions in timber supply and
consequent increases in timber costs. Additional curtailments or closures
of our wood products manufacturing facilities are possible. We are
currently able to meet our timber requirements through a combination of
public and private sources and our more than two million acres of owned
or controlled timberland.
YEAR 2000 COMPUTER ISSUE
Over the last two years, we have been replacing many of our business
computer systems 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 and amortized over approximately five years.
(See Note 6 in the Notes to Financial Statements.) A year 2000-compliance
assessment was completed in 1998. Many of the existing systems were found
to be compliant. We have implemented appropriate modifications of the
noncompliant systems. We expect to complete all necessary changes before
year-end 1999.
We have surveyed our critical suppliers and customers to determine whether
critical processes may be impacted by a lack of year 2000 compliance. Our
critical suppliers and customers have confirmed that they are or have plans
to be compliant by year-end 1999.
Incremental costs to make our systems compliant are expected to be about
$10.0 million. These costs are being expensed as incurred. Approximately
$8.4 million had been spent through September 30, 1999.
The most reasonably likely worst-case scenario of failure by us or our
suppliers or customers to be year 2000-compliant would be a temporary
slowdown of manufacturing operations at one or more of our locations and a
temporary inability to process orders and billings in a timely manner and
to deliver products to our customers in a timely manner. We have developed
or are developing contingency options in the event that critical systems or
suppliers encounter unforeseen year 2000 problems. These contingency plans
include alternative processes using a combination of computerized and
manual systems.
Our discussion of the year 2000 computer issue contains forward-looking
information. We believe that our critical computer systems will be year
2000-compliant and that the costs to achieve compliance will not materially
affect our financial condition, operating results, or cash flows.
Nevertheless, factors that could cause actual results to differ from our
expectations include the successful implementation of year 2000 initiatives
by our customers and suppliers and our ability to successfully identify
and correct all systems affected by the year 2000 issue.
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; the severity and longevity of global economic disruptions;
increases in capacity through construction of new manufacturing facilities
or conversion of older facilities to produce competitive products; changes
in production capacity across paper and wood products markets; 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 and the success of
acquisitions; changes in same-location sales; cost structure improvements;
the ability to implement operating strategies and integration plans and
realize cost savings and efficiencies; fluctuations in foreign currency
exchange rates; fluctuations in paper prices; the success and integration
of new initiatives and acquisitions; the successful 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 the company 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 currencies, 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 changes in market risk since December 31, 1998.
We had no material exposure to losses from derivative financial instruments
held at September 30, 1999. We do not use derivative financial instruments
for trading purposes.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December 1998, the Maine Department of Environmental Protection issued
Notices of Violation for air and water permit exceedances at the Rumford,
Maine, pulp and paper mill for the period 1994 until the mill was sold in
1996. We have reached a settlement in principle with the Maine DEP, and we
expect to finalize the agreement in the fourth quarter. Penalties were
agreed upon at $115,950.
Reference is made to our annual report on Form 10-K/A for the year ended
December 31, 1998, and to our quarterly report on Form 10-Q/A for the
quarter ended June 30, 1999, for information concerning other legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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.
We issued a news release on September 16, 1999, announcing the
completion of the Furman Lumber, Inc. acquisition.
No other Form 8-Ks were filed during the third quarter of 1999.
<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: November 12, 1999
<PAGE>
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1999
Number Description Page Number
______ ___________ ___________
11 Computation of Per Share Earnings
12.1 Ratio of Earnings to Fixed Charges
12.2 Ratio of Earnings to Combined Fixed
Charges and Preferred Dividend Requirements
27 Financial Data Schedule
EXHIBIT 11
Boise Cascade Corporation
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
______________________ ______________________
1999 1998 1999 1998
_________ _________ _________ _________
(expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net income (loss) as reported, before cumulative effect of
accounting change $ 49,048 $ 47,050 $ 124,253 $ (17,350)
Preferred dividends (3,429) (3,515) (10,284) (12,094)
Excess of Series F Preferred Stock redemption price over carrying value - - - (3,958)
_________ _________ _________ _________
Basic income (loss) before cumulative effect of accounting change 45,619 43,535 113,969 (33,402)
Cumulative effect of accounting change, net of tax - - - (8,590)
_________ _________ _________ _________
Basic income (loss) $ 45,619 $ 43,535 $ 113,969 $ (41,992)
========= ========= ========= =========
Basic income (loss) before cumulative effect of accounting change $ 45,619 $ 43,535 $ 113,969 $ (33,402)
Preferred dividends eliminated 3,429 3,515 10,284 10,649
Supplemental ESOP contribution (2,930) (3,001) (8,790) (9,102)
_________ _________ _________ _________
Diluted income (loss) before cumulative effect of accounting change 46,118 44,049 115,463 (31,855)
Cumulative effect of accounting change - - - (8,590)
_________ _________ _________ _________
Diluted income (loss) $ 46,118 $ 44,049 $ 115,463 $ (40,445)
========= ========= ========= =========
Average shares outstanding used to determine basic income (loss)
per common share 57,078 56,332 56,685 56,297
Stock options and other 499 134 430 227
Series D convertible preferred stock 4,090 4,383 4,178 4,420
_________ _________ _________ _________
Average shares used to determine diluted income (loss) per common share 61,667 60,849 61,293 60,944
========= ========= ========= =========
Net income (loss) per common share
Basic income (loss) before cumulative affect of accounting change $ 0.80 $ 0.77 $ 2.01 $ (0.60)
Cumulative affect of accounting change - - - (0.15)
_________ _________ _________ _________
Basic income (loss) per common share $ 0.80 $ 0.77 $ 2.01 $ (0.75)
========= ========= ========= =========
Diluted income (loss) before cumulative effect of accounting change $ 0.74 $ 0.72 $ 1.88 $ (0.52)(a)
Cumulative effect of accounting change - - - (0.14)(a)
_________ _________ _________ _________
Diluted income (loss) $ 0.74 $ 0.72 $ 1.88 $ (0.66)(a)
========= ========= ========= =========
(a) Because the computation of diluted loss per common share was antidilutive, the diluted loss per common share reported for
the nine months ended September 30, 1998, was the same as basic loss per common share.
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
Nine Months
Year Ended December 31 Ended September 30
_________________________________________________________ ______________________
1994 1995 1996 1997 1998 1998 1999
_________ _________ _________ _________ _________ _________ _________
(dollar amounts expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest costs $ 169,170 $ 154,469 $ 146,234 $ 153,691 $ 174,541 $ 132,989 $ 118,803
Interest capitalized during the period 1,630 3,549 17,778 10,575 1,341 537 212
Interest factor related to noncapitalized
leases(a) 9,161 8,600 12,982 11,931 11,308 9,212 9,571
_________ _________ _________ _________ _________ _________ _________
Total fixed charges $ 179,961 $ 166,618 $ 176,994 $ 176,197 $ 187,190 $ 142,738 $ 128,586
Income (loss) before income taxes,
minority interest, and cumulative effect
of accounting change $ (64,750) $ 589,410 $ 31,340 $ (28,930) $ (16,878) $ 1,430 $ 225,123
Undistributed (earnings) losses of less
than 50% owned persons, net of
distributions received (1,110) (36,861) (1,290) 5,180 3,791 3,718 (6,024)
Total fixed charges 179,961 166,618 176,994 176,197 187,190 142,738 128,586
Less: Interest capitalized (1,630) (3,549) (17,778) (10,575) (1,341) (537) (212)
Guarantee of interest on ESOP debt (20,717) (19,339) (17,874) (16,341) (14,671) (11,059) (9,707)
_________ _________ _________ _________ _________ _________ _________
Total earnings before fixed charges $ 91,754 $ 696,279 $ 171,392 $ 125,531 $ 158,091 $ 136,290 $ 337,766
Ratio of earnings to fixed charges - 4.18 - - - - 2.63
Excess of fixed charges over earnings
before fixed charges $ 88,207 $ - $ 5,602 $ 50,666 $ 29,099 $ 6,448 $ -
(a) Interest expense for operating leases with terms of one year or longer is based on an imputed interest rate for each
lease.
</TABLE>
EXHIBIT 12.2
<TABLE>
<CAPTION>
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Combined Fixed Charges
and Preferred Dividend Requirements
Nine Months
Year Ended December 31 Ended September 30
_________________________________________________________ ______________________
1994 1995 1996 1997 1998 1998 1999
_________ _________ _________ _________ _________ _________ _________
(dollar amounts expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest costs $ 169,170 $ 154,469 $ 146,234 $ 153,691 $ 174,541 $ 132,989 $ 118,803
Interest capitalized during the period 1,630 3,549 17,778 10,575 1,341 537 212
Interest factor related to
noncapitalized leases(a) 9,161 8,600 12,982 11,931 11,308 9,212 9,571
Preferred stock dividend
requirements - pretax 81,876 59,850 65,207 44,686 19,940 19,931 16,940
_________ _________ _________ _________ _________ _________ _________
Combined fixed charges and
preferred dividend requirements $ 261,837 $ 226,468 $ 242,201 $ 220,883 $ 207,130 $ 162,669 $ 145,526
Income (loss) before income taxes,
minority interest, and cumulative
effect of accounting change $ (64,750) $ 589,410 $ 31,340 $ (28,930) $ (16,878) $ 1,430 $ 225,123
Undistributed (earnings) losses of
less than 50% owned persons, net of
distributions received (1,110) (36,861) (1,290) 5,180 3,791 3,718 (6,024)
Combined fixed charges and preferred
dividend requirements 261,837 226,468 242,201 220,883 207,130 162,669 145,526
Less: Interest capitalized (1,630) (3,549) (17,778) (10,575) (1,341) (537) (212)
Guarantee of interest on ESOP debt (20,717) (19,339) (17,874) (16,341) (14,671) (11,059) (9,707)
_________ _________ _________ _________ _________ _________ _________
Total earnings before combined fixed
charges and preferred dividend
requirements $ 173,630 $ 756,129 $ 236,599 $ 170,217 $ 178,031 $ 156,221 $ 354,706
Ratio of earnings to combined fixed
charges and preferred dividend
requirements - 3.34 - - - - 2.44
Excess of combined fixed charges and
preferred dividend requirements over
earnings before combined fixed
charges and preferred dividend
requirements $ 88,207 $ - $ 5,602 $ 50,666 $ 29,099 $ 6,448 $ -
(a) Interest expense for operating leases with terms of one year or longer is based on an imputed interest rate for each lease.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data schedule contains summary financial information extracted from Boise
Cascade Corporation's Balance Sheet at September 30, 1999, and from its
Statement of Income for the nine months ended September 30, 1999. The
information presented is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 67,891
<SECURITIES> 2,226
<RECEIVABLES> 698,027
<ALLOWANCES> 11,722
<INVENTORY> 652,825
<CURRENT-ASSETS> 1,541,676
<PP&E> 5,172,465
<DEPRECIATION> 2,344,495
<TOTAL-ASSETS> 5,144,494
<CURRENT-LIABILITIES> 1,204,370
<BONDS> 1,720,622
0
226,462
<COMMON> 142,842
<OTHER-SE> 1,169,830
<TOTAL-LIABILITY-AND-EQUITY> 5,144,494
<SALES> 5,078,398
<TOTAL-REVENUES> 5,078,398
<CGS> 4,143,353
<TOTAL-COSTS> 4,753,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,598
<INCOME-PRETAX> 225,123
<INCOME-TAX> (91,175)
<INCOME-CONTINUING> 124,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,253
<EPS-BASIC> 2.01
<EPS-DILUTED> 1.88
</TABLE>
