<PAGE> 1
THIS PROSPECTUS SUPPLEMENT IS FILED UNDER RULE 424(B)(2) AND RELATES TO FILE
333-50131
Information contained herein is subject to completion or amendment.
SUBJECT TO COMPLETION, DATED APRIL 24, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 15, 1998
BOISE LOGO
$150,000,000
BOISE CASCADE OFFICE PRODUCTS CORPORATION
% NOTES DUE 2005
The Notes will mature on May , 2005. Interest on the Notes is payable on
May and November of each year, commencing November , 1998. The Notes
will be redeemable, in whole or in part, at the option of the Company at any
time at a redemption price equal to the greater of: (i) 100% of the principal
amount of the Notes, or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest (not including the portion of any
such payments of interest accrued as of the redemption date) discounted to the
redemption date on a semiannual basis (assuming a 360-day year of twelve 30-day
months) at the Adjusted Treasury Rate (as defined herein), plus, in each case,
accrued and unpaid interest thereon to the redemption date. The Notes will not
be entitled to any sinking fund. The Notes will be represented by one or more
Global Debt Securities registered in the name of The Depositary Trust Company
("DTC") or its nominee. Beneficial interests in the Notes will be shown on, and
transfers of such interests will be effected only through, records maintained by
DTC and its participants. Except as described herein, Notes in definitive form
will not be issued. The Notes will be issued only in denominations of $1,000 and
integral multiples thereof. See "Description of Notes".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Note................................ % % %
Total................................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from May , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company, estimated at
$ .
---------------------
The Notes are offered severally by the Underwriters as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the Notes will be
made in book-entry form only through the facilities of DTC, on or about May
, 1998.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
---------------------
The date of this Prospectus Supplement is May , 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended. These
forward-looking statements involve uncertainties and risks. When used in this
Prospectus Supplement, we intend the following words to indicate and identify
forward-looking statements: "believe," "expect," "intend," "plan," and similar
expressions.
We caution prospective purchasers of the Notes that our actual results,
performance or achievements could differ materially from those projected in
forward-looking statements as a result of various factors. Accordingly, in
considering the information set forth in forward-looking statements, prospective
purchasers should carefully review all factors described in this Prospectus
Supplement and the accompanying Prospectus, including the discussion in
"Management's Discussion and Analysis" below, as well as factors described in
the Company's filings with the Securities and Exchange Commission.
THE COMPANY
Boise Cascade Office Products Corporation is one of the world's premier
business-to-business distributors of products for the office, with operations in
Australia, Canada, France, Germany, Spain, the United Kingdom, and the United
States. We market to large, medium-sized and small businesses as well as home
offices, through both direct sales forces and catalog mailings. We sell a broad
line of branded and private label consumable office supplies, furniture, paper,
computer-related items and promotional products. We purchase most of our
products directly from manufacturers and distribute them directly to end-users.
We have an integrated network of 49 distribution centers in the United
States. This national network enables us to provide consistent products, prices
and service across our entire system, including next-day delivery of virtually
all orders to our large business customers and approximately 75% of all orders
to our small and medium-sized customers. In Canada, we operate a national
network of nine distribution centers. In Australia, our national network
consists of seven distribution centers. We currently operate 6 distribution
centers in the United Kingdom and western Europe, which will form the nucleus of
our network in Europe.
The office products distribution industry traditionally has been
categorized into three separate channels: the contract stationer channel, the
direct marketing channel, and the retail channel. The contract stationer
channel, which accounted for approximately 85% of our sales in 1997, typically
serves large and medium-sized businesses through both a direct sales force and
product catalogs. The direct marketing channel, which accounted for
approximately 15% of our sales in 1997, typically markets exclusively through
catalogs and other database marketing programs, targeting small and medium-sized
businesses as well as home offices. The retail channel serves small and medium-
sized businesses, home offices, and individuals. Office products superstores, as
well as a diminishing number of independent local dealers, comprise the retail
channel. Our 1997 presence in the retail channel was insignificant, and we do
not expect to focus on this channel.
Until the beginning of 1996, we operated only in the United States, where
we are one of the largest distributors of office products, conducting our
contract stationer business under the Boise Cascade Office Products name and our
direct marketing business under the Reliable name. Since then, we have grown
substantially outside the United States. As a result of a series of acquisitions
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<PAGE> 3
beginning in 1996, we are now a leading distributor of office products in
Australia, Canada (under the name Grand & Toy), France (under the names Boise
Cascade Office Products France and JPG), Spain (under the name Sistemas
Kalamazoo), and the United Kingdom (under the names Neat Ideas and Boise Cascade
Office Products UK) through both the contract stationer and direct marketing
channels. We are also a 50% participant in a joint venture with Otto Versand, a
German company which is one of the world's largest direct marketers of consumer
products. The joint venture, operating under the name Buro + Technik, is
distributing office products in Germany through the direct marketing channel and
may expand into other countries in continental Europe.
We are a Delaware corporation, and our principal executive office is
located at 800 West Bryn Mawr Avenue, Itasca, Illinois 60143-1594, telephone
630/773-5000. All references to "the Company," "we," or "us" refer, unless the
context otherwise requires, to Boise Cascade Office Products Corporation and its
consolidated subsidiaries.
BUSINESS MODEL
In recent years, the office products industry has consolidated and the
lines between the three traditional channels and between the companies operating
in each of these channels have become blurred, not only in the United States but
also to varying degrees in each of the foreign countries in which we operate.
Several major industry participants operate across the three channels and/or
serve all or a large part of the office products customer spectrum. Significant
changes are also taking place in the way business customers purchase office
products. Large multi-site businesses increasingly recognize the efficiency and
cost-effectiveness of uniform system-wide purchasing through a national contract
with a single distributor. Some major businesses are beginning to use integrated
procurement systems to satisfy office product, service and supply needs from a
single source. Small and medium-sized businesses are also searching for ways to
increase efficiency and reduce costs in meeting their office products
requirements.
Our business model aims to address these changing circumstances. Our
objective is to be the preferred supplier of office products to business
customers of all sizes by outperforming our competitors at all levels. To
achieve this, we manage centrally where it is efficient and cost-effective to do
so or where there is value to our customers in nationwide consistency, and we
manage locally where we need to respond to local market needs and opportunities
or local customer requirements.
Centralized functions in the U.S. include a common computer system linking
most of our distribution centers into an integrated distribution network,
merchandising (including product and vendor selection and evaluation and catalog
preparation), logistics support, inventory monitoring and ordering for our most
frequently purchased items, and, to an increasing extent, order entry and
customer service. Functions which we typically perform locally through our
distribution centers include recruiting and hiring, sales management, and a
variety of customer or location-specific services and products.
Other key elements of our business model include rigorous cost analysis and
cost control. Our business model is data intensive, including a comprehensive
activity-based cost management system which enables us to measure our costs by
activity and then by customer and product. We devote a substantial part of our
internal capital spending to improving our efficiency and cost effectiveness at
all levels.
In each of the foreign countries where we have an extensive system of
distribution centers, currently Australia and Canada, we either have introduced
or intend to introduce the major elements of our domestic business model: to
link each of the facilities via computer, offer similar products across the
entire system, serve the full range of customers from each facility, and
centralize a variety of functions where it is efficient and cost-effective to do
so, while performing certain other functions locally.
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<PAGE> 4
BUSINESS STRATEGY
We believe that the office products distribution industry continues to
present significant growth opportunities, especially abroad. We intend to
continue pursuing such opportunities through our business strategy, which
includes the following elements:
- Expand our geographic scope. We plan to expand our geographic coverage
where practical and profitable by entering other foreign countries and
expanding in those foreign countries in which we currently operate. We
expect to do this through a combination of acquisitions, joint ventures,
alliances, and start-up operations. We also expect to establish a
presence in selected additional cities in the United States. Our
geographic expansion will allow us access to more customers in more
market areas and will enhance our ability to serve our customers, both
existing and new, with an even more comprehensive distribution system.
- Broaden our customer base by two methods: increasing our national
account business and continuing to expand our business in the small
business and home office segment. We define a national account as a
multi-site customer served by two or more of our distribution centers
under a single contract. We believe we currently have a competitive
advantage with respect to these businesses in the United States because
of the nationwide coverage of our integrated distribution centers, which
enables us to deliver consistent products, prices, and service across all
customer locations. A key element of our strategy is to exploit this
advantage to expand our national account business. We are pursuing a
similar national account strategy in our foreign operations, which may at
some point serve multi-national accounts as well.
We also plan to continue to broaden our customer base by increasing our
business with small and medium-sized businesses and home offices. This
market is growing more rapidly than the large business customer segment.
However, these smaller customers typically cannot be served
cost-effectively through a direct sales force. Accordingly, we currently
serve these customers primarily through our direct marketing business,
which we plan to expand both geographically and in product offerings,
including specialty or niche catalogs.
- Increase sales of our core products and add new products and
services. We have targeted some of our existing product categories for
increased sales, such as office papers and office furniture. We also plan
to increase sales of our newest categories, such as computer-related
products and promotional products. We plan to expand our product
offerings as appropriate. By broadening our product lines and services,
we can better meet the needs of those customers interested in
consolidating their supplier base and taking advantage of "one-stop
shopping."
Each of the elements of our business strategy has both an internal growth
component and an acquisition component, the mix of which, for any given element
in any given year, will be different because of that year's priorities,
opportunities, capital availability, and other factors.
RECENT DEVELOPMENTS
EARNINGS. On April 14, 1998, we reported first-quarter net income of $17.6
million on quarterly revenues of $760 million. This compares with $14.9 million
in the first quarter of 1997 and $17.7 million in the fourth quarter of 1997.
Revenues were 27% higher than the $598 million reported in the first
quarter of 1997. Revenues reflected a 13% increase for locations operating in
both periods, fueled by U.S. contract stationer same-location sales, which were
up more than 15%. Income from operations was 4.8% of sales, compared with 4.7%
in the first quarter of 1997 and 5.3% in the fourth quarter of 1997.
ACQUISITIONS. During the first quarter of 1998, we acquired Fidelity Direct, a
U.S. direct marketer of packing, shipping, and graphic arts products, with
annualized sales of $10 million. We also acquired
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<PAGE> 5
Sistemas Kalamazoo, a direct marketer of office supplies in Spain, with annual
revenues of $4 million. This acquisition marks our entry into the Spanish
market.
RELATIONSHIP WITH BCC
BCC currently owns approximately 81.3% of the outstanding shares of our
common stock. As a result of its controlling ownership interest in the Company,
BCC is able to elect all of the members of our Board of Directors and to
exercise a controlling influence over our business and affairs, including
determinations regarding entering into mergers or other business combinations,
acquiring or disposing of assets, incurring indebtedness, issuing additional
equity or debt securities, and paying dividends on common stock. In addition,
BCC by virtue of its ownership has the power to approve all matters submitted to
a vote of our shareholders without the consent of our other shareholders. We
have also entered into a Paper Sales Agreement with BCC, under which we agreed
to purchase substantially all of our North American office paper requirements
from BCC at a price determined by a formula which is meant to approximate
prevailing market prices. Currently, four of our seven directors are also
directors and/or officers of BCC.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to repay
indebtedness under our revolving credit agreement and for general working
capital purposes, including financing acquisitions and start-ups. We may also
use a portion of the net proceeds to take advantage of future acquisition
opportunities.
The amount outstanding under our revolving credit agreement as of March 31,
1998, was approximately $290 million. The agreement has a total capacity of $450
million. The interest rate on this outstanding indebtedness, which is subject to
change over time, was 5.9875% per annum as of March 31, 1998. We used the funds
borrowed under the credit agreement to finance acquisitions and for other
general corporate purposes. We may borrow additional amounts under this credit
agreement in the future.
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<PAGE> 6
CAPITALIZATION SUMMARY
The following table sets forth the capitalization of the Company as of
December 31, 1997, and as adjusted to give effect to the sale of the Notes
offered hereby and the application of the estimated gross proceeds, as described
under "Use of Proceeds." This table should be read in conjunction with the
Selected Consolidated Financial Data and the related notes thereto in this
Prospectus Supplement.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
AS ADJUSTED
ACTUAL FOR OFFERING
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 28,755 $ 28,755
======== ========
Current portion of long-term debt........................... 2,917 2,917
======== ========
% Notes Due May , 2005................................ -- $150,000
Other long-term debt, less current portion.................. $357,595 207,595
Other long-term liabilities................................. 37,518 37,518
-------- --------
Total long-term obligations............................ 395,113 395,113
======== ========
Shareholders' equity
Preferred stock, $.01 par value, 20,000,000 shares
authorized;
no shares issued and outstanding....................... -- --
Common stock, $.01 par value, 200,000,000 shares
authorized; 65,588,258 shares issued and outstanding... 656 656
Additional paid-in capital................................ 356,599 356,599
Retained earnings......................................... 148,380 148,380
-------- --------
Total shareholders' equity............................. 505,635 505,635
-------- --------
Total capitalization.............................. $932,420 $932,420
======== ========
</TABLE>
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<PAGE> 7
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the Company for each of the five years 1993 through 1997. The selected
historical income statement data and balance sheet data have been derived from
audited financial statements. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis," which is included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(1) 1993
---------- ---------- ---------- -------- --------
(EXPRESSED IN THOUSANDS, EXCEPT SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................... $2,596,732 $1,985,564 $1,315,953 $908,520 $682,819
Cost of sales................ 1,941,702 1,467,368 980,564 676,515 505,993
---------- ---------- ---------- -------- --------
Gross profit............... 655,030 518,196 335,389 232,005 176,826
Selling and warehouse
operating expense(2)....... 483,241 375,700 238,885 172,876 134,331
Corporate general and
administrative expense..... 41,606 34,409 24,750 15,541 13,247
Goodwill amortization........ 10,933 6,787 2,287 1,389 471
---------- ---------- ---------- -------- --------
Total operating expense.... 535,780 416,896 265,922 189,806 148,049
---------- ---------- ---------- -------- --------
Income from operations....... 119,250 101,300 69,467 42,199 28,777
Interest expense............. 20,165 7,766 685 -- --
Other income, net............ 699 278 2,588 995 681
---------- ---------- ---------- -------- --------
Income before income
taxes................... 99,784 93,812 71,370 43,194 29,458
Income tax expense........... 42,898 38,463 28,191 16,729 11,412
---------- ---------- ---------- -------- --------
Net income................. $ 56,886 $ 55,349 $ 43,179 $ 26,465 $ 18,046
========== ========== ========== ======== ========
OPERATING DATA:
Distribution centers at end
of period.................. 69 63 36 27 21
Increase over prior year
sales on a same-location
basis(3)................... 14% 14% 26% 15% 7%
BALANCE SHEET DATA:
Working capital.............. $ 231,357 $ 168,641 $ 145,824 $104,835 $ 77,475
Total assets................. 1,291,488 905,362 544,124 352,369 227,959
Total long-term debt less
current portion............ 357,595 140,024 198 -- --
Shareholder's equity(4)...... 505,635 404,785 339,417 233,432 149,819
OTHER DATA:
Ratio of earnings to fixed
charges.................... 5.0x 8.4x 25.4x 27.5x --
Long-term debt as percent of
total capital.............. 41.40% 25.70% 0.10% -- --
Depreciation and
amortization............... $ 41,088 $ 27,198 $ 15,355 $ 12,985 $ 12,891
Capital expenditures......... 320,901 222,850 83,884 84,941 2,907
</TABLE>
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<PAGE> 8
(1) In 1994, we acquired three businesses. In 1995, we acquired 10 businesses.
In 1996, we acquired 19 businesses. In 1997, we acquired 8 businesses. All
acquisitions were accounted for as purchases. Data for each year includes
the results of operations of the acquired businesses from the time of
acquisition to year end.
(2) Selling and warehouse operating expense includes the write-off of $5,236,000
in 1993 of deferred software costs that were determined to have limited
future value.
(3) The increase over the prior year in sales on a same-location basis is
calculated using only distribution centers that are included for the entire
12 months of each of the two comparable years.
(4) We participated in BCC's centralized cash management system during the
periods presented. The net effect of our distributions to, and advances
from, BCC is included in shareholder's equity.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996. Net sales in 1997 increased 31% to $2.6 billion, from
$2.0 billion in 1996. The growth in sales resulted from acquisitions and
internal growth. Same location sales increased 14%. Sales growth was constrained
by lower paper prices. Holding paper prices constant, same location sales
increased 17%. Businesses acquired during 1996 had sales in 1996 of $332 million
and sales in 1997 of $524 million. The increase is due to the implementation of
our business model in these acquisitions, including increasing sales to our
national accounts and broadening product offerings, as well as a full calendar
year of ownership in 1997.
Cost of sales, which includes the costs of merchandise sold, delivery, and
occupancy, increased in 1997 to $1.9 billion, which was 74.8% of net sales. This
compares with $1.5 billion, or 73.9% of net sales, in 1996. The 0.9% decrease in
gross margin resulted in part from continued competitive pressures on gross
margins, especially in national accounts. Additionally, in the first half 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. In 1997, paper
costs were more stable but significantly lower, constraining our 1997 margins.
We believe that the increasingly competitive nature of the industry and the
increasing price sensitivity of customers will continue to put downward pressure
on gross margins. In addition, changes in our product mix or marketing strategy
could, from time to time, affect gross margins. For example, we continue to
increase our sales of computer-related consumables, a product line that had
significantly lower gross margins and associated operating expenses in 1997 than
our more traditional office products line.
Operating expense was 20.6% of net sales in 1997, compared with 21.0% in
1996. This decrease resulted in part from leveraging expenses across a larger
revenue base and from specific initiatives to increase efficiency, for example,
by increasing central procurement and integrating distribution programs. Within
the operating expense category, selling and warehouse operating expense was
18.6% of net sales in 1997, compared with 18.9% in 1996. The decrease was a
result of efficiencies gained from our centralized call centers and the
centralization of our inventory rebuying function. Corporate general and
administrative expense declined to 1.6% of net sales in 1997 from 1.7% in 1996
because we were able to spread the cost of centralized functions over our higher
revenues. Goodwill amortization was 0.4% of net sales in 1997 compared with 0.3%
in 1996. The increase between 1996 and 1997 resulted from our acquisition
activity in 1996 and 1997.
As a result of the factors discussed above, income from operations was $119
million in 1997, an 18% increase over $101 million in 1996. Our operating margin
decreased to 4.6% from 5.1% of net sales in 1996.
Interest expense was $20 million in 1997 compared to $8 million in 1996.
The increase resulted from debt incurred in conjunction with our acquisition and
capital spending programs.
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<PAGE> 9
Income tax expense was $43 million in 1997 compared to $38 million in 1996.
The increase resulted from our higher taxable income in 1997 and from an
increase in our effective tax rate. Our effective tax rate increased to 43% in
1997, from 41% in 1996, primarily as a result of increased foreign income,
including nondeductible goodwill, taxed at a higher rate.
Net income increased 3% to $57 million, or 2.2% of net sales, compared to
$55 million, or 2.8% of net sales, in 1996.
1996 COMPARED WITH 1995. Net sales in 1996 increased 51% to $2.0 billion, from
$1.3 billion in 1995. The growth in sales resulted primarily from acquisitions.
Businesses acquired during 1995 had sales in 1995 of $90 million. Sales for the
1995 acquisitions increased to $264 million for 1996 because they were owned for
the full calendar year and we had begun to implement our business model in these
acquisitions, including increasing sales to national accounts and broadening
product offerings. Businesses acquired during 1996 had sales in 1996 of $332
million. Excluding the incremental effect of the 1995 and 1996 acquisitions, net
sales increased $200 million, primarily as a result of growth in national
account sales, our broader product offering, and growth in direct marketing
sales.
Cost of sales, which includes the costs of merchandise sold, delivery, and
occupancy, increased in 1996 to $1.5 billion, which was 73.9% of net sales. This
compares with $981 million, which represented 74.5% of net sales, in 1995. The
0.6% increase in gross margins for 1996 compared to 1995 resulted primarily from
our acquisition of Neat Ideas, a direct marketing company based in the United
Kingdom, and Grand & Toy Limited, one of Canada's largest contract stationers.
Both of these companies have gross margins which are higher than the average
gross margin of our other business. In addition, our average gross margin on
copy paper sales was higher in 1996 than in 1995, when we experienced difficulty
in passing through cost increases early in the year. We believe that the
increasingly competitive nature of the industry and the increasing price
sensitivity of customers will continue to put downward pressure on gross
margins. In addition, changes in our product mix or marketing strategy could,
from time to time, affect gross margins. For example, we continues to increase
our sales of computer-related consumables, a product line that had significantly
lower gross margins and associated operating expenses than our more traditional
office product line in 1996.
Operating expense was 21.0% of net sales in 1996, compared with 20.2% in
1995. This increase was primarily the result of our increased presence in direct
marketing and the international contract stationer business, both of which have
higher operating expenses than the average of our other business. Sharply lower
paper prices in 1996 also reduced overall revenue growth, negatively impacting
our ability to leverage operating expenses. Within the operating expense
category, selling and warehouse operating expense was 18.9% of net sales in
1996, compared with 18.2% in 1995. In addition to the factors discussed above,
we added more than 40 associates to our sales force dedicated to
computer-related products; started up a centralized call center in Peru,
Illinois; and centralized the majority of our domestic inventory rebuying
function. These activities also contributed to the increase in selling and
warehousing operating expenses in 1996. Corporate general and administrative
expense declined to 1.7% of net sales in 1996 from 1.9% in 1995, because we were
able to spread the cost of centralized functions over its higher revenues.
Goodwill amortization was 0.3% of net sales in 1996, compared to 0.2% in 1995.
The increase in goodwill amortization between 1995 and 1996 resulted from our
acquisition activity in 1995 and 1996.
As a result of the factors discussed above, income from operations was $101
million in 1996, a 46% increase over $69 million in 1995. Our operating margin
decreased to 5.1% from 5.3% of net sales.
Interest expense was $8 million in 1996, compared to $1 million in 1995.
The increase in interest expense resulted from debt incurred in conjunction with
our acquisition and capital spending programs.
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<PAGE> 10
Income tax expense was $38 million in 1996, compared to $28 million in
1995. The increase resulted from our higher taxable income in 1996. Our
effective tax rate also increased to 41.0% in 1996, from 39.5% in 1995,
primarily as a result of increased foreign income, including nondeductible
goodwill, taxed at a higher rate.
Net income increased 28% to $55 million, or 2.8% of net sales, compared
with $43 million, or 3.3% of net sales, in 1995.
ACQUISITIONS
In the first quarter of 1998, our direct marketing subsidiary, The Reliable
Corporation, acquired Fidelity Direct, a direct marketer of packing, shipping,
and graphic arts products in Minnesota, and Sistemas Kalamazoo, a direct
marketer of office supplies in Spain. The annualized sales of these acquisitions
were $14 million at the time of announcement.
In 1997 we acquired eight businesses, including two companies in France and
one in the United Kingdom, for cash of $247 million, acquisition liabilities of
$13 million, debt assumed of $10 million, and issuance of our stock valued at $3
million at the time of issuance. The annualized sales of the acquisitions
completed in 1997 were $340 million at the time of announcement.
In 1996, we acquired 19 businesses, including four companies in Canada and
three in Australia, for cash of $180 million, acquisition liabilities of $35
million, and issuance of our stock valued at $7 million at the time of issuance.
The annualized sales of the acquisitions completed in 1996 were $460 million at
the time of announcement.
Goodwill, net of amortization, was $439 million at December 31, 1997, and
$262 million at December 31, 1996. The increase was the result of acquisitions.
We used purchase accounting to record our acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Our principal requirements for cash have been to make acquisitions, fund
working capital needs, upgrade and expand facilities at existing locations, and
open new distribution centers. The funding 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. We expect total capital expenditures in 1998 of about $100
million, exclusive of amounts attributable to acquisitions. In 1997, such
capital expenditures were approximately $67 million.
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 revolving credit
agreement is available for acquisitions and general corporate purposes. It
contains financial and other covenants, including a negative pledge and
covenants specifying a minimum fixed charge coverage ratio and a maximum
leverage ratio. Amounts outstanding under this agreement totaled $340 million at
December 31, 1997. 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 $23 million at December 31, 1997. The maximum
amount of short-term notes payable during the year ended December 31, 1997, was
$95 million. The average amount of short-term notes payable during the twelve
months ended December 31, 1997, was $42 million. The weighted average interest
rate for these borrowings was 5.8%.
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 million.
At December 31, 1997, Boise Cascade Corporation owned 81.4% of our outstanding
common stock.
S-10
<PAGE> 11
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Offered Securities")
supplements the description of the general terms and provisions of Debt
Securities set forth in the Prospectus. We refer potential investors to that
description, as well as to the following description.
The Debt Securities are issued under an Indenture (the "Indenture") dated
as of March 31, 1998, between the Company and U.S. Bank Trust National
Association, Trustee ("Trustee"). The Company conducts banking transactions with
affiliates of the Trustee in the normal course of business and may use the
Trustee or its affiliates as trustee for various debt issues.
GENERAL
The Notes will be unsecured and unsubordinated obligations of the Company,
limited to $150 million aggregate principal amount and maturing on May ,
2005. Each Note will bear interest from May , 1998, at the rate per annum
shown on the front cover of this Prospectus Supplement, payable semi-annually on
May and November of each year, commencing November , 1998, to the
person in whose name the Note is registered at the close of business on the
preceding or , respectively. The Notes will not have the
benefit of any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including
the portion of any such payments of interest accrued as of the redemption date)
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (determined on
the third Business Day preceding such redemption date), plus, in each case,
accrued and unpaid interest thereon to the redemption date.
"Adjusted Treasury Rate" means the arithmetic mean of the yields under the
heading "Week Ending" published in the Statistical Release most recently
published prior to the date of determination under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the redemption date, of
the principal being redeemed, plus 0.20%. If no maturity set forth under such
heading exactly corresponds to the maturity of such principal, yields for the
two published maturities most closely corresponding to the maturity of such
principal shall be calculated pursuant to the immediately preceding sentence,
and the Adjusted Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding in each of the relevant periods to the
nearest month.
"Statistical Release" means the statistical release designated "H.15(519)"
or an successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the terms of the Notes,
then such other reasonably comparable index which shall be designated by the
Company.
Notice of any redemption will be mailed at least 30 days but not more that
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
S-11
<PAGE> 12
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered global
Notes (collectively, the "Global Notes") which will be deposited with, or on
behalf of, The Depositary Trust Company, New York, New York (the "Depositary"),
and registered in the name of the Depositary's nominee. Except as set forth in
the Prospectus, the Global Notes may be transferred, in whole and not in part,
only to the Depositary or another nominee of the Depositary. See "Description of
Debt Securities -- Book Entry System" in the Prospectus.
Settlement for the Notes will be made in immediately available funds.
Secondary market trading in the Notes will be settled in immediately available
funds.
UNDERWRITING
Subject to the terms and conditions set forth in the Pricing Agreement and
the Underwriting Agreement, the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF NOTES
UNDERWRITER ----------------
<S> <C>
Goldman, Sachs & Co......................................... $
J.P. Morgan Securities Inc..................................
Salomon Brothers Inc .......................................
------------
Total.................................................. $150,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the
Pricing Agreement, the Underwriters are committed to take and pay for all of the
Notes, if any are taken. The Underwriters propose to offer the Notes in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at such price
less a concession not in excess of % of the principal amount of the Notes.
Underwriters may allow and dealers may reallow a concession not in excess of
% of the principal amount. After the initial public offering, the
Underwriters may change the public offering price and concession.
The Notes are a new issue of securities with no established trading market.
The Underwriters have advised us that they intend to make a market in the Notes,
but they are not obligated to do so and may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Certain Underwriters and their affiliates engage in transactions with and
perform services for the Company in the ordinary course of business. Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc.,
an underwriter of the Notes, is a lender under the credit facility which is to
be repaid in part with the proceeds of the sale of the Notes. Accordingly, this
offering is being made in accordance with Rule 2710(c)(8) of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. J.P. Morgan
Securities Inc. is participating in this offering on the same terms as the other
underwriters and will not receive any benefit in connection with this offering
other than customary managing, underwriting and selling fees.
In connection with this offering, the Underwriters may purchase and sell
the Notes in the open market. These transactions may include over-allotment and
stabilizing transactions in connection with the offering. Stabilizing
transactions consist of certain bids or purchases made to prevent or slow a
decline in the market price of the Notes. Short positions created by the
Underwriters involve
S-12
<PAGE> 13
the Underwriters' sale of a greater number of Notes than they are required to
purchase from the Company in the offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to broker-dealers regarding the
Notes sold in the offering may be reclaimed by the Underwriters if the
Underwriters repurchase the Notes in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market, and, these activities, if commenced, may be discontinued at any
time. These transactions may be conducted in the over-the-counter market or
otherwise.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by John W.
Holleran, General Counsel, and for the Underwriters by Sullivan & Cromwell, New
York, New York. As of December 31, 1997, Mr. Holleran was the beneficial owner
of 592 shares of our common stock.
EXPERTS
The consolidated financial statements incorporated by reference in our
Annual Report on Form 10-K for the year ended December 31, 1997, which has been
incorporated herein by reference, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, dated January 29, 1998, and is incorporated by reference in reliance
upon the authority of said firm as experts in giving such reports.
S-13
<PAGE> 14
BOISE CASCADE OFFICE PRODUCTS CORPORATION
BOISE LOGO
DEBT SECURITIES
----------------------
Boise Cascade Office Products Corporation (the "Company," "we," or "us")
may periodically offer debentures, notes, or other unsecured types of debt in
one or more series ("Debt Securities"). We may offer Debt Securities to raise up
to $300,000,000 (or, if we sell the Debt Securities in foreign or composite
currencies, whatever the equivalent may be at the time of the offering). Terms
of the Debt Securities will reflect market conditions at the time of sale.
We may sell the Debt Securities directly, through agents, to or through
underwriting syndicates led by one or more managing underwriters, or to or
through one or more underwriters acting alone. If we involve any of our agents
or any underwriters in the sale of these securities, then we will include their
names and any applicable commissions or discounts in a prospectus supplement.
Any underwriters, dealers, or agents participating in the offering will be
"underwriters" as defined by the Securities Act of 1933.
----------------------
Along with this Prospectus, the Company will provide a supplement to this
Prospectus for each offering of Debt Securities ("Prospectus Supplement"). The
Prospectus Supplement will describe the amounts, prices, and terms of the Debt
Securities included in that offering ("Offered Securities"). It will also state
the net proceeds the Company will receive from the sale. The Prospectus
Supplement may also update information in this Prospectus. It is important for
you to read both this Prospectus and the Prospectus Supplement before you
invest.
We will issue the Offered Securities in the form of one or more Global
Securities deposited with The Depository Trust Company, New York, New York
("DTC").
----------------------
Neither the SEC nor any state securities commission has approved these
securities. Similarly, these organizations have not determined that this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
This Prospectus is dated: April 15, 1998.
<PAGE> 15
AVAILABLE INFORMATION
The Company files annual, quarterly and special reports, proxy statements,
and other information with the SEC. You may read and copy any document we file
at the public reference rooms maintained by the SEC at: Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C., 20549; 7 World Trade Center,
New York, New York, 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661. Copies of materials filed with the SEC can be obtained from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov.
Reports, proxy and information statements, and other information concerning
the Company can also be inspected at the office of the New York Stock Exchange
at 20 Broad Street, New York, NY 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered part of this Prospectus, and later information filed with the SEC
will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed:
1. Annual report on Form 10-K for the year ended December 31, 1997;
and
2. The portions of the Company's Proxy Statement on Schedule 14A for
the annual meeting of shareholders held on April 21, 1998, that
have been incorporated by reference into the 10-K for the year
ended December 31, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Boise Cascade Office Products Corporation
800 W. Bryn Mawr Avenue
Itasca, Illinois 60143-1594
630/775-4228
http://www.bcop.com
You should rely only on the information incorporated by reference or
provided in this Prospectus or the Prospectus Supplement. We have not authorized
anyone to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this Prospectus or the Prospectus Supplement is
accurate as of any date other than the date on the front of the document.
THE COMPANY
Boise Cascade Office Products Corporation is one of the world's premier
business-to-business distributors of products for the office, with operations in
Australia, Canada, France, Germany, Spain, the United Kingdom, and the United
States. We market to large, medium-sized and small businesses as well as home
offices, through both a direct sales force and a catalog marketing program. We
sell a broad line of branded and private label consumable office supplies,
furniture, paper, computer-related items and promotional products. We purchase
most of our products directly from manufacturers and distribute them directly to
end-users.
2
<PAGE> 16
We are a Delaware corporation, and our principal executive office is
located at 800 West Bryn Mawr Avenue, Itasca, Illinois 60143-1594, telephone
630/773-5000. All references to the Company refer, unless the context otherwise
requires, to Boise Cascade Office Products Corporation and its consolidated
subsidiaries.
USE OF PROCEEDS
Unless otherwise stated in the Prospectus Supplement, the net proceeds from
the sale of the Debt Securities will be used to repay debt and for other
corporate purposes. Those other corporate purposes may include acquisitions,
additions to working capital, and capital expenditures.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
(UNAUDITED) (UNAUDITED)
-------------------- ------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)...... 25.4 8.4 5.0 6.9 5.1
==== === === === ===
</TABLE>
(1) Earnings consist of pre-tax earnings plus fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt costs, and that
portion of rentals representative of interest. Interest expense for
operating leases with terms of one year or longer is based on an imputed
interest rate for each lease.
For current information on the Ratio of Earnings to Fixed Charges, please
see our most recent Form 10-K. See "Available Information" and "Incorporation of
Certain Documents by Reference."
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture ("Indenture") dated
as of March 31, 1998, between the Company and U.S. Bank Trust National
Association, Trustee ("Trustee"). The Indenture is filed as an exhibit to the
Registration Statement. All section references are to sections of the Indenture.
All capitalized terms have the meanings specified in the Indenture.
Debt Securities may be issued periodically in one or more series. The
Prospectus Supplement will describe the specific information, including amounts,
prices, and terms, for each series of Debt Securities.
General
The Indenture does not limit the amount of securities that the Company may
issue. In addition to the Debt Securities, we may authorize the issuance of
other securities under the Indenture. The securities will be unsecured
obligations of the Company. They will rank on a parity with all our other
unsecured unsubordinated indebtedness.
Each Prospectus Supplement will describe the following terms of the Offered
Securities:
- The title;
- Any limit on the aggregate principal amount;
- The date(s) the principal is payable;
- The interest rate(s), if any, and the date(s) from which the interest
accrues;
3
<PAGE> 17
- The dates on which the interest, if any, is payable and the regular
record dates for the interest payment dates;
- Whether the Offered Securities are redeemable at our option and the
redemption price(s) and other redemption terms and conditions;
- Whether we are obligated to redeem or purchase the Offered Securities
according to any sinking fund or similar provision or at the Holder's
option and the price(s), period(s), and terms and conditions of that
redemption or purchase obligation;
- If other than the principal amount, the portion of the principal amount
payable if the maturity of the Offered Securities is accelerated;
- Whether the provisions relating to Satisfaction, Discharge, and
Defeasance Prior to Maturity or Redemption apply;
- If other than United States Dollars, the currency or currencies of
payment of principal and any premium and interest (which may be a
composite currency such as the European Currency Unit);
- If payments are based on an index, the manner in which the amount of
principal payments and any premium and interest is to be determined; and
- Any other terms. (Section 301)
Securities may be issued and sold at a substantial discount below their
principal amount. The Prospectus Supplement will describe any special United
States federal income tax consequences and other considerations which apply to
securities issued at a discount or to any Offered Securities denominated or
payable in a foreign currency or currency unit.
Book-Entry System
The Offered Securities will be issued in the form of one or more fully
registered Global Securities. These will be deposited with, or on behalf of, DTC
and registered in the name of DTC or its nominee. Except as described below, the
Global Securities may be transferred, in whole and not in part, only to DTC or
to another nominee of DTC.
DTC has advised the Underwriters and the Company that it is:
- A limited-purpose trust company organized under the laws of the state of
New York;
- A member of the Federal Reserve System;
- A "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- A "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
DTC was created to hold securities for institutions that have accounts with
DTC ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants through electronic book-entry
changes in participants' accounts. DTC's participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. DTC administers
its book-entry system in accordance with its rules and bylaws and legal
requirements.
Upon issuance of a Global Security representing Offered Securities, DTC
will credit (on its book-entry registration and transfer system) the principal
amount to participants' accounts. Ownership of beneficial interests in the
Global Security will be limited to participants or to persons that hold
interests through participants. Ownership of interests in the Global Security
will be shown
4
<PAGE> 18
on, and the transfer of those ownership interests will be effected only through,
records maintained by DTC (with respect to participants' interests) and the
participants (with respect to the owners of beneficial interests in the Global
Security). The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of those securities in definitive form. These
limits and laws may impair the ability to transfer beneficial interests in a
Global Security.
So long as DTC, or its nominee, is the registered holder and owner of a
Global Security, DTC or its nominee, as the case may be, will be considered, for
all purposes under the Indenture, the sole owner and holder of the related
Offered Securities. Except as described below, owners of beneficial interests in
a Global Security will not:
- be entitled to have the Offered Securities registered in their names; or
- receive or be entitled to receive physical delivery of certificated
Offered Securities in definitive form.
Each person owning a beneficial interest in a Global Security must rely on DTC's
procedures (and, if such person holds through a participant, on the
participant's procedures) to exercise any rights of an Offered Securities holder
under the Indenture or the Global Security. We understand that under existing
industry practice, if the Company requests any action of Offered Securities
holders or an owner of a beneficial interest in a Global Security desires to
take any action that DTC (as the holder of the Global Security) is entitled to
take, DTC would authorize the participants to take that action and the
participants would authorize their beneficial owners to take the action or would
otherwise act upon the instructions of their beneficial owners.
The Company will pay principal of and interest on Offered Securities to
DTC. We expect that DTC, upon receipt of any payment of principal or interest,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests. We also expect that
payments by participants to owners of beneficial interests in a Global Security
held through them will be governed by standing instructions and customary
practices (as is the case with securities held for customers' accounts in
"street name") and will be the responsibility of the participants. Neither the
Company nor the Trustee will have any responsibility or liability for:
- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Security for any Offered
Securities;
- maintaining, supervising, or reviewing any records relating to any
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- the relationship between the participants and the owners of beneficial
interests in a Global Security.
Unless and until they are exchanged in whole or in part for certificated
Offered Securities in definitive form, the Global Securities may not be
transferred except as a whole by DTC to its nominee or by its nominee to DTC or
another nominee.
The Offered Securities may be exchanged for certificated Offered Securities
in definitive form in denominations of $1,000 or multiples thereof if:
1. DTC notifies us that it is unwilling or unable to continue as
depositary for the Global Securities or if at any time it ceases to be a
clearing agency registered under the Securities Exchange Act of 1934;
2. The Company decides at any time not to have all of the Offered
Securities represented by the Global Securities and so notifies the
Trustee; or
3. An Event of Default has occurred and is continuing with respect to
the Offered Securities.
5
<PAGE> 19
If there is such an exchange, certificated Offered Securities will be
issued in authorized denominations and registered in such names as DTC directs.
Subject to the foregoing, the Global Securities are not exchangeable, except for
a Global Security(ies) of the same aggregate denomination to be registered in
DTC's or its nominee's name.
COVENANTS OF THE COMPANY
Certain Definitions Applicable to Covenants
"Attributable Debt" means the total net amount of rent required to be paid
during the remaining primary term of any particular lease under which any person
is at the time liable, discounted at the rate per annum equal to the weighted
average interest rate borne by the Debt Securities outstanding under the
Indenture. (Section 101)
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting:
(1) all liabilities, other than (a) deferred income taxes, (b) Funded Debt, and
(c) shareholders' equity, and (2) all goodwill, trade names, trademarks,
patents, organization expenses, and other like intangibles of the Company and
its consolidated subsidiaries, all as set forth in the most recent quarterly
balance sheet of the Company and its consolidated subsidiaries. (Section 101)
"Funded Debt" means (1) all indebtedness for money borrowed having a
maturity of more than 12 months from the date as of which the determination is
made or having a maturity of 12 months or less but by its terms being renewable
or extendable beyond 12 months from such date at the borrower's option, and (2)
rental obligations payable more than 12 months from such date under leases which
are capitalized in accordance with generally accepted accounting principles.
(Section 101)
"Principal Property" means any distribution center, warehouse or other
facility owned by the Company or any Restricted Subsidiary which is located
within the present 50 states of the United States and the gross book value of
which (without deduction of any depreciation reserves) on the date as of which
the determination is being made exceeds 1 1/2% of Consolidated Net Tangible
Assets, other than properties or any portion of a particular property which in
the opinion of the Board of Directors is not of material importance to the
Company's business. (Section 101)
"Restricted Subsidiary" means a Subsidiary of the Company (1) substantially
all the property of which is located, or substantially all of the business of
which is carried on, within the present 50 states of the United States, (2)
which owns a Principal Property, and (3) which is not primarily engaged in the
development and sale or financing of real property. (Section 101)
"Secured Debt" means Debt secured by a Mortgage on any Principal Property
of the Company or any Restricted Subsidiary or on any shares of stock or Debt of
a Restricted Subsidiary, as set forth in Section 1004 of the Indenture. (Section
101)
"Subsidiary" of the Company means a corporation more than 50% of the voting
stock of which is owned directly or indirectly by the Company, one or more
Subsidiaries of the Company, or the Company and one or more Subsidiaries.
(Section 101)
Restrictions on Secured Debt
Neither the Company nor any Restricted Subsidiary shall incur, issue,
assume, or guarantee any indebtedness for money borrowed ("Debt"), secured by a
mortgage, pledge or lien ("Mortgage") on any Principal Property of the Company
or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted
Subsidiary, unless the Company secures or causes such Restricted
6
<PAGE> 20
Subsidiary to secure the Debt Securities issued under the Indenture equally and
ratably with (or, at the Company's option, prior to) such Secured Debt, or
unless
(x) the aggregate amount of all such Secured Debt, together with
(y) all Attributable Debt of the Company and its Restricted Subsidiaries
with respect to sale and leaseback transactions involving Principal Properties
(with the exception of such transactions which are excluded as described in
"Restrictions on Sales and Leasebacks" below)
would not exceed 10% of consolidated Net Tangible Assets.
The above restriction does not apply to, and there will be excluded from
Secured Debt in any computation under such restriction, Debt secured by:
1. any Mortgage existing on any asset of, or on shares of stock or
Debt of, any Person at the time such Person becomes a Restricted Subsidiary
and not created in contemplation of such event;
2. any Mortgage on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Mortgage attaches to such asset concurrently with or
within 90 days after the acquisition thereof, or in the case of an asset
under construction, within 90 days after receipt of an occupancy
certificate therefor;
3. any Mortgage on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Company or a Restricted
Subsidiary and not created in contemplation of such event;
4. any Mortgage existing on any asset prior to the acquisition thereof
by the Company or a Restricted Subsidiary and not created in contemplation
of such acquisition;
5. Mortgages in favor of the Company or a Restricted Subsidiary;
6. Mortgages securing industrial revenue or pollution control bonds;
or
7. any Mortgage arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses, provided that such Debt is not increased and is not secured by any
additional assets. (Section 1004)
Restrictions on Sales and Leasebacks
Neither the Company nor any Restricted Subsidiary may enter into any sale
and leaseback transaction involving any Principal Property, unless at the time
of such transaction and after giving effect thereto:
(x) the aggregate amount of all Attributable Debt of the Company and
its Restricted Subsidiaries with respect to such transaction, plus
(y) all secured Debt (with the exception of secured Debt which is
excluded as described in "Restrictions on Secured Debt" above)
will not exceed 10% of Consolidated Net Tangible Assets.
This restriction does not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, any sale and
leaseback transaction if:
1. The lease is for a period, including renewal rights, not in excess
of three years;
2. The sale or transfer of the Principal Property is made within 90
days after its acquisition, or in the case of a Principal Property under
construction, within 90 days after receipt of an occupancy certificate
therefor;
7
<PAGE> 21
3. The lease secures or relates to industrial revenue or pollution
control bonds;
4. The transaction is between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries; or
5. The Company or such Restricted Subsidiary, within 180 days after
the sale is completed, applies to the retirement of Funded Debt of the
Company or a Restricted Subsidiary, or to the purchase of other property
which will constitute Principal Property of a value at least equal to the
value of the Principal Property leased, an amount not less than the greater
of (i) the net proceeds of the sale of the Principal Property leased or
(ii) the fair market value of the Principal Property leased, as determined
by the Board of Directors.
The amount to be applied to the retirement of Funded Debt shall be reduced
by (x) the principal amount of any debentures or notes (including securities
issued under the Indenture) of the Company or a Restricted Subsidiary
surrendered within 180 days after such sale to the applicable trustee for
retirement and cancellation and (y) the principal amount of Funded Debt, other
than items referred to in the preceding clause (x), voluntarily retired by the
Company or a Restricted Subsidiary within 180 days after such sale. (Section
1005)
Merger or Consolidation
The Company shall not enter into any consolidation or merger with or into
any other corporation (other than a merger with a wholly or majority-owned
Subsidiary in which the Company is the surviving corporation) and no conveyance
or transfer of its property substantially as an entirety to another Person may
be made:
1. Unless:
(i) The surviving corporation or acquiring Person shall be a
corporation organized and existing under the laws of the United States of
America, any state thereof, or the District of Columbia and shall expressly
assume the payment of principal of and any premium and interest on the Debt
Securities and the Performance of the covenants in the Indenture;
(ii) Immediately after giving effect to such transaction, no Event of
Default, and no event which after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(iii) The Company has delivered the required Officers' Certificate and
Opinion of Counsel to the Trustee; or
2. If, as a result thereof, any Principal Property of the Company or any
Restricted Subsidiary would become subject to a Mortgage which is not expressly
excluded from the restrictions or permitted by the provisions of the
"Restrictions on Secured Debt" covenant unless all the outstanding Debt
Securities are secured by a lien upon such Principal Property equal with (or at
the Company's option, prior to) that of the Debt secured by such Mortgage.
(Section 801)
MODIFICATION AND WAIVER
The Company and the Trustee may amend the Indenture with the consent of the
Holders of not less than 66 2/3% in aggregate principal amount of the
outstanding securities of each series issued under the Indenture affected by the
amendment. However, the Company and the Trustee may not, without the consent of
the Holder of each Security affected thereby:
1. Change the Stated Maturity of the principal of or any installment
of the principal of or interest, if any, on any such Security;
2. Reduce the principal amount of, the rate of interest, if any, on or
any premium payable upon the redemption of, any such Security;
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<PAGE> 22
3. Reduce the principal amount due upon acceleration of the maturity
of an Original Issue Discount Security;
4. Change the place or currency of payment of principal of (or premium
or interest, if any, on) any such Security;
5. Impair the right to institute suit to enforce any payment on or
after the Stated Maturity or Redemption Date of such Security;
6. Change the Indenture to permit amendments with the consent of the
Holders of less than 66 2/3% in principal amount of securities of any
affected series; or
7. Modify the above requirements or reduce the percentage of
outstanding securities necessary to waive compliance with certain
provisions of the Indenture or to waive certain defaults and their
consequences. (Section 902)
The Holders of a majority in aggregate principal amount of the outstanding
securities of any series may waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1008)
SATISFACTION, DISCHARGE, AND DEFEASANCE
Covenant Defeasance
If the Company deposits with the Trustee, in trust, at or before maturity
or redemption of the outstanding securities of any series, money or direct
obligations of the United States of America or obligations the principal of and
interest on which are guaranteed by the United States of America in such amounts
and maturing at such times that the proceeds of such obligations to be received
upon the respective maturities and interest payment dates of such obligations
will provide funds sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay when due the principal of (and premium,
if any) and each installment of principal of (and premium, if any) and interest
on any series of outstanding securities at the Stated Maturity of such principal
or installment of principal or interest, as the case may be, then the Company
may omit to comply with certain terms of the Indenture with respect to that
series of securities, including the restrictive covenants described above.
Further, the Events of Default described in clauses (3) and (4) under "Events of
Default" below shall not apply. Defeasance of securities of any series is
subject to the satisfaction of certain conditions, including among others:
1. The absence of an Event of Default or event which with notice or
lapse of time would become an Event of Default at the date of the deposit;
and
2. That such deposit will not result in a breach of, or constitute a
default under, any instrument by which the Company is bound. (Sections 402
and 404)
Defeasance and Discharge of any Series
Upon the deposit of money or securities as contemplated in the preceding
paragraph and the satisfaction of certain other conditions, the Company may also
omit to comply with its obligation to pay the principal of (and premium, if any)
and interest on a particular series of securities. Any Events of Default with
respect thereto shall not apply, and thereafter, the Holders of securities of
such series shall be entitled only to payment out of the money or securities
deposited with the Trustee. Such conditions include among others:
1. No Event of Default or event which, with notice or lapse of time,
would become an Event of Default exists at the date of deposit;
2. the Company delivers to the Trustee an Opinion of Counsel of a
nationally recognized tax counsel that Holders of the securities of such
series will not recognize income, gain, or loss for federal income tax
purposes as a result of such deposit and defeasance and will be subject
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<PAGE> 23
to federal income tax in the same amounts, in the same manner, and at the
same times as would have been the case if such deposit and defeasance had
not occurred; and
3. The Company receives an Officer's Certificate stating that
discharge and defeasance will cause such securities or securities of that
series to be delisted from any securities exchange on which they are
listed. (Sections 403 and 404)
Satisfaction and Discharge of Indenture and Securities
The Indenture shall, upon Company Request, cease to be in effect (except
for certain surviving rights expressly provided for in the Indenture) when (A)
all Securities have either been delivered to the Trustee for cancellation or are
due and payable or will become due and payable or will be called for redemption
within one year and the Company has deposited sufficient money in trust with the
Trustee to pay and discharge the entire indebtedness, (B) the Company has paid
all other sums payable by the Company under the Indenture, and (C) the Company
has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent have been complied with.
Federal Income Tax Consequences
Under current federal income tax law, the deposit and defeasance described
above under "Covenant Defeasance" will not result in a taxable event to any
Holder of securities or otherwise affect the federal income tax consequences of
an investment in securities of any series.
The federal income tax treatment of the deposit and defeasance described
above under "Defeasance and Discharge of any Series" is not clear. A deposit and
defeasance is likely to be treated as a taxable exchange of such securities for
beneficial interests in the trust consisting of the deposited money or
securities. In that event, a Holder of securities would be required to recognize
gain or loss equal to the difference between the Holder's adjusted basis for the
securities and the fair market value of the Holder's beneficial interest in such
trust. Thereafter, such Holder would be required to include in income a share of
the income, gain, and loss of the trust. As described above, except in certain
limited circumstances involving a deposit made within one year of maturity or
redemption (see Section 401 of the Indenture), it is a condition to such a
deposit and defeasance that the Company obtain an opinion of tax counsel to the
effect that such deposit and defeasance will not alter the Holders' tax
consequences that would have been applicable in the absence of the deposit and
defeasance. Purchasers of the Debt Securities should consult their own advisers
with respect to the tax consequences to them of such deposit and defeasance,
including the applicability and effect of tax laws other than federal income tax
law.
EVENTS OF DEFAULT
The Indenture defines an "Event of Default" with respect to securities of
each series as one or more of the following events:
1. Default in the payment of any interest on any security of that
series for 30 days after becoming due;
2. Default in the payment of principal of or any premium on any
security of that series when due;
3. Default in the deposit of any sinking fund payment when due under
the terms of the securities of that series;
4. Default in the performance, or breach, of any other covenant or
warranty of the Company in the Indenture for 90 days after notice;
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<PAGE> 24
5. Involuntary acceleration of the maturity of indebtedness in excess
of $5,000,000 for money borrowed by the Company or any of its Subsidiaries,
if the acceleration is not rescinded or annulled, or the indebtedness is
not discharged, within 10 days after notice;
6. Certain events of bankruptcy, insolvency, or reorganization; and
7. Any other Event of Default provided with respect to securities of
that series issued under the Indenture. (Section 501)
If any Event of Default described in clauses (1), (2), or (7) above shall
occur and be continuing, then either the Trustee or the Holders of at least 25%
(or if the securities of the series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that series)
in principal amount of the outstanding securities of that series may accelerate
the Maturity of the securities of that series. If an Event of Default described
in clauses (3), (4), (5), or (6) above shall occur and be continuing, then
either the Trustee or the Holders of at least 25% (or if the securities are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) in principal amount of the outstanding
securities issued under the Indenture may accelerate the Maturity of all
outstanding securities. (Section 502)
The Indenture provides that if a default occurs, the Trustee shall give the
Holders of securities of that series notice of the default as required or
provided by the Trust Indenture Act. (Section 602)
The Indenture requires the Company to furnish to the Trustee an annual
statement by certain Company officers that to the best of their knowledge the
Company is not in default of any of its obligations under the Indenture or, if
there has been a default, specifying each such default. (Section 1006)
The Holders of a majority in principal amount of the outstanding securities
of any series affected will have the right, subject to certain limitations, to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the securities of such series and to waive certain
defaults. (Section 512)
Subject to certain provisions, the Trustee will not be obligated to
exercise any of its rights or powers under the Indenture at the request of any
of the Holders of securities unless they shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses, and liabilities
which the Trustee might incur in compliance with such request. (Section 603)
CONCERNING THE TRUSTEE
The Company and its consolidated subsidiaries maintain customary banking
relationships with U.S. Bank Trust National Association (the Trustee under the
Indenture) and/or its affiliates.
GOVERNING LAW
The Indenture and the securities shall be governed by and construed under
New York law.
PLAN OF DISTRIBUTION
We may sell Debt Securities to one or more underwriters for public offering
and sale or may sell Debt Securities to investors directly or through agents.
The Prospectus Supplement will describe the method of distribution.
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<PAGE> 25
The Offered Securities may be distributed periodically in one or more
transactions at:
- A fixed price or prices, which may be changed;
- Market prices prevailing at the time of sale;
- Prices related to the prevailing market prices; or
- Negotiated prices.
In connection with the sale of Offered Securities, underwriters or agents may
receive compensation from us in the form of underwriting discounts or
commissions. They may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters or agents may sell
Offered Securities to or through dealers. Those dealers may receive compensation
in the form of discounts, concessions, or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation which we pay to underwriters or agents in
connection with the Offered Securities and any discounts, concessions, or
commissions allowed by underwriters to participating dealers will be described
in the Prospectus Supplement. Underwriters, dealers, and agents participating in
the distribution of the Offered Securities may be deemed to be underwriters, and
any discounts and commissions received by them and any profit realized by them
on resale of the Offered Securities may be deemed to be underwriting discounts
and commissions, under the Securities Act of 1933. Underwriters or agents and
their controlling persons, dealers, and agents may be entitled, under agreements
entered into with us, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act of 1933.
If indicated in the Prospectus Supplement, we will authorize dealers or
other persons acting as our agents to solicit offers by certain institutions to
purchase Offered Securities from us pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date(s) stated in the
Prospectus Supplement. Each Contract will be for an amount not less than (and
the aggregate amount of Offered Securities sold pursuant to Contracts shall be
not less or more than) the respective amounts stated in the Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions. Purchasers will in all cases be subject to the Company's approval.
The obligations of any purchaser under any Contract will not be subject to any
conditions except:
1. The purchase by an institution of the Offered Securities covered by
its Contract shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is
subject, and
2. If the Offered Securities are being sold to underwriters, the
Company shall have sold to the underwriters the total principal amount of
the Offered Securities less the principal amount covered by Contracts.
The underwriters will not have any responsibility regarding the validity or
performance of the Contracts.
Each issue of Offered Securities will be a new issue of securities with no
established trading market. Any underwriters to whom we sell Offered Securities
for public offering and sale may make a market in the Offered Securities.
Nevertheless, the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Offered Securities.
Certain of the underwriters and their associates may engage in transactions
with and perform services for us in the ordinary course of business.
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<PAGE> 26
VALIDITY OF OFFERED SECURITIES
The validity of the Offered Securities will be passed upon for us by John
W. Holleran, our General Counsel, and for the underwriters or agents, if any, by
Sullivan & Cromwell, New York, New York. As of December 31, 1997, Mr. Holleran
was the beneficial owner of 592 shares of our common stock.
EXPERTS
The financial statements incorporated by reference in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report which accompanies those statements, and are
incorporated by reference in reliance upon the authority of that firm as experts
in accounting and auditing in giving such reports.
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<PAGE> 27
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements.............. S-2
The Company............................. S-2
Business Model.......................... S-3
Business Strategy....................... S-4
Recent Developments..................... S-4
Relationship with BCC................... S-5
Use of Proceeds......................... S-5
Capitalization Summary.................. S-6
Selected Consolidated Financial Data.... S-7
Management's Discussion and Analysis.... S-8
Description of Notes.................... S-11
Underwriting............................ S-12
Validity of Notes....................... S-13
Experts................................. S-13
PROSPECTUS
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company............................. 2
Use of Proceeds......................... 3
Ratio of Earnings to Fixed Charges...... 3
Description of Debt Securities.......... 3
Plan of Distribution.................... 11
Validity of Offered Securities.......... 13
Experts................................. 13
</TABLE>
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BOISE LOGO
BOISE CASCADE OFFICE PRODUCTS CORPORATION
$150,000,000
% NOTES DUE 2005
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
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