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, 1998
( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Transition Period From ____________ to ____________
Commission File number 1-13662
BOISE CASCADE OFFICE PRODUCTS CORPORATION
State of Incorporation IRS Employer Identification No.
Delaware 82-0477390
800 West Bryn Mawr Avenue
Itasca, Illinois 60143
(630) 773 - 5000
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, 1998
Common Stock, $.01 par value 65,690,158
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
1998 1997
Net sales $ 759,808 $ 597,871
Cost of sales, including purchases
from Boise Cascade Corporation
of $67,243 and $48,041 564,230 446,999
__________ __________
Gross profit 195,578 150,872
__________ __________
Selling and warehouse operating
expense 143,690 111,173
Corporate general and administrative
expense, including amounts paid to
Boise Cascade Corporation of $643
and $643 12,437 9,210
Goodwill amortization 3,170 2,194
__________ __________
159,297 122,577
__________ __________
Income from operations 36,281 28,295
__________ __________
Interest expense 6,465 3,075
Other income, net 423 49
__________ _________
Income before income taxes 30,239 25,269
Income tax expense 12,650 10,360
__________ __________
Net income $ 17,589 $ 14,909
Earnings per share-basic $ .27 $ .24
Earnings per share-diluted $ .27 $ .23
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
(unaudited)
March 31 December 31
ASSETS 1998 1997 1997
Current
Cash and cash equivalents $ 53,151 $ 22,762 $ 28,755
Receivables, less allowances
of $7,707, $3,900, and $7,591 382,826 292,997 357,321
Inventories 203,733 164,748 197,990
Deferred income tax benefits 18,404 13,963 14,223
Other 20,816 19,856 23,808
___________ __________ ___________
678,930 514,326 622,097
___________ __________ ___________
Property
Land 27,677 13,488 28,913
Buildings and improvements 128,708 75,081 127,430
Furniture and equipment 195,735 150,407 175,778
Accumulated depreciation (140,054) (96,492) (129,951)
___________ __________ ___________
212,066 142,484 202,170
___________ __________ ___________
Goodwill, net of amortization
of $27,575, $15,349, and $24,019 439,809 264,499 438,830
Other assets 33,117 21,798 28,391
___________ __________ ___________
Total assets $1,363,922 $ 943,107 $1,291,488
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands, except share information)
(unaudited)
March 31 December 31
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 1997
Current
Notes payable $ 73,800 $ 25,600 $ 23,300
Current portion of long-term debt 2,578 135 2,917
Accounts payable
Trade and other 272,972 188,014 238,773
Boise Cascade Corporation 28,710 26,963 42,097
___________ __________ ___________
301,682 214,977 280,870
___________ __________ ___________
Accrued liabilities
Compensation and benefits 26,053 21,475 30,717
Income taxes payable 15,679 19,928 3,370
Taxes, other than income 20,161 8,698 18,718
Other 54,950 32,218 30,848
___________ __________ ___________
116,843 82,319 83,653
___________ __________ ___________
494,903 323,031 390,740
___________ __________ ___________
Other
Deferred income taxes - 195 -
Long-term debt, less current portion 307,224 170,016 357,595
Other 35,827 28,467 37,518
___________ __________ ___________
343,051 198,678 395,113
___________ __________ ___________
Shareholders' equity
Common stock, $.01 par value,
200,000,000 shares authorized;
65,656,158, 62,904,575, and
65,588,258 shares issued and
outstanding at each period 657 629 656
Additional paid-in capital 357,661 307,308 356,599
Retained earnings 172,968 113,436 155,412
Accumulated other comprehensive
income (5,318) 25 (7,032)
___________ __________ ___________
Total shareholders' equity 525,968 421,398 505,635
___________ __________ ___________
Total liabilities and
shareholders' equity $1,363,922 $ 943,107 $1,291,488
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(expressed in thousands)
(unaudited)
Three Months Ended March 31
1998 1997
Cash provided by (used for) operations
Net income $ 17,589 $ 14,909
Items in income not using (providing) cash
Depreciation and amortization 13,756 8,820
Deferred income taxes (4,499) (2,121)
Receivables (23,966) (5,122)
Inventories (4,554) 9,320
Accounts payable and accrued liabilities 36,397 (11,605)
Current and deferred income taxes 12,679 11,539
Other, net 6,177 (5,399)
__________ __________
Cash provided by operations 53,579 20,341
__________ __________
Cash provided by (used for) investment
Expenditures for property and equipment (17,576) (15,697)
Acquisitions (4,042) (14,912)
Other, net (8,070) 1,128
__________ __________
Cash used for investment (29,688) (29,481)
__________ __________
Cash provided by (used for) financing
Long-term debt (50,266) 30,000
Notes payable 50,500 (11,100)
Other, net 271 240
__________ __________
Cash provided by financing 505 19,140
__________ __________
Increase in cash and cash equivalents 24,396 10,000
Balance at beginning of the period 28,755 12,762
__________ __________
Balance at March 31 $ 53,151 $ 22,762
The accompanying notes are an integral part of these Financial Statements.
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 a distributor of products for the
office through its contract stationer and direct marketing channels.
At March 31, 1998, Boise Cascade Corporation owned 81.3% 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 1997 Annual
Report.
(2) EARNINGS PER SHARE. Basic earnings per share of $.27 and $.24 for the
three months ended March 31, 1998 and 1997, were computed by dividing
net income by the weighted average number of shares of common stock
outstanding for the periods. Diluted earnings per share of $.27 and
$.23 for the three months ended March 31, 1998 and 1997, include the
weighted average impact of stock options assumed exercised using the
treasury method.
In 1997, we adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share." Earnings per share for 1997 have been
restated to reflect SFAS 128.
(3) COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) for the
periods include the following:
Three Months Ended
March 31
1998 1997
(expressed in thousands)
Net income $ 17,589 $ 14,909
Other comprehensive income (loss)
Cumulative foreign currency translation
adjustment, net of income taxes 1,714 (1,471)
_________ _________
Comprehensive income, net of income taxes $ 19,303 $ 13,438
Accumulated other comprehensive income (loss) for each period was as
follows:
March 31 December 31
1998 1997 1997
(expressed in thousands)
Balance at beginning of period
Minimum pension liability
adjustment, net of income taxes $ (417) $ (24) $ (24)
Cumulative foreign currency
translation adjustment, net of
income taxes (6,615) 1,520 1,520
Changes within periods
Minimum pension liability
adjustment, net of income taxes - - (393)
Cumulative foreign currency
translation adjustment, net
of income taxes 1,714 (1,471) (8,135)
_________ _________ _________
Balance at end of period $ (5,318) $ 25 $ (7,032)
(4) DEFERRED SOFTWARE COSTS. We defer purchased and internally developed
software and related installation costs for computer systems that are
used in our business. Deferral of costs begins when technological
feasibility of the project has been established and it is determined
that the software will benefit future years. These costs are amortized
on the straight-line method over a maximum of five years or the useful
life of the product, whichever is less. If the useful life of the
product is shortened, the amortization period is adjusted. "Other
assets" in the Balance Sheets includes deferred software costs of
$20.1 million, $10.8 million, and $17.5 million at March 31, 1998 and
1997 and December 31, 1997.
(5) DEBT. On June 26, 1997, we entered into a $450 million revolving credit
agreement with a group of banks that expires on June 29, 2001, and
provides for variable rates of interest based on customary indices. It
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. This agreement replaced
our $350 million revolving credit agreement. We may, subject to the
covenants contained in the credit agreement and to market conditions,
refinance existing debt or raise additional funds through the agreement
and through other external debt or equity financings in the future.
At March 31, 1998, borrowing under the revolving credit agreement was
$290 million.
In addition to the amount outstanding under the revolving credit
agreement, we had $73.8 million and $25.6 million of short-term notes
payable at March 31, 1998 and 1997. The maximum amount of short-term
notes payable during the three months ended March 31, 1998 and 1997,
was $104.6 million and $59.3 million. The average amount of short-term
notes payable during the three months ended March 31, 1998 and 1997,
were $63.7 million and $33.2 million. The weighted average interest
rates for these borrowings was 5.9% and 5.6% for the periods.
We filed a registration statement with the Securities and Exchange
Commission to register $300 million of shelf capacity for debt
securities. The effective date of the filing was April 22, 1998. On
May 12, 1998, we issued $150.0 million of 7.05% Notes under this
registration statement. The Notes are due May 15, 2005.
Proceeds from the issuance will be used to repay borrowings under our
revolving credit agreement. We have $150.0 million of shelf capacity
remaining under this registration statement. In December 1997, we
entered into agreements to hedge against a rise in Treasury rates.
We entered into the transactions in anticipation of our issuance of
these debt securities. The hedge agreements had a notional amount of
$70 million. The settlement rate, based on the yield on 10-year U.S.
Treasury bonds, was less than the agreed upon initial rate, and we
made a cash payment of $0.6 million. The amount paid will be recognized
as an increase in interest expense over the life of the debt securities
issued.
Cash payments for interest were $6.7 million and $3.0 million for the
three months ended March 31, 1998 and 1997.
(6) TAXES. The estimated tax provision rate for the first three months of
1998 was 42.0%, compared with a tax provision rate of 41.0% for the same
period in the prior year. The increase is primarily due to increased
nondeductible goodwill and foreign income, taxed at a higher rate.
For the three months ended March 31, 1998 and 1997, we paid income
taxes, net of refunds received, of $3.1 million and $0.9 million.
(7) ACQUISITIONS. During the first three months of 1998 we completed two
acquisitions, and during the first three months of 1997 we completed
three 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 12, 1998, we acquired the direct marketing business of
Fidelity Direct, based in Minneapolis, Minnesota. On February 28,
1998, we acquired the direct marketing business of Sistemas Kalamazoo,
based in Madrid, Spain. These transactions were completed for cash of
$4.0 million, debt assumed of $0.2 million, and the recording of
$3.8 million of acquisition liabilities.
On January 31 and February 28, 1997, we acquired contract stationer
businesses in Montana and Florida. Also in January 1997, we completed
a joint venture with Otto Versand to direct market office products in
Europe. These transactions, including the joint venture, 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.
Unaudited pro forma results of operations reflecting the acquisitions
would have been as follows. If the 1998 acquisitions had occurred
January 1, 1998, sales for the first three months of 1998 would have
increased to $760.6 million, net income would have remained $17.6
million, and basic earnings per share would have remained $.27.
If the 1998 and 1997 acquisitions had occurred January 1, 1997, sales for
the first three months of 1997 would have increased to $605.9 million,
net income would have remained $14.9 million, and basic earnings per
share would have remained $.24. 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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended March 31, 1998, Compared with Three Months Ended
March 31, 1997
Results of Operations
Net sales in the first quarter of 1998 increased 27% to $759.8
million, compared with $597.9 million in the first quarter of
1997. The growth in sales resulted from a combination of
acquisitions and same-location sales growth. Same-location sales
increased 13% in the first quarter of 1998, compared with sales
in the first quarter of 1997.
Cost of sales, which includes the cost of merchandise sold and
delivery and occupancy costs, increased to $564.2 million in the
first quarter of 1998, which was 74.3% of net sales. This
compares with $447.0 million reported in the same period of the
prior year, which represented 74.8% of net sales. Gross profit
as a percentage of net sales was 25.7% and 25.2% for the first
quarters of 1998 and 1997. The increase in the first quarter of
1998 was primarily due to increases in our U.S. contract
stationer and direct marketing gross margins, offset slightly by
lower margins in our other businesses.
Operating expense was 21.0% of net sales in the first quarter of
1998, compared with 20.5% in the first quarter of 1997. Within
the operating expense category, selling and warehouse operating
expense was 18.9% of net sales in the first quarter of 1998,
compared with 18.6% in 1997. The increase in the first quarter
of 1998 was due in part to our direct marketing business, which
has both higher gross margins and higher operating expenses.
Direct marketing acquisitions made in 1997 increased our cost
average compared to the prior year. Corporate general and
administrative expense was 1.6% of net sales in the first quarter
of 1998, compared with 1.5% in 1997. Goodwill amortization
increased to $3.2 million in the first quarter of 1998, compared
with $2.2 million in the first quarter of 1997. The increase in
goodwill amortization was the result of recording goodwill
arising from our acquisitions.
Income from operations in the first quarter of 1998 increased to
$36.3 million, or 4.8% of net sales, compared to our first
quarter 1997 operating income of $28.3 million, or 4.7% of net
sales.
Interest expense was $6.5 million in the first quarter of 1998,
compared with $3.1 million in the first quarter of 1997. 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 1998 increased to $17.6
million, or 2.3% of net sales, compared with $14.9 million, or
2.5% 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 technology development and 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 $450 million revolving credit agreement
that expires in 2001 and provides for variable rates of interest
based on customary indices. The 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 fixed charge
coverage ratio and a maximum leverage ratio. At March 31, 1998,
$290 million was outstanding under this agreement. We may,
subject to the covenants contained in the credit agreement and to
market conditions, refinance existing debt or 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 $73.8 million at
March 31, 1998. The maximum amount of short-term notes payable
during the three months ended March 31, 1998, was $104.6 million.
The average amount of short-term notes payable during the three
months ended March 31, 1998, was $63.7 million. The weighted
average interest rate for these borrowings was 5.9%.
We filed a registration statement with the Securities and
Exchange Commission to register $300 million of shelf capacity
for debt securities. The effective date of the filing was April
22, 1998. On May 12, 1998, we issued $150.0 million of 7.05%
Notes under this registration statement. The Notes are due May
15, 2005. Proceeds from the issuance will be used to repay
borrowings under our revolving credit agreement. We have $150.0
million of shelf capacity remaining under this registration
statement.
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, 1998, 3.5 million shares
remained unissued under this registration statement.
On September 25, 1997, we issued 2.25 million shares of common
stock at $21.55 per share to Boise Cascade Corporation for total
proceeds of $48.5 million. At March 31, 1998, Boise Cascade
Corporation owned 81.3% of our outstanding common stock.
Net cash provided by operations in the first three months of 1998
was $53.6 million. This was the result of $26.8 million of net
income, depreciation and amortization, and other noncash items,
and a $26.7 million decrease in working capital. Net cash used
for investment in the first three months of 1998 was $29.7
million, which included $17.6 million of expenditures for
property and equipment, and $4.0 million for acquisitions. Net
cash provided by financing was $0.5 million for the first three
months of 1998.
Net cash provided by operations in the first three months of 1997
was $20.3 million. This was primarily 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.
The majority of our 1998 and 1997 acquisitions have been
completed for cash, resulting in higher outstanding balances
under our credit agreement and short-term borrowing capacity.
The increase in borrowings has caused interest expense to
increase for the first three months of 1998 compared to the same
period of 1997.
New Accounting Standards
In 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related
Information." This Statement establishes standards for the way
that public business enterprises report information about
operating segments in annual financial statements and requires
that those enterprises report selected information about
operating segments in interim financial reports issued to
shareholders. We are still evaluating what impact, if any, this
Statement will have on us. We will adopt this Statement at year-
end 1998. Adoption of this Statement will have no impact on net
income.
In March 1998, the American Institute of Certified Public
Accountants (AICPA), issued Statement of Position 98-1 (SOP 98-
1), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This SOP is effective for financial
statements for fiscal years beginning after December 31, 1998,
with earlier application encouraged. We currently account for
software costs generally in accordance with this SOP.
Year 2000 Computer Issue
Many computer systems in use today were designed and developed
using two digits, rather than four, to specify the year. As a
result, such systems will recognize the year 2000 as "00." This
could cause many computer applications to fail completely or to
create erroneous results unless corrective measures are taken.
We utilize software and related computer technologies that will
be affected by this issue. We are currently implementing, or
planning to implement, several computer system replacements or
upgrades before the year 2000, all of which will be year 2000
compliant. Most of the costs associated with these replacements
and upgrades have been or will be deferred. (See Note 4 in
"Notes to Quarterly Financial Statements.") We are evaluating
what actions will be necessary to make our remaining computer
systems year 2000 compliant. The expense associated with these
actions is not expected to be material to the Company. We have
discussed this issue with our significant suppliers and large
customers to determine the extent to which we could be affected
if their systems are not year 2000 compliant. While there can be
no guarantee that systems of other companies will be corrected on
a timely basis, we do not expect any material adverse effects to
the Company.
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. It will also depend, in part, on
our plans to make further acquisitions in the U.S. and
internationally. Our level of future acquisition activity 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 these ratios
as our sales mix evolves over time.
Office papers and converted paper products represent a
significant portion of our sales. 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
future financial results.
Risk Factors Associated With Forward Looking Statements
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, continued same-location sales
growth; the timing and amount of paper price recovery; the
changing mix of products sold to our customers; the pace and
success of our acquisition program; the success of 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.
Item 3. Quantitative and Qualitative Disclosures About Market
Risks
Changes in interest rates and currency rates expose us to
financial market risks. To date, these risks have not been
significant and are not expected to be so in the near term.
Changes in our debt and our continued international expansion
could increase these risks. To manage volatility relating to
these risks, we may enter into various derivative transactions
such as interest rate swaps, rate hedge agreements, and forward
exchange contracts. We do not use derivative financial
instruments for trading purposes.
In December 1997, we entered into agreements to hedge against a
rise in Treasury rates. We entered into the transactions in
anticipation of our issuance of debt securities in the first half
of 1998. The hedge agreements had a notional amount of $70
million and were settled with our issuance of debt securities on
May 12, 1998. The settlement rate, based on the yield on 10-year
U.S. Treasury bonds, was less than the agreed upon initial rate,
and we made a cash payment of $0.6 million. The amount paid will
be recognized as an increase in interest expense over the life of
the debt securities issued.
Our operations in Australia, Canada, France, Germany, Spain, 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 are not engaged 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.
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.
Required exhibits are listed in the Index to Exhibits and are
incorporated by reference.
(b) No Form 8-K's were filed during the quarter covered by this
report.
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, 1998
BOISE CASCADE OFFICE PRODUCTS CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 1998
Number Description Page
10 Key Executive Stock Option Plan and Form of
Agreement, as amended through April 2, 1998
11 Computation of Per Share Earnings
27 Financial Data Schedule
Exhibit 10
BOISE CASCADE OFFICE PRODUCTS CORPORATION
KEY EXECUTIVE STOCK OPTION PLAN
(As Amended Through April 2, 1998)
SECTION 1
PURPOSE
1.1 Establishment and Purpose. Boise Cascade
Office Products Corporation, a Delaware corporation (the
"Company"), hereby establishes the Boise Cascade Office Products
Corporation Key Executive Stock Option Plan (the "Plan") as a
vehicle by which a portion of the compensation of certain
employees of the Company may be provided in the form of long-
term, equity-based incentives that are designed to attract,
retain, and motivate key employees of the Company and to focus
the employee's attention on the long-term growth of the Company.
Each Option issued under this Plan is issued solely in respect of
the Participant's employment with the Company.
SECTION 2
DEFINITIONS
2.1 Act. "Act" means the Securities Exchange Act
of 1934, as amended, and any rules and regulations thereunder.
2.2 Board. "Board" means the Board of Directors
of the Company as the same may be constituted from time to time.
2.3 Company. "Company" means Boise Cascade
Office Products Corporation, a Delaware corporation, and its
subsidiaries and their respective successors and assigns.
2.4 Compensation Committee. "Compensation
Committee" means the committee composed of members of the Board,
or any successor to such committee, who have been appointed by
the Board to such position from time to time with the purpose of
making recommendations concerning executive compensation.
2.5 Competitor. "Competitor" means any business,
foreign or domestic, which is engaged at any time relevant to the
provisions of this Plan, in the distribution of products or in
the providing of services in competition with products sold or
distributed, or services provided by the Company. The
determination of whether a business is a Competitor shall be made
by the Company's General Counsel, in his/her sole discretion.
2.6 Disability. "Disability" means a physical
or mental impairment that prevents the Participant from
performing the duties of the employment in which the Participant
was engaged before the commencement of impairment, subject to the
written certification of a medical doctor.
2.7 Eligible Individual. "Eligible Individual"
means an employee of the Company who, by virtue of his or her
position with the Company or the nature of the services he or she
provides to the Company, has been identified by the senior
management of the Company and selected by the Compensation
Committee as being eligible for consideration to receive grant(s)
of Options under this Plan.
2.8 Employment with any Competitor. "Employment
with any Competitor" means providing significant services as an
employee or consultant, or otherwise rendering services of a
significant nature for remuneration, to a Competitor.
2.9 Exercise Price. "Exercise Price" means, for
any Option, the Fair Market Value of the Shares on the Grant Date
of such Option.
2.10 Fair Market Value. "Fair Market Value" means,
until the Shares are listed on the New York Stock Exchange, the
fair value of the Shares on the Grant Date as determined by the
Compensation Committee. Once the Shares are so listed, "Fair
Market Value" shall mean the closing price of a Share as reported
on the consolidated tape of the New York Stock Exchange on the
date with respect to which the Fair Market Value is being
determined. In the event there are no transactions in Shares on
the date in question, the Fair Market Value shall be determined
as of the next immediately preceding date on which there were
transactions in Shares on the New York Stock Exchange.
2.11 Grant Date. "Grant Date" means the date on
which an Option is granted under this Plan.
2.12 Internal Revenue Code or Code. "Internal
Revenue Code" or "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and the regulations thereunder.
2.13 Option. "Option" means an option to purchase
Shares granted in accordance with the terms of the Plan, as
described more fully in Section 4.
2.14 Participant. "Participant" means an Eligible
Individual to whom the Compensation Committee has granted an
Option under this Plan, provided such Eligible Individual has
elected to participate in the Plan by completing and submitting a
stock option agreement as contemplated by Section 3.1 hereof.
2.15 Retirement. "Retirement" means an Employee's
termination of employment with the Company, other than as a
result of death, total and permanent disability, or for
disciplinary reasons (as defined for purposes of the Company's
Corporate Policy Manual) at any time after the Employee has
reached age 55 with ten or more Years of Service with the Company
as defined in the Company's Pension Plan for Salaried Employees.
2.16 Share. "Share" means a share, duly
authorized, of the Company's common stock, $.01 par value.
SECTION 3
ELIGIBILITY
3.1 Eligibility. An individual who is an
Eligible Individual shall be eligible to receive grant(s) of
Options provided he or she signs a stock option agreement in such
form as is prescribed by the Compensation Committee from time to
time for such purposes.
SECTION 4
OPTIONS
4.1 Shares Subject to the Plan. Options may be
granted to Participants by the Company under this Plan, pursuant
to Section 4.2, in respect of authorized and unissued Shares,
provided that the aggregate number of Shares reserved for
issuance under this Plan, subject to adjustment or increase of
such number, pursuant to the provisions of Section 4.11, shall
not exceed 3,000,000 Shares. If any Shares are subject to an
Option which expires or is terminated unexercised, such Shares
shall be available for issuance with respect to subsequent
Options granted under the Plan. No fractional shares may be
purchased or issued under the Plan.
4.2 Grant of Options. An Eligible Individual
may be granted, by the Compensation Committee, an Option to
purchase a number of Shares from the Company at the Exercise
Price per Share. The number of Shares subject to an Option,
those Eligible Individuals chosen to receive Options, and the
Grant Date for an Option are matters solely within the discretion
of the Compensation Committee. The Compensation Committee shall
determine whether an Option is to be an Incentive Stock Option
(within the meaning of Section 422A of the Code) or a
nonstatutory Option. In no event shall any grant of an Incentive
Stock Option provide for such Option to be or become exercisable
in amounts in excess of $100,000 per calendar year.
4.3 Option Agreement. As determined by the
Compensation Committee, each Option shall be evidenced by a stock
option agreement that specifies:
(a) Grant price;
(b) Duration of the Option;
(c) Number of shares of Stock to which
the Option pertains;
(d) Vesting requirements, if any;
(e) Whether the Option is an incentive
stock option or a nonstatutory option;
(f) Restrictions on exercisability, if any;
(g) Rights of the Optionees upon
termination of employment with the Company, provided that the
termination rights for Optionees receiving incentive stock
options shall conform with Section 422A of the Code;
(h) The terms of the loan, if any, that
will be made available in connection with the exercise of an
Option; and
(I) Such other information as the
Committee deems desirable.
No Option shall have an expiration date
later than the first day following the tenth anniversary of the
date of its grant.
4.4 Exercise of Options. Subject to any
restrictions set out in any policy of the Company that may be
adopted to provide guidelines as to when Participants and others
may engage in transactions involving securities of the Company,
an Option may be exercised by delivery to the Company of a
completed stock option exercise form, in the form approved by the
Company from time to time, specifying the number of Shares with
respect to which the Option is being exercised and accompanied by
payment in full of the Exercise Price of the Shares then being
purchased in (i) cash, (ii) Shares, (iii) a loan from the
Company, or (iv) delivery of an irrevocable written notice
instructing the Company to deliver the Shares being purchased to
a broker selected by the Company, subject to the broker's written
guarantee to deliver cash to the Company, in each case equal to
the full consideration of the Exercise Price for the Shares being
purchased. Options may be exercised in whole or in part.
Certificates for such Shares, or such other proof of purchase as
is appropriate, shall be delivered to the Participant within a
reasonable time following the receipt of such notice and payment.
4.5 Vesting of Options. The vesting of any
Option shall be determined by the Compensation Committee at the
time that the Option is granted and shall be specified in the
applicable stock option agreement.
4.6 Exercise Price. Options shall be exercised
under this Plan only at the Exercise Price.
4.7 Limit on Options to any Person. The total
number of Options to be granted to any one Participant under the
Plan shall not exceed 20% of the total number of shares
authorized for issuance pursuant to the Plan.
4.8 Options Nonassignable. Each Option is
personal to the Participant and shall not be transferable by the
Participant other than by will or the laws of descent and
distribution. No Option granted under this Plan, nor any
interest therein, may be otherwise transferred, assigned,
pledged, or hypothecated by the Participant to whom the Option
was granted in such Participant's lifetime, whether by operation
of law or otherwise, or be made subject to execution, attachment,
levy, or similar process. A Participant, by written notice to
the Company, may designate one or more persons (and from time to
time change such designation), including his or her legal
representative, who, by reason of the Participant's death, shall
acquire the right to exercise all or a portion of an Option
granted under this Plan. Any exercise by a representative shall
be subject to the provisions of this Plan.
4.9 Change of Employment. Notwithstanding any
other provisions of the Plan, Options already granted shall not
be affected by any change of employment of the Participant where
the Participant continues to be employed by the Company. For
purposes of the Plan, neither (i) a transfer of a Participant to
or from the Company or to or from a subsidiary or parent or from
one subsidiary to another, or (ii) a leave of absence duly
authorized by the Company shall be deemed a termination of
employment. However, a Participant may not exercise an Option or
any applicable stock appreciation right during any leave of
absence unless authorized to do so by the Committee.
4.10 Conditions Precedent to Issuance of Shares.
Notwithstanding any of the provisions contained in the Plan or in
any Option, the Company's obligation to issue Shares to a
Participant pursuant to the exercise of an Option under the Plan
shall be subject to:
(a) Completion of such registration or
other qualification of such Shares or obtaining approval of such
governmental authority as shall be determined to be necessary or
advisable in connection with the authorization, issuance, or sale
thereof;
(b) The listing of such Shares on the
New York Stock Exchange and, if required, the preclearance of the
Plan with such Exchange;
(c) The receipt from the Participant of
such representations, agreements, and undertakings as to future
dealings in such Shares as the Company determines to be necessary
or advisable; and
(d) Such shareholder approval as may be
required under the Act, other applicable securities laws, the
Code, and the New York Stock Exchange.
In this connection, the Company shall, to
the extent necessary, take all reasonable steps to obtain such
approvals, registrations, and qualifications as may be necessary
for issuance of such Shares in compliance with applicable laws
and for the listing of such Shares on the New York Stock
Exchange.
4.11 Adjustments. Subsequent to the adoption of
the Plan by the Compensation Committee, appropriate adjustments
in the number of Shares subject to the Plan, Options granted or
to be granted, Shares subject to an Option, and Exercise Price
shall be made by the Compensation Committee to give effect to
adjustments in the number of Shares resulting from subdivision,
split, consolidation, exchange, merger, recapitalization, or
reclassification of the Shares, the payment of stock dividends by
the Company (other than dividends in the ordinary course) or
other similar changes in the capital stock of the Company. The
purpose of such adjustments shall be to ensure that any
Participant exercising an Option after such change in the capital
stock of the Company shall be in the same position as he or she
would have been if he or she had exercised the Option prior to
such change, except with respect to the receipt of income on the
Shares. Fractional shares resulting from such adjustment shall
be rounded up to the nearest whole number. No adjustment shall
be made in connection with the issuance by the Company of any
warrants, rights, or options to acquire additional shares or of
securities convertible into Shares.
4.12 Acceleration of Stock Options.
Notwithstanding any other provision of this Plan, in the event of
a dissolution or a liquidation of the Company or a merger and
consolidation in which the Company is not the surviving
corporation, any unexercised Options granted prior to the date of
the merger or consolidation shall become exercisable on the day
immediately preceding the date of the merger or consolidation.
SECTION 5
EVENTS AFFECTING ENTITLEMENT
5.1 Events Affecting Entitlement to Options. If
the Participant dies, terminates employment, retires, or suffers
a Disability before Options granted to such Participant are
exercised, such Options shall expire on the date specified in the
governing stock option agreement, unless the Compensation
Committee extends, in whole or in part, the expiration date.
SECTION 6
DURATION OF THE PLAN
6.1 Duration. The Plan shall remain in effect
until all Shares subject to Options granted pursuant to the Plan
have been purchased pursuant to exercise of such Options.
Notwithstanding the foregoing, no Options may be granted pursuant
to the Plan after the tenth anniversary of the Plan's effective
date.
SECTION 7
PARTICIPANTS' RIGHTS
7.1 Employment. Nothing in this Plan shall
interfere with or limit in any way the right to the Company to
terminate the employment of an any Eligible Employee or
Participant at any time. Nothing in this Plan shall confer upon
any employee, any Eligible Employee, or any Participant any right
to continue in the employ of the Company, the employment of such
individuals being expressly "at will" and subject to termination
at any time in the Company's sole discretion.
7.2 Rights as Shareholders. Prior to the
exercise of their Options, Participants shall have no rights
whatsoever as shareholders in respect of any of the Shares
(including, without limitation, any right to receive dividends or
other distribution therefrom, voting rights, warrants, or rights
under any rights offering). Following the exercise of their
Options, Participants shall have the same rights with respect to
the Shares as other shareholders of like Shares.
7.3 No Extension of Rights. Participation in
this Plan shall not give any Participant any right or claim to
any benefit except to the extent provided in the Plan.
SECTION 8
VALUATION
8.1 Method of Valuation. Options granted under
this Plan shall be valued at Fair Market Value or, should it not
be possible to determine Fair Market Value as provided hereunder,
in accordance with such other valuation methodology as is
determined by the Compensation Committee from time to time to be
appropriate and which is acceptable to applicable regulatory
authorities.
SECTION 9
NOTICES
9.1 Delivery. Any notice or other document to be
delivered to a Participant shall be validly sent, given, or
delivered if it is delivered by hand to the Participant or it is
mailed by first class prepaid mail to the latest address shown on
the records of the Company for the Participant.
SECTION 10
ADMINISTRATION AND TERMINATION
10.1 Administration. This Plan shall be
administered by the Compensation Committee of the Board of
Directors of the Company. The Compensation Committee shall have
full authority to administer this Plan, including authority to
interpret and construe any provision of this Plan, to adopt such
rules for administration of this Plan as it may deem necessary or
appropriate, and to delegate duties hereunder to such persons or
entities as it deems appropriate. Decisions of the Compensation
Committee shall be final and binding on all persons who have an
interest in this Plan.
10.2 Amendment. The Compensation Committee may
amend the Plan at any time, with or without notice to the
Participants, provided, however, that no amendment shall reduce
the interests of the Participants under any Options earlier
granted to a Participant under the Plan without the written
consent of the Participants. Without approval of a majority of
the Company's shareholders, no revision or amendment shall
(i) change the number of Shares subject to this Plan (except as
provided in Section 4.11), (ii) change the designation of the
class of employees eligible to participate in the Plan,
(iii) change the Exercise Price of the Options, or
(iv) materially increase the benefits accruing to Participants
under the Plan or the cost of this Plan to the Company.
Moreover, in no event may Plan provisions be amended more than
once every six months other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules and regulations thereunder. No amendment,
modification, or termination of this Plan shall in any manner
adversely affect the rights of any Participant holding Options
granted under this Plan without his or her consent.
10.3 Termination. The Company may terminate the
Plan at any time, with or without notice to the Participants, in
which case all Options granted to Participants shall vest fully
in those Participants.
10.4 Shareholder Approval and Registration
Statement. This Plan shall be approved by the Compensation
Committee and submitted to the Company's shareholders for
approval. Any Options granted under this Plan, prior to
effectiveness of a registration statement filed with the
Securities and Exchange Commission covering the Shares to be
issued hereunder, shall not be exercisable until, and are
expressly conditional upon, the effectiveness of a registration
statement covering the Shares.
10.5 Expenses. The Company shall pay all costs of
administering and operating the Plan.
10.6 Records. The Company shall maintain, or cause
to be maintained, records indicating the amount credited to the
Participant's account under the Plan, from time to time, and the
number of Options granted to each Participant. Such records
shall be conclusive as to all matters involved in the
administration of the Plan.
10.7 Statements. The Company shall furnish, or
cause to be furnished, to each Participant periodical statements
indicating the vested status of his or her Options and any other
information which the Company considers to be relevant to the
Participant. Such statements shall be given at times determined
by the Company.
10.8 Tax Information Returns. The Company will
issue, or cause to be issued, to each Participant all tax
information required to be delivered under United States tax laws
within the time periods specified in those laws.
10.9 Withholding Taxes. Whenever Shares are issued
on the exercise of an Option under the Plan, the Company shall
(a) require the recipient of the Shares to remit to the Company
an amount sufficient to satisfy all withholding taxes, (b) deduct
from any cash payment pursuant to any broker-assisted option
exercise (net to optionee in cash or shares) an amount sufficient
to satisfy any withholding tax requirements, or (c) withhold from
or require surrender by the recipient, as appropriate, Shares
otherwise issuable or issued upon exercise of the Option, the
number of Shares sufficient to satisfy, to the extent permitted
under applicable law, federal and state withholding tax
requirements resulting from the exercise, provided, however, that
the Company shall not withhold or accept surrender of Shares
under this paragraph unless the recipient of the Shares has made
an irrevocable election to have Shares withheld or surrendered
for this purpose at least six months after the date of grant of
the Option and either (i) six months or (ii) within a window
period prior to the date the amount of withholding tax is
determined. The Committee may, at any time subsequent to an
election under this paragraph, disapprove the election and
require satisfaction of withholding taxes by other means
permitted under the Plan. Shares withheld or surrendered under
this paragraph shall be valued at their Fair Market Value on the
date the amount of withholding tax is determined.
10.10 Effective Date of This Plan. This Plan shall be
effective February 20, 1995, subject to approval by the
shareholder of the Company.
10.11 Law of Delaware. The Plan shall be governed by
and construed in accordance with the laws of the state of
Delaware.
BOISE CASCADE OFFICE PRODUCTS CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option (the "Option") is granted
____________, 19__, ("Grant Date"), by BOISE CASCADE OFFICE
PRODUCTS CORPORATION (the "Company") to ____________________
("Optionee") pursuant to the Key Executive Stock Option Plan (the
"Plan"), a copy of which is attached as Exhibit A, subject to the
following terms and conditions.
1. This Agreement is subject to all the terms and conditions
of the Plan, and all capitalized terms not otherwise defined in
this Agreement shall have the meaning given them in the Plan.
2. The Company hereby grants the Optionee a nonstatutory
stock option to purchase up to _________ Shares of stock at a
price of $________ per share.
3. The Option shall expire on the first to occur of (a) ten
years and one day from the date of this Agreement; (b) five years
after Optionee's termination of employment as a result of
Retirement, death, or total and permanent disability, provided
that Optionee has not, as of the date of the exercise of the
Option, commenced employment with any Competitor of the Company;
or (c) three years following termination of Optionee's employment
with the Company provided (i) the termination is the direct
result of the sale or permanent closure of any facility or
operating unit of the Company, and (ii) Optionee has not, as of
the date of the exercise of the Option, commenced employment with
any competitor of the Company; or (d) three months following
termination of Optionee's employment with the Company for any
other reason, except that the Option shall be canceled in the
event of termination of employment for disciplinary reasons.
4. One-third of the Shares of this Option shall be
exercisable after one year from the Grant Date; two-thirds of the
Shares shall be exercisable after two years from the Grant Date;
and all of the Shares shall be exercisable after three years from
the Grant Date. In the event of death or disability of the
Optionee, all of the Shares may be exercisable after the first
anniversary of the date of this agreement.
5. "Competitor" means any business, foreign or domestic,
which is engaged at any time relevant to the provisions of this
Plan, in the distribution of products or in the providing of
services in competition with products sold or distributed, or
services provided by the Company. The determination of whether a
business is a Competitor shall be made by the Company's General
Counsel, in his/her sole discretion.
6. "Employment with any Competitor" means providing
significant services as an employee or consultant, or otherwise
rendering services of a significant nature for remuneration, to a
Competitor.
7. This Option may be exercised from time to time by
delivery of written notice to the Company specifying the number
of Shares of stock to be purchased. Payment of the Grant Price
shall be made as provided in Section 4.4 of the Plan.
BOISE CASCADE OFFICE PRODUCTS CORPORATION
By ____________________________________________
John Love
Vice President, Human Resources
Accepted:
By ______________________________
Optionee
EXHIBIT 11
BOISE CASCADE OFFICE PRODUCTS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
For the Three Months Ended March 31
1998 1997
(in thousands, except share information)
BASIC EARNINGS PER SHARE
Net income $ 17,589 $ 14,909
Shares of Common Stock:
Weighted average shares outstanding 65,618,760 62,844,398
Effect of contingent shares 28,180 458,094
65,646,940 63,302,492
Basic earnings per share (1) $ .27 $ .24
DILUTED EARNINGS PER SHARE
Net income $ 17,589 $ 14,909
Shares of Common Stock:
Weighted average shares outstanding 65,618,760 62,844,398
Effect of contingent shares 28,180 458,094
Effect of options 92,535 142,427
65,739,475 63,444,919
Diluted earnings per share (1) $ .27 $ .23
(1) In 1997, we adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." Earnings
per share for 1997 have been restated to reflect SFAS 128. The
impact of the adoption was to reduce diluted earnings per
share by $.01.
<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, 1998, and
from its Statement of Income for the three months ended March 31, 1998. 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 53,151
<SECURITIES> 0
<RECEIVABLES> 390,533
<ALLOWANCES> 7,707
<INVENTORY> 203,733
<CURRENT-ASSETS> 678,930
<PP&E> 352,120
<DEPRECIATION> 140,054
<TOTAL-ASSETS> 1,363,922
<CURRENT-LIABILITIES> 494,903
<BONDS> 307,224
0
0
<COMMON> 657
<OTHER-SE> 525,311
<TOTAL-LIABILITY-AND-EQUITY> 1,363,922
<SALES> 759,808
<TOTAL-REVENUES> 759,808
<CGS> 564,230
<TOTAL-COSTS> 564,230
<OTHER-EXPENSES> 159,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,465
<INCOME-PRETAX> 30,239
<INCOME-TAX> 12,650
<INCOME-CONTINUING> 17,589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,589
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
