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 March 31, 1997
( ) 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 1-13662
BOISE CASCADE OFFICE PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0477390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 West Bryn Mawr Avenue
Itasca, Illinois
60143
(Address of principal executive offices)
(Zip Code)
(630) 773-5000
(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 April 30, 1997
Common stock, $.01 par value 62,904,575
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(expressed in thousands, except share information)
(unaudited)
Three Months Ended March 31
1997 1996
Net sales $ 597,871 $ 461,423
Cost of sales, including purchases
from Boise Cascade Corporation
of $48,041 and $42,595 446,999 338,526
__________ __________
Gross profit 150,872 122,897
__________ __________
Selling and warehouse operating
expense 111,173 87,095
Corporate general and administrative
expense, including amounts paid to
Boise Cascade Corporation of $643
and $586 9,210 6,854
Goodwill amortization 2,194 1,380
__________ __________
122,577 95,329
__________ __________
Income from operations 28,295 27,568
Interest expense 3,075 1,289
Other income, net 49 48
__________ __________
Income before income taxes 25,269 26,327
Income tax expense 10,360 10,764
__________ __________
Net income $ 14,909 $ 15,563
Earnings per share (based
upon 62,844,398 and 62,305,746
average common shares outstanding
for the three months ended
March 31, 1997 and 1996) $ .24 $ .25
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
(unaudited)
March 31 December 31
1997 1996 1996
ASSETS
Current
Cash and short-term investments $ 22,762 $ 13,138 $ 12,762
Receivables, less allowances
of $3,900, $3,123, and $3,887 292,997 232,325 285,337
Inventories 164,748 130,030 171,748
Deferred income tax benefits 13,963 8,156 13,963
Other 19,856 14,218 15,378
__________ __________ __________
514,326 397,867 499,188
__________ __________ __________
Property
Land 13,488 12,411 13,488
Buildings and improvements 75,081 66,342 72,917
Furniture and equipment 150,407 114,634 137,137
Accumulated depreciation (96,492) (79,814) (90,980)
__________ __________ __________
142,484 113,573 132,562
__________ __________ __________
Goodwill, net of amortization
of $15,349, $6,961, and $13,138 264,499 206,637 261,706
Other assets 21,798 5,319 11,906
__________ __________ __________
Total assets $ 943,107 $ 723,396 $ 905,362
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands, except share information)
(unaudited)
March 31 December 31
1997 1996 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Notes payable $ 25,600 $ 6,000 $ 36,700
Current portion of long-term debt 135 219 180
__________ __________ __________
Accounts payable
Trade and other 188,014 157,826 185,370
Boise Cascade Corporation 26,963 12,774 21,926
__________ __________ __________
214,977 170,600 207,296
__________ __________ __________
Accrued liabilities
Compensation and benefits 21,475 14,774 31,120
Income taxes payable 19,928 11,805 7,100
Taxes, other than income 8,698 7,467 8,351
Other 32,218 25,686 39,800
__________ __________ __________
82,319 59,732 86,371
__________ __________ __________
323,031 236,551 330,547
__________ __________ __________
Other
Deferred income taxes 195 2,727 4,470
Long-term debt, less current portion 170,016 110,143 140,024
Other 28,467 18,622 25,536
__________ __________ __________
198,678 131,492 170,030
__________ __________ __________
Shareholders' equity
Common stock, $.01 par value,
200,000,000 shares authorized;
62,904,575, 62,331,258, and
62,750,318 shares issued and
outstanding at each period 629 623 628
Additional paid-in capital 307,308 295,793 304,134
Retained earnings 113,461 58,937 100,023
__________ __________ __________
Total shareholders' equity 421,398 355,353 404,785
__________ __________ __________
Total liabilities and
shareholders' equity $ 943,107 $ 723,396 $ 905,362
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(expressed in thousands)
(unaudited)
Three Months Ended March 31
1997 1996
Cash provided by (used for) operations
Net income $ 14,909 $ 15,563
Items in income not using (providing) cash
Depreciation and amortization 8,820 5,279
Deferred income tax benefit (2,121) 934
Receivables (5,122) (3,130)
Inventories 9,320 5,888
Accounts payable and accrued liabilities (11,605) (5,784)
Current and deferred income taxes 11,539 4,889
Other, net (5,399) 2,561
__________ __________
Cash provided by operations 20,341 26,200
__________ __________
Cash provided by (used for) investment
Expenditures for property and equipment (15,697) (10,587)
Acquisitions (14,912) (129,259)
Other, net 1,128 (3,416)
__________ __________
Cash used for investment (29,481) (143,262)
__________ __________
Cash provided by (used for) financing
Additions to long-term debt 30,000 110,000
Notes payable (11,100) 6,000
Other, net 240 118
__________ __________
Cash provided by financing 19,140 116,118
__________ __________
Increase (decrease) in cash 10,000 (944)
Balance at beginning of the period 12,762 14,082
__________ __________
Balance at March 31 $ 22,762 $ 13,138
The accompanying notes are an integral part of these Financial Statements.
<PAGE>
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION. Boise Cascade Office
Products Corporation (together with its subsidiaries, "the Company"
or "we"), headquartered in Itasca, Illinois, is one of the world's
premier business-to-business distributors of products for the office
through its contract stationer business, as well as through its
direct marketing channel. At March 31, 1997, Boise Cascade
Corporation owned approximately 81% of our outstanding common stock.
The quarterly financial statements of the Company and its
subsidiaries 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.
Except as may be disclosed in the notes to the 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. We have prepared the 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 quarterly financial statements should
be read together with the statements and the accompanying notes
included in our 1996 Annual Report.
(2) EARNINGS PER SHARE. Earnings per share of $.24 and $.25 for
the three months ended March 31, 1997 and 1996, are based upon the
average number of common shares outstanding, including common shares
issued to effect acquisitions made by the Company and shares issued
as a result of stock options exercised.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share, which will be implemented in the fourth quarter of 1997. The
statement will have no significant impact on previously reported
earnings per share, which will be renamed basic earnings per share.
(3) STOCK SPLIT. We effected a two-for-one split of our common stock in
the form of a 100% stock dividend. Each shareholder of record at the
close of business on May 6, 1996, received one additional share for
each share held on that date. The new shares were distributed on
May 20, 1996. All references in these financial statements to share
amounts, net income per share, and average common shares outstanding
have been adjusted to reflect the stock split.
(4) DEBT. We have a $350 million revolving credit agreement with a group
of banks. At March 31, 1997, borrowing under this agreement was
$170 million, and we had $26 million of short-term notes payable.
(5) TAXES. The estimated tax provision rate for the first three months
of 1997 and 1996 was 41.0%.
(6) ACQUISITIONS. During the first three months of 1997 we completed two
acquisitions, and during the first three months of 1996 we completed
five 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 results of
operations or the financial position of the Company. 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 31, 1997, we acquired the stock of the contract stationer
business of The Office Stop, based in Butte, Montana. On
February 28, 1997, we acquired the assets of the contract stationer
business of Florida Ribbon and Carbon, based in Jacksonville,
Florida. In January 1997, we also completed a joint venture with
Otto Versand to direct market office products in Europe, initially in
Germany. These transactions, including the joint venture with Otto,
were completed for cash of $14.9 million, $2.9 million of our common
stock, and the recording of $1.0 million of acquisition liabilities.
On February 5, 1996, we completed the acquisition of 100% of the
shares of Grand & Toy Limited (Grand & Toy) from Cara Operations
Limited (Toronto). On January 31, February 9, and March 29, 1996, we
acquired businesses in New Mexico, Maine, Vermont, and Wisconsin.
These businesses were acquired for cash of $129.3 million and the
recording of $18.4 million of acquisition liabilities.
Unaudited pro forma results of operations reflecting the acquisitions
would have been as follows. If the 1997 acquisitions had occurred
January 1, 1997, sales for the first three months of 1997 would have
increased to $601 million. There would have been no significant
change to net income and earnings per share. If the 1997 and 1996
acquisitions had occurred January 1, 1996, sales for the first three
months of 1996 would have increased to $498 million. There would
have been no significant change to net income and earnings per share.
This unaudited pro forma financial information does not necessarily
represent the actual consolidated results of operations that would
have resulted if the acquisitions had occurred on the dates assumed.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Management's Discussion and Analysis of Financial Condition and Results
of Operations includes "forward looking statements" which involve
uncertainties and risks. There can be no assurance that actual results
will not differ from the Company's expectations. Factors which could cause
materially different results include, among others, the timing and amount
of any paper price recovery; the changing mix of products sold to our
customers; the pace of acquisitions and cost structure improvements; the
success of new product line introductions; the uncertainties of expansion
into international markets, including currency exchange rates, legal and
regulatory requirements, and other factors; and competitive and general
economic conditions.
Three Months Ended March 31, 1997, Compared with Three Months Ended
March 31, 1996
Results of Operations
Net sales in the first quarter of 1997 increased 30% to $597.9 million,
compared with $461.4 million in the first quarter of 1996. The growth in
sales resulted primarily from acquisitions and product line extensions.
Same location sales increased 12% in the first quarter of 1997, compared
with sales in the first quarter of 1996. Significant paper price declines
from the same quarter a year ago constrained revenue growth in the current
quarter.
Cost of sales, which includes the cost of merchandise sold, and delivery
and occupancy costs, increased to $447.0 million in the first quarter of
1997, which was 74.8% of net sales. This compares with $338.5 million
reported in the same period of the prior year, which represented 73.4% of
net sales. In the first quarter of 1996, paper costs to us were declining
rapidly from the peak reached late in 1995, which raised our gross margin
in the first half of 1996. Paper costs were more stable and significantly
lower in the first quarter of 1997. Our strong sales growth in technology-
related products, which have lower gross margins than our more traditional
office products line, also contributed to the lower gross margin level in
this year's first quarter.
Operating expense was 20.5% of net sales in the first quarter of 1997,
compared with 20.7% in the first quarter of 1996. Within the operating
expense category, selling and warehouse operating expense was 18.6% of net
sales in the first quarter of 1997, compared with 18.9% in the first
quarter of 1996. This decrease resulted, in part, from our changing sales
mix described above, and expense leveraging as our central procurement,
call center, and integrated distribution programs ramp up. Corporate
general and administrative expense was 1.5% of net sales in the first
quarter of 1997 and 1996. Goodwill amortization increased to $2.2 million
in the first quarter of 1997, compared with $1.4 million in the first
quarter of 1996. The increase in goodwill amortization was the result of
recording goodwill arising from our acquisitions.
As a result of the factors discussed above, income from operations in the
first quarter of 1997 increased to $28.3 million, or 4.7% of net sales,
compared to our first quarter of 1996 operating income of $27.6 million, or
6.0% of net sales.
Interest expense was $3.1 million in the first quarter of 1997, compared
with $1.3 million in the first quarter of 1996. The increase in interest
expense resulted from debt incurred in conjunction with our acquisition and
capital spending programs.
Net income in the first quarter of 1997 decreased to $14.9 million, or 2.5%
of net sales, compared with $15.6 million, or 3.4% of net sales in the same
period of the prior year.
Liquidity and Capital Resources
Our principal requirements for cash have been to make acquisitions, fund
working capital needs, upgrade and expand our facilities at existing
locations, and open new distribution centers. The execution of our
strategy for growth, including acquisitions and the relocation of several
existing distribution centers into new and larger facilities, is expected
to require capital outlays over the next several years.
To finance our capital requirements, we expect to rely upon funds from a
combination of sources. In addition to cash flow from operations, we have a
$350 million revolving credit agreement that expires in 2001 and provides for
variable rates of interest based on customary indices. The revolving credit
agreement is available for acquisitions and general corporate purposes. It
contains customary restrictive financial and other covenants, including a
negative pledge and covenants specifying a minimum net worth, a minimum
fixed charge coverage ratio, and a maximum leverage ratio. At March 31,
1997, $170 million was outstanding under this agreement. We may, subject
to the covenants contained in the revolving credit agreement and to market
conditions, raise additional funds through the agreement and through other
external debt or equity financings in the future.
In addition to the amount outstanding under the revolving credit agreement,
we had short-term notes payable of $26 million at March 31, 1997.
In June 1996, we filed a registration statement with the Securities and
Exchange Commission for 4.4 million shares of common stock to be offered
from time to time in connection with future acquisitions. As of March 31,
1997, 3.9 million shares remained unissued under this registration
statement.
Net cash provided by operations for the first three months of 1997 was
$20.3 million. This was the result of $21.6 million of net income,
depreciation and amortization, and other noncash items offset by a $1.3
million increase in working capital. Net cash used for investment in the
first three months of 1997 was $29.5 million, which included $15.7 million
of expenditures for property and equipment, and $14.9 million for
acquisitions. Net cash provided by financing was $19.1 million for the
first three months of 1997, resulting primarily from borrowings we made to
fund acquisitions.
Net cash provided by operations in the first three months of 1996 was
$26.2 million. This was primarily the result of $21.8 million of net
income, depreciation and amortization, and other noncash items, and a $4.4
million decrease in working capital. Net cash used for investment in the
first three months of 1996 was $143.3 million, which included $10.6 million
of expenditures for property and equipment, and $129.3 million for
acquisitions. Net cash provided by financing was $116.1 million for the
first three months of 1996, resulting primarily from borrowings we made to
fund acquisitions.
The majority of our 1997 and 1996 acquisitions have been completed for
cash, resulting in higher outstanding balances under our revolving credit
agreement and short-term borrowing capacity. The increase in borrowings
has caused interest expense to increase for the first quarter of 1997.
Effects of Fluctuations in Foreign Currency Exchange Rates
Our operations in Australia, Canada, Germany, and the United Kingdom are
denominated in currencies other than U.S. dollars. Each of our operations
conducts substantially all of its business in its local currency with
minimal cross-border product movement. As a result, these operations are
not subject to material operational risks associated with fluctuations in
exchange rates. Furthermore, our results of operations were not materially
impacted by the translation of our other operations' currencies into U.S.
dollars. Because we intend to expand the size and scope of our
international operations, this exposure to fluctuations in exchange rates
may increase. Accordingly, no assurance can be given that our future
results of operations will not be adversely affected by fluctuations in
foreign currency exchange rates. Although we currently do not engage in
any foreign currency hedging activities, we may consider doing so in the
future. Such future hedges would be intended to minimize the effects of
foreign exchange rate fluctuations on our investment and would not be done
for speculative purposes.
Business Outlook
We expect our cross-selling efforts in furniture, computer-related
consumables, promotional products, and office papers to result in
additional sales to our existing customers. We also expect to grow sales
by developing business with new customers. The pace of our revenue growth
will partially depend on the success of these initiatives. We also plan to
make further acquisitions in the U.S. and internationally, which will add
to sales. The results of our acquisition program will reflect the extent
of economically acceptable opportunities available to us.
Our gross margins and operating expense ratios vary among our product
categories, distribution channels, and geographic locations. As a result,
we expect fluctuations in our financial ratios as our sales mix evolves
over time.
Office papers and converted paper products represent a significant portion
of our sales. Dramatic reductions in the cost and selling price of paper,
compared to the same quarter last year, impacted our sales growth, gross
margins, and operating expense leverage in the current quarter. It is
unclear to what extent or when prices might significantly rise or fall and
what favorable or adverse impact those changes might have on our financial
results.
New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share, which will be
implemented in the fourth quarter of 1997. The statement will have no
significant impact on previously reported earnings per share, which will be
renamed basic earnings per share.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any legal or administrative
proceedings that it believes could have, either individually or in the
aggregate, a material adverse effect on its business or financial
condition.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
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.
A list of the exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which immediately
precedes such exhibits and is incorporated herein by reference.
(b) No Form 8-Ks were filed during the quarter covered by this
report.
<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
OFFICE PRODUCTS CORPORATION
As Duly Authorized Officer and
Chief Accounting Officer: /s/Darrell R. Elfeldt
Darrell R. Elfeldt
Vice President and Controller
Date: May 12, 1997
<PAGE>
BOISE CASCADE OFFICE PRODUCTS CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 1997
Number Description Page Number
11 Computation of Per Share Earnings
27 Financial Data Schedule
Boise Cascade Office Products Corporation
Computation of Per Share Earnings
For the Three Months
Ended March 31
1997 1996
(in thousands, except
share information)
EARNINGS PER SHARE
Shares of common stock
Weighted average shares
outstanding 62,844,398 62,305,746
Net income $ 14,909 $ 15,563
Earnings per share $ .24 $ .25
FULLY DILUTED EARNINGS PER SHARE
Shares of common stock
Weighted average shares
outstanding 62,844,398 62,305,746
Dilutive effect of options 159,181 256,906
Dilutive effect of contingent shares 458,094 493,498
Fully diluted weighted average
shares outstanding 63,461,673 63,056,150
Net income $ 14,909 $ 15,563
Fully diluted earnings per share(1) $ .23 $ .25
(1) Fully diluted earnings per share for the periods presented are not
disclosed in the financial statements because the amounts are not
considered dilutive under the provisions of Accounting Principles
Board Opinion No. 15, "Earnings Per Share."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data schedule contains summary financial information extracted from Boise
Cascade Office Products Corporation's Balance Sheet at March 31, 1997, and
from its Statement of Income for the three months ended March 31, 1997. The
information presented is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,762
<SECURITIES> 0
<RECEIVABLES> 296,897
<ALLOWANCES> 3,900
<INVENTORY> 164,748
<CURRENT-ASSETS> 514,326
<PP&E> 238,976
<DEPRECIATION> 96,492
<TOTAL-ASSETS> 943,107
<CURRENT-LIABILITIES> 323,031
<BONDS> 170,016
0
0
<COMMON> 629
<OTHER-SE> 420,769
<TOTAL-LIABILITY-AND-EQUITY> 943,107
<SALES> 597,871
<TOTAL-REVENUES> 597,871
<CGS> 446,999
<TOTAL-COSTS> 446,999
<OTHER-EXPENSES> 122,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,075
<INCOME-PRETAX> 25,269
<INCOME-TAX> 10,360
<INCOME-CONTINUING> 14,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,909
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
