UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Transition Period From ____________ to ____________
Commission File number 1-13662
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 October 31, 1999
Common Stock, $.01 par value 65,800,212
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 September 30
1999 1998
Net sales $ 838,521 $ 760,437
Cost of sales, including purchases
from Boise Cascade Corporation
of $76,072 and $71,731 630,516 571,978
___________ ___________
Gross profit 208,005 188,459
___________ ___________
Selling and warehouse operating
expense 157,271 145,554
Corporate general and administrative
expense, including amounts paid
to Boise Cascade Corporation
of $817 and $657 12,690 11,985
Goodwill amortization 3,709 3,162
___________ ___________
173,670 160,701
___________ ___________
Income from operations 34,335 27,758
___________ ___________
Interest expense 5,932 6,553
Other income, net 487 422
___________ ___________
Income before income taxes 28,890 21,627
Income tax expense 12,507 9,800
___________ ___________
Net income $ 16,383 $ 11,827
Earnings per share-basic $ .25 $ .18
Average common shares
outstanding-basic 65,800,212 65,785,573
Earnings per share-diluted $ .25 $ .18
Average common shares
outstanding-diluted 65,800,212 65,812,831
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(expressed in thousands, except share information)
(unaudited)
Nine Months Ended September 30
1999 1998
Net sales $2,488,469 $2,253,108
Cost of sales, including purchases
from Boise Cascade Corporation
of $220,396 and $206,932 1,848,197 1,680,762
___________ ___________
Gross profit 640,272 572,346
___________ ___________
Selling and warehouse operating
expense 484,814 431,163
Corporate general and administrative
expense, including amounts paid
to Boise Cascade Corporation
of $2,458 and $1,944 38,098 37,797
Goodwill amortization 11,133 9,357
Other operating income (3,195) -
___________ ___________
530,850 478,317
___________ ___________
Income from operations 109,422 94,029
___________ ___________
Interest expense 18,180 19,903
Other income, net 1,286 1,301
___________ ___________
Income before income taxes 92,528 75,427
Income tax expense 39,377 32,283
___________ ___________
Net income $ 53,151 $ 43,144
Earnings per share-basic $ .81 $ .66
Average common shares
outstanding-basic 65,793,770 65,725,640
Earnings per share-diluted $ .81 $ .66
Average common shares
outstanding-diluted 65,800,780 65,792,665
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
(unaudited)
September 30 December 31
ASSETS 1999 1998 1998
Current
Cash and cash equivalents $ 19,560 $ 39,729 $ 31,838
Receivables, less allowances
of $10,042, $8,730, and $9,539 447,720 396,045 394,013
Inventories 210,783 213,170 226,955
Deferred income tax benefits 20,647 16,313 14,335
Other 31,741 19,860 31,532
___________ ___________ ___________
730,451 685,117 698,673
___________ ___________ ___________
Property
Land 28,483 27,586 28,572
Buildings and improvements 156,369 142,037 143,192
Furniture and equipment 229,442 199,902 214,611
Accumulated depreciation (173,759) (143,603) (149,071)
___________ ___________ ___________
240,535 225,922 237,304
___________ ___________ ___________
Goodwill, net of amortization
of $48,241, $33,927, and $37,108 488,400 442,657 494,883
Other assets 39,007 39,677 30,885
___________ ___________ ___________
Total assets $1,498,393 $1,393,373 $1,461,745
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)
September 30 December 31
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 1998
Current
Notes payable $ 70,090 $ 74,000 $ 72,100
Current portion of long-term debt 2,593 2,531 2,065
Accounts payable
Trade and other 294,573 288,198 279,928
Boise Cascade Corporation 38,256 28,387 29,297
___________ ___________ ___________
332,829 316,585 309,225
___________ ___________ ___________
Accrued liabilities
Compensation and benefits 45,662 32,154 38,144
Income taxes payable - - 796
Taxes, other than income 12,352 16,973 9,466
Other 84,049 45,062 36,861
___________ ___________ ___________
142,063 94,189 85,267
___________ ___________ ___________
547,575 487,305 468,657
___________ ___________ ___________
Other
Long-term debt, less current portion 310,774 317,480 354,224
Other 28,371 33,225 75,950
___________ ___________ ___________
339,145 350,705 430,174
___________ ___________ ___________
Shareholders' equity
Common stock, $.01 par value,
200,000,000 shares authorized;
65,800,212, 65,758,524, and
65,758,524 shares issued and
outstanding at each period 658 658 658
Additional paid-in capital 359,557 359,224 359,224
Retained earnings 261,631 198,558 208,480
Accumulated other comprehensive
income (loss) (10,173) (3,077) (5,448)
___________ ___________ ___________
Total shareholders' equity 611,673 555,363 562,914
___________ ___________ ___________
Total liabilities and
shareholders' equity $1,498,393 $1,393,373 $1,461,745
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)
Nine Months Ended September 30
1999 1998
Cash provided by (used for) operations
Net income $ 53,151 $ 43,144
Items in income not using (providing) cash
Depreciation and amortization 45,148 37,106
Deferred income taxes (4,020) (3,392)
Restructuring reserve (3,988) -
Receivables (53,707) (37,185)
Inventories 19,869 (13,991)
Accounts payable and accrued liabilities 34,331 53,824
Current and deferred income taxes (5,408) (6,808)
Other, net 3,366 8,304
__________ __________
Cash provided by operations 88,742 81,002
__________ __________
Cash used for investment
Expenditures for property and equipment (33,429) (47,710)
Acquisitions (7,619) (4,042)
Other, net (14,970) (28,479)
__________ __________
Cash used for investment (56,018) (80,231)
__________ __________
Cash provided by (used for) financing
Additions to long-term debt 47,569 159,645
Payments of long-term debt (90,491) (201,740)
Notes payable ( 2,010) 50,700
Other, net (70) 1,598
__________ __________
Cash provided by (used for) financing (45,002) 10,203
__________ __________
Increase (decrease) in cash and
cash equivalents (12,278) 10,974
Balance at beginning of the period 31,838 28,755
__________ __________
Balance at September 30 $ 19,560 $ 39,729
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 one of the world's premier
business-to-business distributors of products for the office.
At September 30, 1999, Boise Cascade Corporation owned approximately
81% of our outstanding common stock.
The quarterly financial statements of the Company and its subsidiaries
have not been audited by independent public accountants, but in the
opinion of management, all adjustments necessary to present fairly the
results for the periods have been included. Except as may be disclosed
in the notes to the Financial Statements, the adjustments made were of a
normal, recurring nature. Quarterly results are not necessarily
indicative of results that may be expected for the year. We have
prepared the statements pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These
quarterly financial statements should be read together with the
statements and the accompanying notes included in our 1998 Annual
Report.
(2) NEW ACCOUNTING STANDARDS. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This Statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet
as either an asset or liability measured at its fair value. In
July 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 that delayed the effective date of
Statement 133 until fiscal years beginning after June 15, 2000. We plan
to adopt this Statement in the first quarter of 2001. We are in the
process of reviewing this Statement. Adoption of this Statement is not
expected to have a significant impact on our results of operations or
financial position.
(3) RESTRUCTURING RESERVE. During the second quarter of 1999, we
revised the amount of a restructuring reserve that we established
in the fourth quarter of 1998 for our U.K. operations. The
restructuring program was less costly than originally anticipated.
As a result, we recorded an increase to operating income of approximately
$4.0 million ($2.7 million, net of tax benefit or $.04 per share-diluted)
in the second quarter of 1999. Of this amount, about $3.2 million was
included in "Other operating income" and about $0.8 million was included
in "Cost of sales" in the Statements of Income.
The restructuring liability is included in "Accrued liabilities, other"
in the Balance Sheets. Changes in the reserve balance through
September 30, 1999, were as follows:
Termination Legal and
payments to professional Leasehold Other Inventory
employees fees terminations costs writedown
(expressed in thousands)
Beginning balance $ 1,400 $ 900 $ 3,400 $ 4,400 $ 1,000
Charges against
reserve (200) - - (3,600) -
Balance at ________ _______ ________ ________ ________
December 31, 1998 $ 1,200 $ 900 $ 3,400 $ 800 $ 1,000
Charges against
reserve (600) (200) (400) (300) (200)
Reserves credited
to income (500) (600) (1,600) (500) (800)
________ _______ ________ ________ ________
Balance at
September 30, 1999 $ 100 $ 100 $ 1,400 $ - $ -
Reserves credited to income reflect lower legal and professional fees,
a sublease on one of the facilities, a decision to retain a small
printing portion of the business, and fewer terminations of employees.
Termination payments to employees are the result of workforce reductions
of about 90 warehouse and administrative support associates as
of September 30, 1999. We expect the restructuring to result in total
workforce reductions of approximately 100 warehouse and administrative
support associates.
(4) EARNINGS PER SHARE. Basic earnings per share for the three and nine
months ended September 30, 1999 and 1998, were computed by dividing
net income by the weighted average number of shares of common stock
outstanding for the periods. Diluted earnings per share for the
three and nine months ended September 30, 1999 and 1998, include the
weighted average impact of stock options assumed exercised using the
treasury method. Earnings per share is computed independently for
each period.
For the three months For the nine months
ended September 30 ended September 30
1999 1998 1999 1998
BASIC EARNINGS PER SHARE
Net income $ 16,383 $ 11,827 $ 53,151 $ 43,144
Shares of common stock:
Weighted average
shares outstanding 65,800,212 65,757,737 65,775,016 65,700,493
Effect of contingent
shares - 27,836 18,754 25,147
65,800,212 65,785,573 65,793,770 65,725,640
Basic earnings per share $ .25 $ .18 $ .81 $ .66
DILUTED EARNINGS PER SHARE
Net income $ 16,383 $ 11,827 $ 53,151 $ 43,144
Shares of common stock:
Weighted average
shares outstanding 65,800,212 65,757,737 65,775,016 65,700,493
Effect of options - 27,258 7,010 67,025
Effect of contingent
shares - 27,836 18,754 25,147
65,800,212 65,812,831 65,800,780 65,792,665
Diluted earnings per share $ .25 $ .18 $ .81 $ .66
(5) COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) for the
periods include the following:
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
(expressed in thousands)
Net income $16,383 $11,827 $53,151 $43,144
Other comprehensive
income (loss)
Cumulative foreign
currency translation
adjustment, net of
income taxes 3,108 2,720 (4,725) 3,955
________ ________ ________ ________
Comprehensive income,
net of income taxes $19,491 $14,547 $48,426 $47,099
(6) 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 the expected useful life of the product.
If the useful life of the product is changed, the amortization period is
adjusted. "Other assets" in the Balance Sheets includes deferred
software costs of $30.6 million, $24.9 million, and $26.9 million at
September 30, 1999 and 1998, and December 31, 1998.
(7) DEBT. On June 26, 1997, we entered into a $450 million revolving credit
agreement with a group of banks that expires in June 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. At September 30, 1999,
borrowings under the agreement totaled $155 million. 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 October 1998, we entered into an interest rate swap with a
notional amount of $25 million that expires in 2000. The swap results in
an effective fixed interest rate of 5.0% with respect to $25 million of
our revolving credit agreement borrowings. We are exposed to credit-
related gains or losses in the event of nonperformance by the
counterparty to the swap; however, we do not expect the counterparty
to fail to meet their obligations.
We have $300 million of shelf capacity for debt securities registered
with the Securities and Exchange Commission. In May 1998, we issued
$150 million of 7.05% Notes ("Notes") under this registration statement.
The Notes are due May 15, 2005. We have $150 million of borrowing
capacity remaining under this registration statement.
In addition to the amount outstanding under the revolving credit
agreement and Notes, we had $70.1 million and $74.0 million of short-term
notes payable at September 30, 1999 and 1998. The maximum amount of
short-term notes payable during the nine months ended September 30, 1999
and 1998, was $111.9 million and $116.6 million. The average amount of
short-term notes payable during the nine months ended September 30, 1999
and 1998, was $73.6 million and $64.7 million. The weighted average
interest rates for these borrowings were 5.5% and 5.9% for the periods.
Cash payments for interest were $15.6 million and $16.5 million for the
nine months ended September 30, 1999 and 1998.
(8) TAXES. The estimated annual tax provision rate for the first nine months
of 1999 and 1998 was approximately 43%.
For the nine months ended September 30, 1999 and 1998, we paid income
taxes, net of refunds received, of $46.3 million and $39.9 million.
(9) ACQUISITIONS. During the first nine months of 1999 we completed two
acquisitions, and during the first nine months of 1998 we also completed
two acquisitions, all of which were accounted for under the purchase
method of accounting. Accordingly, the purchase prices were allocated
to the assets acquired and liabilities assumed based upon their estimated
fair values. 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
generally being amortized over 40 years. The results of operations of
the acquired businesses are included in our operations subsequent to the
dates of acquisition.
In January 1999, we acquired the office supply business of Wallace
Computer Services, based in Lisle, Illinois. In September 1999, we
acquired Supply West, based in Perth, Western Australia. The
transactions were completed for cash of $7.6 million and the recording
of $2.6 million of acquisition liabilities.
In January 1998, we acquired the direct marketing business of Fidelity
Direct, based in Minneapolis, Minnesota. In February 1998, we acquired
the direct marketing business of Sistemas Kalamazoo, based in Spain.
These transactions were completed for cash of $4.0 million, debt assumed
of $0.2 million, and the recording of $3.8 million of acquisition
liabilities.
Unaudited pro forma results of operations reflecting the acquisitions
would have been as follows. If the 1999 acquisitions had occurred on
January 1, 1999, there would have been no significant change in the
results of operations for the first nine months of 1999. If the 1999 and
1998 acquisitions had occurred January 1, 1998, there would have been no
significant change in the results of operations for the first nine months
of 1998. This unaudited pro forma financial information does not
necessarily represent the actual results of operations that would have
occurred if the acquisitions had taken place on the dates assumed.
In 1997, we acquired 100% of the shares of Jean-Paul Guisset S.A.
("JPG"). JPG is a direct marketer of office products in France. The
negotiated purchase price was approximately FF850.0 million
(US$144.0 million) plus a price supplement payable in the year 2000,
if certain earnings and sales growth targets are reached.
The maximum amount of the price supplement is FF300.0 million.
In 1998, we made a partial payment of the price supplement of
FF27.0 million (US$4.4 million). At September 30, 1999, we have a
liability for the maximum remaining amount of the price supplement,
FF273.0 million (US$43.5 million), which is included in "Other current
liabilities" in the Balance Sheets.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three Months Ended September 30, 1999, Compared with Three Months Ended
September 30, 1998
Results of Operations
Net sales in the third quarter of 1999 increased 10% to $838.5 million,
compared with $760.4 million in the third quarter of 1998. The growth in
sales resulted primarily from same-location sales growth. Same-location sales
increased 7% in the third quarter of 1999, compared with sales in the third
quarter of 1998. Excluding the negative impact of paper price changes and
foreign currency changes, same-location sales increased 8%.
Cost of sales, which includes the cost of merchandise sold, the cost to
deliver products to customers, and the occupancy costs of our facilities,
increased to $630.5 million in the third quarter of 1999, which was 75.2% of
net sales. This compares with $572.0 million reported in the same period of
the prior year, which represented 75.2% of net sales. Gross profit as a
percentage of net sales was 24.8% for both the third quarters of 1999 and 1998
but decreased from 26.5% of net sales in the second quarter of 1999. The
decrease in gross profit from the second quarter of 1999 was primarily due to
rising paper prices. Paper prices have been rising during 1999. We are
passing these price increases along to our customers, but with a lag, which
negatively affected our gross margins in the quarter.
Operating expense was 20.7% of net sales in the third quarter of 1999,
compared with 21.1% in the third quarter of 1998. Within the operating
expense category, selling and warehouse operating expense was 18.8% of net
sales in the third quarter of 1999, compared with 19.1% in the third quarter
of 1998. This decrease resulted, in part, from lower operating costs in
Canada as we resolved the warehouse integration issues in our new distribution
center. Corporate general and administrative expense was 1.5% of net sales in
the third quarter of 1999, compared with 1.6% in 1998. Goodwill amortization
increased to $3.7 million in the third quarter of 1999, compared with $3.2
million in the third quarter of 1998. The increase in goodwill amortization
was the result of additional goodwill arising from our acquisitions.
Income from operations in the third quarter of 1999 increased to $34.3
million, or 4.1% of net sales, compared to our third quarter 1998 operating
income of $27.8 million, or 3.7% of net sales. Compared to third quarter
1998, our third quarter 1999 operating income includes an improvement of
approximately $1.2 million in our European operations affected by our
restructuring efforts. This improvement is primarily non-cash and mainly
represents the 1998 losses incurred in our joint venture with Otto Versand.
Interest expense was $5.9 million in the third quarter of 1999, compared with
$6.6 million in the third quarter of 1998. The decrease in interest expense
is due to lower debt balances compared with the prior period.
Net income in the third quarter of 1999 was $16.4 million, or 2.0% of net
sales, compared with $11.8 million, or 1.6% of net sales in the same period of
the prior year.
Nine Months Ended September 30, 1999, Compared with Nine Months Ended
September 30, 1998
Net sales for the nine months ended September 30, 1999, increased 10% to $2.5
billion, compared with $2.3 billion a year ago. The increase was due
primarily to same-location sales growth. Same-location sales increased 7%
year to year. Excluding the negative impact of paper price changes and
foreign currency changes, same-location sales grew 9%.
Cost of sales, which includes the cost of merchandise sold, the cost to
deliver products to customers, and the occupancy costs of our facilities,
increased to $1.8 billion for the nine months ended September 30, 1999, which
was 74.3% of net sales. This compares with $1.7 billion reported in the same
period of the prior year, which represented 74.6% of net sales. Gross profit
as a percentage of net sales was 25.7% and 25.4% for the first nine months of
1999 and 1998. The increase was due to higher gross margins in many of our
businesses, with particular strength in our domestic operations. Our higher
margins were primarily the result of lower procurement costs.
Operating expense was 21.3% of net sales for the first nine months of 1999,
compared with 21.2% in the same period of the prior year. Excluding the
impact of nonroutine items associated with restructuring, operating expense
for the first nine months of 1999 was 21.5% (see "Restructuring Reserve"
section for detailed information). Within the operating expense category,
selling and warehouse operating expense was 19.5% of net sales for the first
nine months of 1999, compared with 19.1% in 1998. The increase is due, in
part, to increased investment in our growth initiatives and a modest employee-
wide bonus program implemented during the last half of 1998. Corporate
general and administrative expense was 1.5% of net sales for the first nine
months of 1999, compared with 1.7% in 1998. Goodwill amortization increased
to $11.1 million for the first nine months of 1999, compared with $9.4 million
in 1998. The increase in goodwill amortization was the result of additional
goodwill arising from our acquisitions.
Excluding the impact of nonroutine items, income from operations for the first
nine months of 1999 was $105.4 million, or 4.2% of net sales, compared with
1998 operating income of $94.0 million, or 4.2% of net sales. Compared to the
first nine months of 1998, our operating income for the first nine months of
1999 includes an improvement of approximately $3.1 million in our European
operations affected by our restructuring efforts. This improvement is
primarily non-cash and mainly represents the 1998 losses incurred in our joint
venture with Otto Versand.
Interest expense was $18.2 million for the first nine months of 1999, compared
with $19.9 million in 1998. The decrease in interest expense is due to lower
debt balances compared with the prior period.
Excluding nonroutine items associated with restructuring, net income for the
first nine months of 1999 was $49.2 million, or 2.0% of net sales, compared
with $43.1 million, or 1.9% of net sales, in the same period of the prior
year.
Restructuring Reserve
During the second quarter of 1999, we revised the amount of a restructuring
reserve that we established in the fourth quarter of 1998 for our U.K.
operations. The restructuring program was less costly than originally
anticipated. As a result, we recorded an increase to operating income of
approximately $4.0 million ($2.7 million, net of tax benefit or $.04 per
share-diluted) in the second quarter of 1999. Of this amount, about $3.2
million was included in "Other operating income" and about $0.8 million was
included in "Cost of sales" in the Statements of Income.
The restructuring liability is included in "Accrued liabilities, other" in the
Balance Sheets. Changes in the reserve balance through September 30, 1999,
were as follows:
Termination Legal and
payments to professional Leasehold Other Inventory
employees fees terminations costs writedown
(expressed in thousands)
Beginning balance $ 1,400 $ 900 $ 3,400 $ 4,400 $ 1,000
Charges against
reserve (200) - - (3,600) -
Balance at ________ _______ ________ ________ ________
December 31, 1998 $ 1,200 $ 900 $ 3,400 $ 800 $ 1,000
Charges against
reserve (600) (200) (400) (300) (200)
Reserves credited
to income (500) (600) (1,600) (500) (800)
________ _______ ________ ________ ________
Balance at
September 30, 1999 $ 100 $ 100 $ 1,400 $ - $ -
Reserves credited to income reflect lower legal and professional fees, a
sublease on one of the facilities, a decision to retain a small printing
portion of the business, and fewer terminations of employees. Termination
payments to employees are the result of workforce reductions of about 90
warehouse and administrative support associates as of September 30, 1999. We
expect the restructuring to result in total workforce reductions of
approximately 100 warehouse and administrative support associates.
Liquidity and Capital Resources
Our principal requirements for cash have been to make acquisitions, fund
technology development and working capital needs, 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. Our restructuring
efforts (see "Restructuring Reserve" section) are not expected to have a
material impact on our liquidity.
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. At September 30, 1999, $155 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 October 1998, we entered into an interest
rate swap with a notional amount of $25 million that expires in 2000. The
swap results in an effective fixed interest rate of 5.0% with respect to the
$25 million of our revolving credit agreement borrowings.
We have $300.0 million of shelf capacity for debt securities registered with
the Securities and Exchange Commission. In May 1998, we issued $150.0 million
of 7.05% Notes ("Notes") under this registration statement. The Notes are due
May 15, 2005. We have $150.0 million of borrowing capacity remaining under
this registration statement.
In addition to the amount outstanding under the revolving credit agreement and
Notes, we had short-term notes payable of $70.1 million at September 30, 1999.
The maximum amount of short-term notes payable during the nine months ended
September 30, 1999, was $111.9 million. The average amount of short-term
notes payable during the nine months ended September 30, 1999, was $73.6
million. The weighted average interest rate for these borrowings was 5.5%
As a result of our acquisition activity, we also had short-term acquisition
liabilities of $52.9 million, primarily for the JPG price supplement, at
September 30, 1999, which were included in "Accrued liabilities, other."
Additionally, we had long-term acquisition liabilities of $2.3 million at
September 30, 1999, which were included in "Other long-term liabilities" (see
Note 9, "Acquisitions," in the Notes to Financial Statements for more
information on our acquisition activity.)
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 September 30,
1999, 3.8 million shares remained unissued under this registration statement.
Net cash provided by operations in the first nine months of 1999 was $88.7
million. This was the result of $90.2 million of net income, depreciation and
amortization, and other noncash items, and a $1.5 million decrease in certain
components of working capital. Net cash used for investment in the first nine
months of 1999 was $56.0 million, which included $33.4 million of expenditures
for property and equipment, and $7.6 million for acquisitions. Net cash used
for financing was $45.0 million for the first nine months of 1999, resulting
from reductions in our total debt outstanding.
Net cash provided by operations in the first nine months of 1998 was $81.0
million. This was primarily the result of $76.9 million of net income,
depreciation and amortization, and other noncash items, and a $4.1 million
decrease in certain components of working capital. Net cash used for
investment in the first nine months of 1998 was $80.2 million, which included
$47.7 million of expenditures for property and equipment, and $4.0 million for
acquisitions. Net cash provided by financing was $10.2 million for the first
nine months of 1998, resulting primarily from borrowings we made to fund
technology developments and facility relocations.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. In July
1999, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 137 that delayed the effective date of Statement 133
until fiscal years beginning after June 15, 2000. We plan to adopt this
Statement in the first quarter of 2001. We are in the process of reviewing
this Statement. Adoption of this Statement is not expected to have a
significant impact on our results of operations or financial position.
Year 2000 Computer Issue
We have completed a comprehensive review of our operations worldwide to
identify our preparedness for the year 2000 issue, and we are nearing
completion of a multi-year plan for our operations to address this issue. We
believe that all of the computer systems we use to service our customers in
all of our domestic and foreign locations are now year 2000 compliant.
We have reviewed the year 2000 compliance in our infrastructure (e.g.
telecommunication; heating, ventilation, and air conditioning; security
systems; utilities; warehouse equipment; voice mail systems; desktop and
portable personal computers). We believe that all of our data communications
infrastructure is now compliant and that nearly all of our voice
communications infrastructure (switches, automatic call distribution systems,
and voice mail systems) are compliant. With vendor-supplied software release
upgrades to three of our telephone switches in October, all of our voice
communications infrastructure will be compliant. We believe that all other
infrastructure critical to customer service is now compliant. We are
continuing to perform compliance testing on all residual infrastructure
components. Our four major data centers now have back-up power sources under
our management as a contingency against public utility power outages.
We have discussed the year 2000 issue with our critical suppliers to determine
the extent to which we could be affected if their systems are not year 2000
compliant. Most of our critical suppliers have confirmed they already are
compliant or have specified when they expect to be compliant. We intend to
continue monitoring this compliance.
The most reasonably likely worst case scenario of failure by us or our
suppliers or customers to be year 2000 compliant would be a temporary
inability to process orders, to obtain or deliver products and services to our
customers, or to collect amounts due to us from customers. We are currently
developing contingency plans in the event that critical systems, suppliers, or
customers encounter year 2000 problems.
The overall incremental costs to make our systems year 2000 compliant are
expected to be about $4.5 million. Approximately $4.4 million has been spent
through September 30, 1999. These costs are being expensed as incurred. We
have also incurred costs over the last several years for year 2000 compliant
computer system additions, replacements, and upgrades in order to realize
efficiencies and process improvements. These costs are generally capitalized
and amortized over the expected useful life of the product.
Our discussion of the year 2000 computer issue contains forward-looking
information. We believe our critical computer systems will be year 2000
compliant and the costs to achieve compliance will not materially impact our
financial condition, operating results, or cash flows. Nevertheless, factors
that could cause actual results to differ from our expectations include the
successful implementation of year 2000 initiatives by our customers and
suppliers and our ability to successfully identify and correct all systems
affected by the year 2000 issue.
Business Outlook
Our core North American operations remain strong. We continue to expect our
cross-selling efforts in furniture, computer consumables, promotional
products, and office paper to result in additional sales to our existing
customers. Also, we have developed an approach to serve the middle-market,
which represents businesses of 25 to 100 employees. Our custom-designed sales
effort, Boise Express, targets this market. Growth potential also exists in
developing procurement management offerings for our customers, including
further investments in components of integrated supply and expansion of our
electronic commerce capabilities. The pace of our revenue growth will
partially depend on the success of these initiatives. We are also seeing
merger-driven consolidations among not only some of our large customers but
also among some of our key competitors. As a result, continued same-location
sales growth will depend, in part, on conditions outside our control such as
economic conditions and the competitive environment in which we operate.
Our sales growth also depends, in part, on our ability to identify appropriate
acquisition candidates in the U.S. and internationally. Over the past several
years, acquisitions have contributed significantly to our revenue growth.
Although our acquisition pace has slowed, acquisitions remain an important
part of our growth strategy. We will continue to pursue acquisitions of
businesses that fit our business model.
Our French and Australian operations are performing well, posting double-digit
sales growth and operating income improvement. We are continuing to develop
our direct marketing operations in Spain and Belgium, both of which are
progressing nicely. In the U.K., our newly restructured operations create an
appropriate cost structure and efficient operating model upon which we can
grow this business.
We believe our gross margins will continue to be impacted principally by the
competitive environment in which we operate, including the pricing strategies
established by our competitors. While we believe that our efforts to lower
our procurement costs will be successful over time, there is no assurance that
our gross margins may not decline under competitive pressure. In addition,
office paper has historically impacted our gross margins and operating margins
as paper prices rise or fall. We are uncertain as to the timing or magnitude
of any future changes in paper prices. Also, it is difficult to accurately
predict what favorable or adverse impact changes in paper prices might have on
our future gross margins or financial results. However, we believe our office
paper business can be managed to maintain acceptable margins and cost
effectively provide our customers with this important product. To a lesser
extent our gross margins will be impacted by our ability to lower our delivery
costs and leverage our fixed occupancy costs. Gross margins and operating
expense ratios generally vary among product categories, distribution channels,
and geographic locations. As a result, we expect some fluctuation in these
ratios over time as our sales mix evolves.
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, our ability to implement our operating
strategies, integration, and restructuring plans and to realize cost savings
and efficiencies; the timing and amount of any paper price changes; continued
same-location sales growth; the changing mix of products sold to our
customers; the pace and success of our acquisition program; 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; changes in the competitive environment brought about by
consolidation of customers and competitors, and other 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
risk. Our debt is a combination of variable-rate and fixed-rate debt. We
experience only modest changes in interest expense when market interest rates
change. Consequently, our market risk-sensitive instruments do not subject us
to material market risk exposure. Our operations in Australia, Belgium,
Canada, France, Spain, and the United Kingdom are denominated in currencies
other than U.S. dollars. Most foreign currency transactions have been
conducted in the local currency, with minimal cross-border product movement,
limiting our exposure to changes in currency rates. Changes in our debt and
our continued international expansion could increase these risks. To manage
volatility relating to these exposures, we may enter into various derivative
transactions such as interest rate swaps, rate hedge agreements, and forward
exchange contracts. We use interest rate swaps and rate hedge agreements to
hedge underlying debt obligations or anticipated transactions. For qualifying
hedges, our financial statements reflect interest rate differentials as
adjustments to interest expense over the life of the swap or underlying debt.
We defer gains and losses related to qualifying hedges of foreign currency
firm commitments and anticipated transactions, and we recognize such gains and
losses in income or as adjustments of carrying amounts when the hedged
transaction occurs. We mark to market all other forward exchange contracts
and include unrealized gains and losses in current period net income. We had
no material exposure to losses from derivative financial instruments held at
September 30, 1999. We do not use derivative financial instruments for trading
purposes.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Required exhibits are listed in the Index to Exhibits and are
incorporated by reference.
(b) 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/Thomas J. Jaszka
_____________________________
Thomas J. Jaszka
Vice President and Controller
Date: November 10, 1999
BOISE CASCADE OFFICE PRODUCTS CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1999
Number Description Page
10.1 Form of Executive Officer Severance Agreement,
as amended through August 3, 1999
10.2 Early Retirement Plan for Executive Officers, as
amended through August 3, 1999
10.3 Supplemental Pension Plan, as amended through
August 3, 1999
27 Financial Data Schedule
Exhibit 10.1
[As amended through August 3, 1999]
CONFIDENTIAL
(Date)
[ ]
Dear [ ]:
Boise Cascade Office Products Corporation (the "Company") considers it
essential to the best interests of its stockholders to foster the
continuous employment of key management personnel in the event there is, or
is threatened, a change in control (as defined in this Agreement) of Boise
Cascade Corporation ("Boise Cascade"), the principal shareholder of the
Company. In this connection, the Board of Directors of the Company (the
"Board") recognizes that the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members
of the Company's management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control, although no such
change is now contemplated.
In order to induce you to remain in the employ of the Company in the
face of a change in control and in consideration of your agreement set
forth in Section 2.B hereof, the Company agrees that you shall receive the
severance benefits set forth in this letter agreement in the event your
employment with the Company is terminated prior or subsequent to "change in
control" (as defined in Section 2 hereof) under the circumstances described
below.
1. Term of Agreement. This Agreement amends, supersedes, and
restates in its entirety the Agreement between you and the Company dated
___________, and terminates the Agreement between you and Boise Cascade
dated __________, effective immediately. This amendment shall be effective
on the date hereof and shall continue in effect through [ ];
provided, however, that commencing on [ ], and each January 1
thereafter, the term of this Agreement shall automatically be extended so
as to terminate on the third anniversary of such date, unless, not later
than September 30 of the preceding year, the Company shall have given
notice not to extend this Agreement; provided, however, if a change in
control (as defined in Section 2 hereof) shall have occurred during the
term of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four months beyond the month in which such
change in control occurred.
2. Change in Control.
A. No benefits shall be payable hereunder unless there shall
have been a change in control, as set forth below, and your employment by
the Company shall have been terminated in accordance with Section 3 below.
A "change in control" shall be deemed to have occurred if, at any time when
Boise Cascade owns more than 50% of the outstanding voting securities of
the Company, the event set forth in any one of the following paragraphs
shall have occurred:
(1) Any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of Boise Cascade representing 20% or
more of either the then outstanding shares of common stock of Boise Cascade
or the combined voting power of Boise Cascade's then outstanding
securities; provided, however, if such Person acquires securities directly
from Boise Cascade, such securities shall not be included unless such
Person acquires additional securities which, when added to the securities
acquired directly from Boise Cascade, exceed 20% of Boise Cascade's then
outstanding shares of common stock or the combined voting power of Boise
Cascade's then outstanding securities; and provided further that any
acquisition of securities by any Person in connection with a transaction
described in Subsection 2A(3)(i) of this Agreement shall not be deemed to
be a change in control of Boise Cascade; or
(2) The following individuals cease for any reason to
constitute at least 66 2/3% of the number of directors of Boise Cascade
then serving: individuals who, on the date hereof, constitute the board of
directors of Boise Cascade and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of Boise Cascade) whose
appointment or election by the board of directors of Boise Cascade or
nomination for election by Boise Cascade's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors of Boise Cascade then
still in office who either were directors of Boise Cascade on the date
hereof or whose appointment, election or nomination for election was
previously so approved (the "Continuing Directors"); or
(3) The consummation of a merger or consolidation of
Boise Cascade (or any direct or indirect subsidiary of Boise Cascade) with
any other corporation other than (i) a merger or consolidation which would
result in both (a) continuing directors continuing to constitute at least
66 2/3% of the number of directors of the combined entity immediately
following consummation of such merger or consolidation and (b) the voting
securities of Boise Cascade outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or any
parent thereof) at least 66 2/3% of the combined voting power of the voting
securities of Boise Cascade or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of Boise
Cascade (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of Boise Cascade
representing 20% or more of either the then outstanding shares of common
stock of Boise Cascade or the combined voting power of Boise Cascade's then
outstanding securities; provided, however, if such Person acquires
securities directly from Boise Cascade, such securities shall not be
included unless such Person acquires additional securities which, when
added to the securities acquired directly from Boise Cascade, exceed 20% of
Boise Cascade's then outstanding shares of common stock or the combined
voting power of Boise Cascade's then outstanding securities; and provided
further that any acquisition of securities by any Person in connection with
a transaction described in Subsection 2A(3)(i) of this Agreement shall not
be deemed to be a change in control of Boise Cascade; or
(4) The stockholders of Boise Cascade approve a plan of
complete liquidation or dissolution of Boise Cascade or the consummation of
an agreement for the sale or disposition by Boise Cascade of all or
substantially all of Boise Cascade's assets, other than a sale or
disposition by Boise Cascade of all or substantially all of Boise Cascade's
assets to an entity, at least 66 2/3% of the combined voting power of the
voting securities of which are owned by Persons in substantially the same
proportions as their ownership of Boise Cascade immediately prior to such
sale.
Notwithstanding the foregoing, any event or transaction
which would otherwise constitute a change in control (a "Transaction")
shall not constitute a change in control for purposes of your benefits
under this Agreement if, in connection with the Transaction, you
participate as an equity investor in the acquiring entity or any of its
affiliates (the "Acquiror"). For purposes of the preceding sentence, you
shall not be deemed to have participated as an equity investor in the
Acquiror by virtue of (a) obtaining beneficial ownership of any equity
interest in the Acquiror as a result of the grant to you of an incentive
compensation award under one or more incentive plans of the Acquiror
(including but not limited to the conversion in connection with the
Transaction of incentive compensation awards of the Company or Boise
Cascade into incentive compensation awards of the Acquiror), on terms and
conditions substantially equivalent to those applicable to other executives
of the Company or Boise Cascade immediately prior to the Transaction, after
taking into account normal differences attributable to job
responsibilities, title and the like, (b) obtaining beneficial ownership of
any equity interest in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all other stockholders
of Boise Cascade, or (c) having obtained an incidental equity ownership in
the Acquiror prior to and not in anticipation of the Transaction.
B. For purposes of this Agreement, a "potential change in
control" shall be deemed to have occurred if (1) Boise Cascade enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of Boise Cascade; (2) Boise Cascade or any Person
publicly announces an intention to take or to consider taking actions which
if consummated would constitute a change in control of Boise Cascade; (3)
any Person becomes the Beneficial Owner, directly or indirectly, of
securities of Boise Cascade representing 9.5% or more of either the then
outstanding shares of common stock of Boise Cascade or the combined voting
power of Boise Cascade's then outstanding securities; or (4) the Board
adopts a resolution to the effect that a potential change in control for
purposes of this Agreement has occurred. You agree that, subject to the
terms and conditions of this Agreement, in the event of a potential change
in control, you will at the option of the Company remain in the employ of
the Company until the earlier of (a) the date which is six months from the
occurrence of the first such potential change in control, or (b) the date
of a change in control.
C. For purposes of this Agreement, "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
D. For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof, except that such term shall not
include (1) Boise Cascade or any of its subsidiaries, (2) a trustee or
other fiduciary holding securities under an employee benefit plan of Boise
Cascade or any of its subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a corporation
owned, directly or indirectly, by the stockholders of Boise Cascade in
substantially the same proportions as their ownership of stock of Boise
Cascade.
3. Termination and Change in Control. If (1) any of the events
described in Section 2 hereof constituting a change in control shall have
occurred and your employment subsequently terminates during the term of
this Agreement or (2) there has occurred a potential change in control,
your employment subsequently terminates during the term of this Agreement
in contemplation of a change in control, and subsequently an actual change
in control of Boise Cascade pursuant to Section 2 occurs, you shall be
entitled to the benefits provided in Sections 4 and 5 hereof unless in
either case such termination is because of your death, by the Company for
Cause or Disability, or by you other than for Good Reason.
A. Disability. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from your duties
with the Company on a full-time basis for six consecutive months, and
within thirty days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, the Company
may terminate your employment for "Disability."
B. Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (1) the willful and continued failure
by you to substantially perform your duties with the Company (other than
any such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from your
termination for Good Reason), after a demand for substantial performance is
delivered to you by the Board which specifically identifies the manner in
which the Board believes that you have not substantially performed your
duties, or (2) the willful engaging by you in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on your part shall
be considered "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was
in the best interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct set forth
above in clauses (1) or (2) of the first sentence of this Subsection and
specifying the particulars thereof in detail. All decisions by the Company
regarding termination for Cause must be supported by clear and convincing
evidence.
C. Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall, without your express written consent, mean:
(1) The assignment to you of any duties inconsistent
with your status as an Executive Officer of the Company or an adverse
alteration in the nature or status of your responsibilities from those in
effect immediately prior to a change in control;
(2) The disposition by the Company of the business of
the Company for which your services are principally provided pursuant to a
partial or complete liquidation of the Company, a sale of assets (including
stock of a subsidiary) of the Company, or otherwise;
(3) A reduction by the Company in your annual base
salary as in effect on the date hereof or as the same may be increased from
time to time, except for across-the-board salary reductions similarly
affecting all executives of the Company, all executives of any Person in
control of the Company, and all executives of any Person in control of
Boise Cascade;
(4) The Company's requiring you to be based anywhere
other than in the metropolitan area in which you were based immediately
prior to a change in control, except for required travel on the Company's
business to an extent substantially consistent with your business travel
obligations as such existed immediately prior to the change in control;
(5) The failure by the Company to continue in effect
any compensation plan in which you were participating immediately prior to
the change in control, including but not limited to your participation, if
any, in the Company's Key Executive Performance Plan for Executive Officers
(the "KEPP"), the 1995 Executive Officer Deferred Compensation Plans, the
1995 Key Executive Deferred Compensation Plans (the "Deferred Compensation
Plans"), the Key Executive Stock Option Plan, or any substitute or
additional plans adopted prior to the change in control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan in connection with the change
in control, or unless the plan has expired in accordance with its terms in
effect immediately prior to the change in control; or the failure by the
Company to continue your participation therein on a basis not materially
less favorable, both in terms of the amount of benefits provided and the
level of your participation relative to other participants, as existed
immediately prior to the change in control;
(6) The failure by the Company to continue to provide
you with benefits substantially similar to those enjoyed by you under any
of the Company's pension, life insurance, medical, health and accident, or
disability plans, including, without limitation, the Company's Split-Dollar
Life Insurance Plan ("Split-Dollar Plan"), and the Supplemental Early
Retirement Plan for Executive Officers ("Early Retirement Plan"), the
Pension Plan for Salaried Employees (the "Qualified Plan"), the Savings and
Supplemental Retirement Plan (the "SSRP"), the Supplemental Retirement
Programs (the "Excess Benefit Plans"), and any other nonqualified pension
agreement between you and the Company, in which you may have been
participating at the time of a change in control, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by you
at the time of the change in control, or the failure by the Company to
provide you with the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the change in
control;
(7) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 7 hereof; or
(8) Any purported termination of your employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection D below (and, if applicable, Subsection B
above). Furthermore, no such purported termination of your employment
shall be effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to physical or
mental illness. Your continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
D. Notice of Termination. Any purported termination by the
Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 8 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
E. Date of Termination, Etc. "Date of Termination" shall
mean (1) if your employment is terminated for Disability, thirty days after
Notice of Termination is given (provided that you shall not have returned
to the performance of your duties on a full-time basis during such thirty-
day period), and (2) if your employment is terminated pursuant to
Subsection B or C above or for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination pursuant to
Subsection B above shall not be less than thirty days, and in the case of a
termination pursuant to Subsection C above shall not be more than sixty
days, respectively, from the date such Notice of Termination is given);
provided that if within thirty days after any Notice of Termination is
given the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected); and provided
further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Company
will continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved in
accordance with this Section. Amounts paid under this Section are in
addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability.
A. During any period that you fail to perform your duties
hereunder as a result of incapacity due to physical or mental illness, you
shall continue to receive your full base salary at the rate then in effect
and all compensation, including under the KEPP, paid during the period
until your employment is terminated pursuant to Section 3.A hereof.
Thereafter, your benefits shall be determined in accordance with the
insurance programs then in effect of the Company or subsidiary corporation
by which you are employed, and any qualified retirement plan and any
executive supplemental retirement plan in effect immediately prior to the
change in control.
B. If your employment shall be terminated for Cause or by you
other than for Good Reason, the Company shall pay you only your full base
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time such
payments are due, and the Company shall have no further obligations to you
under this Agreement.
C. If your employment shall be terminated by the Company or
any subsidiary corporation by which you are employed other than for Cause
or Disability, or by you for Good Reason, then you shall be entitled to the
benefits provided below:
(1) The Company shall pay you, not later than the fifth
day following the Date of Termination, your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination
is given without regard to any reduction in base salary that would
constitute Good Reason, plus all other amounts to which you are entitled
under any compensation plan of the Company at the time such payments are
due;
(2) The Company shall pay to you, not later than the
fifth day following the Date of Termination, a lump sum severance payment
equal to (a) three times the sum of (i) your annual base salary at the rate
in effect at the time Notice of Termination is given without regard to any
reduction in base salary that would constitute Good Reason, plus (ii) your
target bonus payout under the Company's Key Executive Performance Plan for
Executive Officers (the "KEPP") (or any substitute plan) for the year in
which occurs the Date of Termination or change in control, whichever is
greater, less (b) the dollar amount, if any, which you are paid upon
termination of employment, without regard to the provisions of this
Agreement, under the Company's Severance Pay Policy for Executive Officers
as in effect immediately prior to the Date of Termination;
(3) The Company shall pay to you, not later than the
fifth day following the Date of Termination, a lump sum amount equal to the
greater of the value of your unused and accrued vacation entitlement in
accordance with the Company's Vacation Policy as in effect immediately
prior to the change in control or as in effect on Date of Termination;
(4) The Company shall pay to you, not later than the
fifth day following the Date of Termination, a lump sum amount equal to the
sum of (a) any unpaid bonus (excluding deferred awards, plus interest,
credited to your account, which shall be payable under the KEPP in
accordance with its terms) pursuant to the KEPP (or any substitute plan)
allocable to you in respect of the Plan year preceding that in which the
Date of Termination occurs, and (b) a KEPP award (or award under a
substitute plan) for the year in which the Date of Termination occurs,
equal to the greater of (i) your target bonus payout under such plan
(determined without regard to any reduction in your base salary
constituting Good Reason), prorated through the month in which the Date of
Termination occurs, or (ii) the actual KEPP award (or award under such
substitute plan) as determined by actual year-to-date earnings per share
through the last day of the month prior to the month in which the Date of
Termination occurs in accordance with the KEPP award criteria (or criteria
under such substitute plan) in which you are participating as of the Date
of Termination, prorated through the month in which the Date of Termination
occurs;
(5) All stock options granted under the Key Executive
Stock Option Plan held by you shall become immediately exercisable;
(6) The Company shall continue to pay such amounts as
may be required to maintain any insurance you may have had in force
pursuant to the Company's Split Dollar Life Insurance Plan until the later
of your sixty-fifth birthday or ten years after the insurance policy is
issued, after which the Company will release to you its interest in each
such policy; and
(7) The Company shall also pay to you all legal fees
and expenses incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement).
D. If your employment shall be terminated (1) by the Company
or subsidiary corporation by which you are employed other than for Cause or
Disability or (2) by you for Good Reason, then for a twelve-month period
following such termination, the Company shall maintain, in full force and
effect for your continued benefit, either (a) all life, disability,
accident and health insurance plans or arrangements, and financial
counseling services in which you may have been participating immediately
prior to the change in control or (b) at your election, such plans or
arrangements in which you were participating immediately prior to the Date
of Termination, provided your continued participation (or a particular type
of coverage) is possible under the general terms and provisions of such
plans and arrangements. In the event your participation (or a particular
type of coverage) under any such plan or arrangement is barred, the Company
shall arrange to provide you with benefits, at substantially the same cost
to you, which are substantially similar to those which you are entitled to
receive under such plans and arrangements. Notwithstanding the foregoing,
the Company shall continue to pay such amounts as may be required to
maintain any insurance you may have had in force pursuant to the Split-
Dollar Plan until the later of your sixty-fifth birthday or ten years after
the insurance policy is issued, after which the Company will release to you
its interest in each such policy.
E. If your employment shall be terminated (1) by the Company
or subsidiary corporation by which you are employed other than for Cause or
Disability or (2) by you for Good Reason, then in addition to the aggregate
retirement benefits to which you are entitled under the Company's Qualified
Plan, the Company's Excess Benefit Plans, any other nonqualified pension
agreement or arrangement, or any successor plans thereto, the Company shall
pay you amounts equal to (a), (b), (c), or (d), whichever is applicable:
(a) If you have satisfied the service, but not the age,
requirements of the Early Retirement Plan, as in effect immediately prior
to the change in control, you shall receive a monthly benefit, commencing
on your fifty-fifth birthday equal to the benefit to which you would have
been entitled under the Early Retirement Plan, as in effect immediately
prior to the change in control, had you satisfied the age and service
requirements as of the Date of Termination; or
(b) If you have satisfied the age, but not the service,
requirement of the Early Retirement Plan, as in effect immediately prior to
the change in control, you shall receive a monthly benefit, commencing as
of the Date of Termination equal to the benefit to which you would have
been entitled under the Early Retirement Plan, as in effect immediately
prior to the change in control, had you satisfied the age and service
requirements as of the Date of Termination; or
(c) If you have satisfied neither the age nor the
service requirements of the Early Retirement Plan, as in effect immediately
prior to the change in control, you shall receive a monthly benefit,
commencing on your fifty-fifth birthday equal to the benefit to which you
would have been entitled under the Early Retirement Plan, as in effect
immediately prior to the change in control, had you satisfied the age and
service requirements as of the Date of Termination; or
(d) If you have satisfied both the age and the service
requirements of the Early Retirement Plan, as in effect immediately before
the change in control, you shall receive the benefits to which you are
entitled under the Early Retirement Plan.
The benefits under this Paragraph E shall be paid in the same manner as,
and shall otherwise possess the same rights and privileges as were
available with respect to, benefits under the terms of the Early Retirement
Plan as in effect immediately prior to the change in control.
F. If your employment shall be terminated (1) by the Company
or subsidiary corporation by which you are employed other than for Cause or
Disability or (2) by you for Good Reason, then you shall not be required to
mitigate the amount of any payment provided for in this Section 4 by
seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 (except as otherwise provided in
the immediately succeeding sentence) be reduced by any compensation earned
by you as the result of employment by another employer or by retirement
benefits after the Date of Termination, or otherwise. Benefits otherwise
receivable by you pursuant to Section 4.D shall be reduced to the extent
comparable benefits are actually received by you during the twelve-month
period following your termination, and any such benefits actually received
by you shall be reported to the Company.
5. Protective Limitation.
A. Notwithstanding any provision hereof to the contrary, in
the event you (1) would receive payments under this Agreement or under any
other plan, program, or policy sponsored by the Company (the "Total
Payments"); and (2) which Total Payments relate to a change in control of
the Company and which are determined by the Company to be subject to excise
tax under Section 4999 of the Code (the "Excise Tax"); then (3) the Company
shall pay to you an additional amount (the "Gross-up Payment") such that
the net amount retained by you, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and employment
taxes, and Excise Tax upon the Gross-up Payment, shall be equal to the
Total Payments.
B. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (1) all of the Total Payments shall be treated as "parachute payments"
(within the meaning of Section 280G(b)(2) of the Code) unless, in the
Company's opinion, such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code, and (2) all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the Excise
Tax unless, in the Company's opinion, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the base amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax. For purposes of determining the
amount of the Gross-up Payment, you will be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
your residence on the Date of Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes.
C. The payments provided in Subsection 5(A) shall be made not
later than the fifth day following the Date of Termination; provided,
however, if the amount of such payment cannot be finally determined on or
before such day, the Company shall pay to you on such day an estimate, as
determined in good faith by the Company of the minimum amount of such
payments to which you are clearly entitled and shall pay the remainder of
such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments when
due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to
you, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in Section
1274(b)(2)(B) of the Code). At the time that payments are made under this
Agreement, the Company shall provide you with a written statement setting
forth the manner in which such payments were calculated and the basis for
such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, its auditor, or other
advisors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
D. In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the
Gross-up Payment, you shall repay to the Company, within five (5) business
days following the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-up Payment attributable to
such reduction (plus that portion of the Gross-up Payment attributable to
the Excise Tax and federal, state, and local income and employment taxes
imposed on the Gross-up Payment being repaid by you, to the extent that
such repayment results in a reduction in the Excise Tax and a dollar-for-
dollar reduction in your taxable income and wages for purposes of federal,
state, and local income and employment taxes) plus interest on the amount
of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined, for any reason,
to exceed the amount taken into account hereunder in calculating the Gross-
up Payment, the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest, penalties, or additions payable
by you with respect to such excess and such portion) within five (5)
business days following the time that the amount of such excess is finally
determined. You and the Company shall reasonably cooperate with the other
in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the
Total Payments.
6. Deferred Compensation and Benefits Trust. The Company will
establish a Deferred Compensation and Benefits Trust, and shall comply with
the terms of that Trust. Upon the occurrence of any potential change in
control, the Company shall transfer to the Trust an amount of cash,
marketable securities, or other property acceptable to the trustee(s) equal
in value to 105% of the amount necessary, on an actuarial basis and
calculated in accordance with the terms of the Trust, to pay the Company's
obligations under this Agreement (the "Funding Amount"). The cash,
marketable securities, and other property so transferred shall be held,
managed, and disbursed by the trustee(s) subject to and in accordance with
the terms of the Trust. In addition, from time to time, the Company shall
make any and all additional transfers of cash, marketable securities, or
other property acceptable to the trustee(s) as may be necessary in order to
maintain the Funding Amount with respect to this Agreement. The
determination of the amount required to be transferred by the Company to
the Trust shall include any amounts that could in any circumstances be
payable in the future under Sections 4 and 5 hereof, calculated in
accordance with the following rules: (A) Upon a potential change in
control, the Company will calculate the amount required to be transferred
to the Trust based on the assumption that your employment, if not
previously terminated, will be terminated by the Company other than for
Cause or Disability on the second anniversary of the potential change in
control; and (B) Upon any subsequent recalculation, your employment will be
deemed to have been terminated by the Company other than for Cause or
Disability on the later of the date of actual termination or the date of
such recalculation.
For this purpose, the term Deferred Compensation and Benefits
Trust shall mean an irrevocable trust or trusts established or to be
established by the Company with an independent trustee or trustees for the
benefit of persons entitled to receive payments or benefits hereunder, the
assets of which nevertheless will be subject to claims of the Company's
creditors in the event of bankruptcy or insolvency and with respect to
which the Company shall have received a ruling from the Internal Revenue
Service that the trust is a "grantor trust" for federal income tax
purposes.
The Deferred Compensation and Benefits Trust shall contain the
following additional provisions:
(a) If a change in control does not occur within one year
after the potential change in control, the Company may reclaim the assets
transferred to the trustee or trustees subject to the requirement that it
be again funded upon the occurrence of another potential change in control.
(b) Upon a change in control, the assets of the Deferred
Compensation and Benefits Trust shall be used to pay benefits under this
Agreement, except to the extent such benefits are paid by the Company, and
the Company and any successor shall continue to be liable for the ultimate
payment of those benefits.
(c) The Deferred Compensation and Benefits Trust will be
terminated upon the exhaustion of the trust assets or upon payment of all
the Company's obligations.
(d) The Deferred Compensation and Benefits Trust shall
contain other appropriate terms and conditions consistent with the purposes
sought to be accomplished by it. Prior to a change in control, the
Deferred Compensation and Benefits Trust may be amended from time to time
by the Company, but no such amendment may substantially alter any of the
provisions set out in the preceding paragraphs.
7. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation
from the Company in the same amount and on the same terms as you would be
entitled hereunder if you terminate your employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
B. This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you should die while any amount would still be payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or if there is no such designee, to
your estate.
C. Any dispute between you and the Company regarding this
Agreement may be resolved either by binding arbitration or by judicial
proceedings at your sole election, and the Company agrees to be bound by
your election in that regard.
8. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to
the attention of the Board with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be
designated by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections.
If the obligations of the Company under Sections 4 and 5 arise prior to
the expiration of the term of this Agreement, such obligations shall
survive the expiration of the term.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
12. No Guaranty of Employment. Neither this contract nor any action
taken hereunder shall be construed as giving you a right to be retained as
an employee or an executive officer of the Company.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with Delaware law.
14. Other Benefits. Any payments due to you as provided herein are
in addition to, and not in lieu of, any amounts to which you may be
entitled under any other employee benefit plan, program or policy of the
Company.
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of
this letter which will then constitute our agreement on this subject.
Sincerely,
BOISE CASCADE OFFICE PRODUCTS CORPORATION
By___________________________
George J. Harad
Chairman of the Board
of Directors
Agreed to this [ ] day of [ ],
______________________________
[Name of Officer]
Enclosure
Exhibit 10.2
BOISE CASCADE OFFICE PRODUCTS CORPORATION
EARLY RETIREMENT PLAN FOR EXECUTIVE OFFICERS
(As Amended Through August 3, 1999)
BOISE CASCADE OFFICE PRODUCTS CORPORATION
EARLY RETIREMENT PLAN FOR EXECUTIVE OFFICERS
ARTICLE I: PURPOSE
The purpose of this Plan is to facilitate the orderly succession of
Executive Officers of the Company with continuity of management by providing
additional Early Retirement Benefits for eligible Executive Officers.
ARTICLE II: DEFINITIONS AND CONSTRUCTION
2.1 Definitions: The following words and phrases shall have the
meaning set forth below unless the context clearly indicates to the contrary:
(a) "Board of Directors" shall mean the Board of Directors of
Boise Cascade Office Products Corporation or any duly constituted committee of
the Board of Directors to whom authority to act on behalf of the Board of
Directors has been delegated.
(b) "Committee" shall mean the Retirement Committee of the
Company, appointed by the Board of Directors, which, in addition to its other
duties and responsibilities, shall have the duties and responsibilities set
out in Article V of this Plan.
(c) "Company" shall mean Boise Cascade Office Products
Corporation or its successor or successors, and including all wholly owned and
majority-owned subsidiaries of Boise Cascade Office Products Corporation.
(d) "Competitor" shall mean any business, foreign or domestic,
which is engaged, at any time relevant to the provisions of this Plan, in the
manufacture, sale, or distribution of products, or in the providing of
services, in competition with products manufactured, sold, or distributed or
services provided by the Company.
(e) "Early Retirement Date" shall mean the date an Executive
Officer terminates employment with the Company after satisfying the
eligibility requirements of Section 3.1 of this Plan and before his or her
Normal Retirement Date.
(f) "Early Retirement Benefits" shall mean the benefits that
will be paid to an Eligible Executive Officer who retires from the Company
under the provisions of this Plan.
(g) "Effective Date" shall mean the date this Plan becomes
effective as established by the Board of Directors.
(h) "Eligible Executive Officer" shall mean an Executive Officer
of the Company who satisfies the criteria for participation in the Plan
described in Section 3.1 hereof.
(i) "Executive Officer" shall mean any person identified by the
Board of Directors as such.
(j) "Normal Retirement Date" shall mean the first day of the
month coincident with or next following an Executive Officer's 65th birthday.
(k) "Salaried Plan" shall mean the Boise Cascade Corporation
Pension Plan for Salaried Employees, together with the Company's Supplemental
Pension Plan, as such plans currently are in effect and as they may be amended
from time to time after the Effective Date of this Plan.
(l) "Plan" shall mean the Boise Cascade Office Products
Corporation Early Retirement Plan for Executive Officers as set forth herein
and as amended from time to time.
2.2 Construction: Except to the extent preempted by federal law, this
Plan shall be construed according to the laws of the state of Delaware. The
words "hereof," "herein," "hereunder," and other similar compounds of the word
"here" shall mean and refer to the entire Plan, not to any particular
provision or section. Capitalized terms used herein but not defined in this
Article II shall have the meaning ascribed to such terms in the Salaried Plan.
ARTICLE III: ELIGIBILITY FOR EARLY RETIREMENT BENEFITS
3.1 Eligibility. An Executive Officer (i) with ten or more years of
service with the Company (including years of service with Boise Cascade
Corporation) as defined in the Salaried Plan, (ii) who is also an Executive
Officer of Boise Cascade Corporation, (iii) who has served as an Executive
Officer of Boise Cascade Corporation for at least five full years measured
from the date of his or her election to such office, and (iv) whose employment
with the Company is terminated through Involuntary Retirement or who elects
early retirement on or after his or her Early Retirement Date but before his
or her Normal Retirement date, shall receive the Early Retirement Benefits as
set forth in Article IV hereof; provided, however, in the event an Executive
Officer is terminated for "disciplinary reasons" as that term is used in the
Company's Termination of Employment Policy, such Executive Officer shall not
be eligible to receive any benefits under this Supplemental Plan.
3.2 Notice: Any Eligible Executive Officer desiring to retire under
the terms of this Plan shall notify the Company of his or her decision, in
writing, at least 30 days in advance of the date he or she intends to retire
from the Company.
ARTICLE IV: EARLY RETIREMENT BENEFITS
4.1 Early Retirement Benefits: An Eligible Executive Officer who
retires before his or her Normal Retirement Date shall receive the Early
Retirement Benefits as set forth in Section 4.2 hereof.
4.2 Computation of Early Retirement Benefits: The Early Retirement
Benefits payable to an Executive Officer who is covered by the provisions of
Section 4.1 hereof shall be calculated as follows:
(a) Until age 65, the Early Retirement Benefits payable here-
under shall be an amount equal to the Basic Pension Benefit that would have
been payable at age 65 under the Salaried Plan, as described in Article 5 of
the Salaried Plan, (before reduction to reflect any retirement option selected
by the Executive Officer pursuant to the Salaried Plan) without reduction on
account of early retirement. Upon reaching age 65, benefits under this Plan
shall cease and the Executive Officer shall receive the Basic Pension Benefit
to which he or she is entitled under the terms of the Salaried Plan, with the
benefit commencement date under the Salaried Plan being the Executive
Officer's Normal Retirement Date.
(b) Notwithstanding the foregoing, if an Eligible Executive
Officer commences receipt of a Basic Pension Benefit from the Salaried Plan
prior to his or her Normal Retirement Date, upon the date such Basic Pension
Benefit commences the amounts described in subparagraph (a) above shall be
adjusted to become equal to the difference between (1) the amount of the Basic
Pension Benefit, as defined in the Salaried Plan (before the reduction to
reflect any retirement option selected by the Executive Officer pursuant to
the Salaried Plan), payable to the Executive Officer as of his or her Early
Retirement Date, without reduction for early retirement under the Salaried
Plan, and (2) the amount of the Basic Pension Benefit, as defined in the
Salaried Plan (before the reduction to reflect any retirement option selected
by the Executive Officer pursuant to the Salaried Plan), payable to the
Executive Officer as of his or her Early Retirement Date, after application of
the reduction factors as set forth in Article VI of the Salaried Plan due to
the Executive Officer's election to retire on or after his or her Early
Retirement Date.
If the calculations made pursuant to this Section 4.2 produce no
Early Retirement Benefits for an Executive Officer, then this Plan shall not
apply to that Executive Officer.
The Company will be secondarily liable for the payment of any
amounts that are payable from the Salaried Plan.
4.3 Manner and Adjustment of Payment: The Early Retirement Benefits,
as computed in Section 4.2 hereof and as provided hereunder, shall be an
unfunded general obligation of the Company and shall be paid to the Executive
Officer in monthly installments as a supplemental retirement benefit. The
Early Retirement Benefits shall be paid in the same form as the Executive
Officer's benefits selected under the Salaried Plan and shall be actuarially
reduced to reflect the optional form of payment, if any, selected by the
Executive Officer under the Salaried Plan.
4.4 Executive Officer Not to Compete: If an Executive Officer, who is
receiving Early Retirement Benefits hereunder and who has not yet reached his
or her Normal Retirement Date, provides significant services as an employee or
consultant, or otherwise renders services of a significant nature for
remuneration, to a Competitor, the Company may, in its sole discretion, cancel
all further Early Retirement Benefits due to be payable to the Executive
Officer hereunder. After the date of cancellation, the Executive Officer
shall forfeit all future benefits under this Plan. The Company may, in its
sole discretion, consent to an Executive Officer's rendering services to a
Competitor. If the Company does so consent, it may place whatever limitations
it considers appropriate on the consent. If the Executive Officer breaches
the terms of the consent, the Company may, in its sole discretion, cancel all
further Early Retirement Benefits due to be payable to the Executive Officer
hereunder. After the date of cancellation, the Executive Officer shall
forfeit all future benefits under this Plan. The determination of whether an
Executive Officer is or will be providing "significant services to a
Competitor" shall be made by the Board of Directors in its sole discretion.
4.5 Supplemental Survivor's Retirement Benefit: In the event an
Eligible Executive Officer terminates employment by reason of death, his or
her spouse, if any, shall be eligible to receive a supplemental Survivor's
Retirement Benefit under this Plan. The amount of the supplemental Survivor's
Retirement Benefit shall be equal to the difference between the Survivor's
Retirement Benefit payable under the terms of the Salaried Plan and the amount
to which the spouse would be entitled under the terms of both this Plan and
such Salaried Plan if the Eligible Executive Officer had elected Early
Retirement on the date of his or her death and had elected to receive benefits
in the form of a 50% Joint and Survivor Annuity with the spouse as joint
annuitant. A surviving spouse shall not be eligible for a supplemental
survivor's benefit under this Plan unless the spouse is eligible for a
survivor's benefit under the terms of the Salaried Plan.
ARTICLE V: DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
5.1 Committee's Powers: Except as otherwise provided in the Plan with
regard to the powers of the Company, the Committee shall have control of
administration of the Plan with all powers necessary to enable it to carry out
its duties hereunder. The Committee shall have the right to inspect the
records of the Company whenever such inspection may be reasonably necessary in
order to determine any fact pertinent to the performance of the duties of the
Committee. The Committee, however, shall not be required to make such
inspection but may, in good faith, rely on any statement of the Company or any
of its officers or employees.
5.2 Copy of Plan to Be Furnished: The Committee shall cause a copy of
this Plan to be provided to all Executive Officers of the Company who are or
become entitled to be covered under this Plan as Eligible Executive Officers.
5.3 Records: The Committee shall keep a complete record of all its
proceedings and all data necessary for administration of the Plan.
5.4 Appeal Procedure: If any Eligible Executive Officer feels
aggrieved by any decision of the Committee concerning his or her benefits
hereunder, the Committee shall provide, upon written request of the Eligible
Executive Officer, specific written reasons for the decision. The Committee
shall afford an Eligible Executive Officer whose claim for benefits has been
denied 60 days from the date notice of denial is mailed in which to request a
hearing before the Committee. If an Eligible Executive Officer requests a
hearing, the Committee shall review the written comments, oral statements, and
any other evidence presented on behalf of the Eligible Executive Officer at
the hearing and render its decision within 60 days of such hearing. If the
Eligible Executive Officer still feels aggrieved by the Committee's decision
concerning his or her benefits hereunder, the Eligible Executive Officer can
request the Compensation Committee of the Board of Directors to review his or
her case. The request for hearing must be made in writing within 60 days from
the date of the Committee's decision. The Compensation Committee of the Board
of Directors shall review said decision within four months after receiving the
Eligible Executive Officer's request for review and shall, within a reasonable
time thereafter, render a decision respecting the Eligible Executive Officer's
claim which shall be final, binding, and conclusive.
If any Eligible Executive Officer feels aggrieved by any decision
of the Company concerning his or her rights hereunder, the Company shall
provide, upon the written request of the Eligible Executive Officer, specific
written reasons for its decision. If the Eligible Executive Officer is not
satisfied with the Company's decision with respect to his or her rights, the
Eligible Executive Officer can request the Compensation Committee of the Board
of Directors to review the case. The Eligible Executive Officer's request
must be made within 60 days of the mailing of the Company's written decision,
and the Compensation Committee of the Board of Directors will handle the
review in the same manner as set forth above with respect to appeals from
Committee decisions.
ARTICLE VI: AMENDMENT AND TERMINATION
6.1 Amendment: The Company reserves the right to amend this Plan at
any time, in its sole discretion and for any reason whatsoever, acting through
the Board of Directors or any duly authorized delegate thereof; provided,
however, no such amendment shall affect the right to any benefits hereunder of
any Eligible Executive Officer who elected or was required, pursuant to this
Plan, to retire prior to his or her Normal Retirement date.
6.2 Termination: It is the present intention of the Company to
maintain this Plan indefinitely. Nonetheless, the Company reserves the right
to terminate this Plan at any time, in its sole discretion and for any reason
whatsoever, acting through its Board of Directors; provided, however, no such
termination shall affect the right to any benefits hereunder of an Eligible
Executive Officer who elected or was required, pursuant to this Plan, to
retire prior to his or her Normal Retirement Date.
ARTICLE VII: MISCELLANEOUS
7.1 Benefits Not Transferable or Assignable: None of the benefits,
payments, proceeds, claims, or rights of any Executive Officer hereunder shall
be subject to the claim of any creditor of the Executive Officer, other than
the Company as permitted in Section 7.2 hereof, nor shall any Executive
Officer have any right to transfer, assign, encumber, or otherwise alienate
any of the benefits or proceeds which he or she may expect to receive,
contingently or otherwise, under this Plan.
7.2 Setoff: The Company shall have the right to withhold and deduct
from payments due hereunder to any Executive Officer any amounts owed by the
Executive Officer to the Company which were incurred prior to the Executive
Officer's retirement from the Company.
Exhibit 10.3
BOISE CASCADE OFFICE PRODUCTS CORPORATION
SUPPLEMENTAL PENSION PLAN
(As Amended Through August 3, 1999)
BOISE CASCADE OFFICE PRODUCTS CORPORATION
SUPPLEMENTAL PENSION PLAN
ARTICLE I
1. Purpose of the Plan. It is the policy of Boise Cascade Office
Products Corporation (the "Company") to provide retirement benefits to
eligible employees in accordance with the terms and conditions of the
Company's retirement plans. Under certain circumstances the effect of federal
and state tax laws may preclude payment of full benefits to which an employee
is otherwise entitled out of the assets of the Company's retirement plans
qualified under Section 401 of the Internal Revenue Code of 1986 (the "Code").
In addition, the election of certain employees to voluntarily defer receipt of
otherwise taxable and pensionable compensation may have the effect of reducing
the amount of retirement benefits which such employees would otherwise be
entitled to receive out of the Company's tax-qualified retirement plans. In
order to ensure that employees of the Company receive the full retirement
benefits earned during the course of their employment with the Company, the
Company will provide benefits as described in this Plan.
ARTICLE II
2. Definitions.
2.1 "Act" shall mean the Employee Retirement Income Security Act
of 1974 ("ERISA") as amended from time to time.
2.2 "Pension Plan" shall mean the Boise Cascade Corporation
Pension Plan for Salaried Employees, as adopted by the Company, and as amended
from time to time.
2.3 "Code" shall mean the Internal Revenue Code of 1986 as
amended from time to time.
2.4 "Company" shall mean Boise Cascade Office Products
Corporation and any of its subsidiaries or affiliated business entities
participating in the Pension Plan.
2.5 "Compensation" shall mean a Participant's compensation as
defined in the Pension Plan, but without regard to any limitations required by
Section 401(a)(17) of the Code, and including amounts voluntarily deferred at
the Participant's election under any of the nonqualified deferred compensation
plans of the Company.
2.6 "Effective Date" shall mean February 20, 1995.
2.7 "Maximum Benefit" shall mean the monthly equivalent of the
maximum benefit permitted by the Code to be paid to a participant in the
Company's Pension Plan, taking into account all limitations required by the
Code in order for the Pension Plan to retain its qualified status under
Section 401 of the Code.
2.8 "Participant" shall mean any employee of the Company who is
an active Participant in the Pension Plan on or after the Effective Date and
whose pension benefits determined on the basis of the provisions of the
Pension Plan, without regard to the limitations of the Code, would exceed the
Maximum Benefits permitted under the Code.
2.9 "Plan" shall mean the Boise Cascade Office Products
Corporation Supplemental Pension Plan, as amended from time to time, which
shall be an unfunded plan providing benefits for a select group of senior
management or highly compensated employees of the Company.
2.10 "Unrestricted Benefit" shall mean the maximum monthly
normal, early, or deferred vested (or disability) retirement benefit,
whichever is applicable, which a Participant has earned, calculated in
accordance with the benefit formula under the Pension Plan and determined
without regard to any limitations imposed by the Code, including but not
limited to limitations under Code Sections 401(a)(17) and 415. The amount of
the Unrestricted Benefit shall be based on a Participant's Compensation as
defined in this Plan.
2.11 All capitalized terms used herein not otherwise defined
shall have the meaning ascribed to such terms under the Pension Plan.
ARTICLE III
3. Benefits.
3.1 Normal Retirement Benefit. Upon the Normal Retirement of a
Participant, as defined in the Pension Plan, a Participant shall be entitled
to a monthly benefit under this Plan equal in amount to his or her
Unrestricted Benefit minus the Maximum Benefit.
3.2 Early Retirement Benefit. Upon the early retirement of a
Participant as provided under the Pension Plan, such Participant shall be
entitled to a monthly benefit under this Plan equal to his or her Unrestricted
Benefit minus the Maximum Benefit.
3.3 Deferred Vested Retirement Benefit. If a Participant
terminates employment with the Company and is entitled to a deferred vested
retirement benefit provided under the Pension Plan, such Participant shall be
entitled to a monthly benefit under this Plan equal to his or her Unrestricted
Benefit minus the Maximum Benefit.
3.4 Spousal Pension Benefit. Subject to Section 3.5 below, on
the death of a Participant whose spouse is eligible for a pre- or post-
retirement surviving spouse benefit under the Pension Plan, the Participant's
surviving spouse shall be entitled to a monthly benefit equal to the surviving
spouse benefit determined in accordance with the provisions of the Pension
Plan without regard to the limitations under the Code, minus the Maximum
Benefit.
3.5 Forms of Benefit Payment.
(a) If on the date of a Participant's termination of
employment with the Company his or her accrued vested benefit under this Plan
is less than $5,000 in present value (calculated in accordance with present
value determinations under the Pension Plan), such benefit shall be
distributed in a lump sum on or about February 1 of the calendar year
following the year in which termination of employment occurred.
(b) If on the date of a Participant's termination of
employment with the Company his or her accrued vested benefit under this Plan
is equal to or greater than $5,000 in present value (calculated in accordance
with present value determinations under the Pension Plan), such benefit shall
be distributed in a lump sum on or about February 1 of the calendar year
following the year in which termination of employment occurred, unless the
Participant elects a form of benefit payment described in subsection (i) or
(ii) below:
(i) A Participant described in paragraph (b) above
may elect to have benefits payable under Sections 3.1, 3.2, 3.3, or 3.4 of
this Article III paid in such form and at such time as benefits are paid to
the Participant (or beneficiary, if applicable) under the Pension Plan; or
(ii) A Participant described in paragraph (b) above
may elect to have his or her benefit paid in monthly installments over a
period not to exceed 15 years, commencing no later than the first of the month
following the Participant's 65th birthday. A Participant electing this form
of distribution shall be eligible to receive, upon written request to the
Company at any time after payment of benefits has commenced, to have the
present value of his or her unpaid benefit distributed in a lump sum. Any
such lump sum distribution, less a ten percent penalty, shall be paid as soon
as administratively feasible after the Company's receipt of such request.
3.6 Withholding of Taxes. All applicable taxes may be withheld
by the Company or its agent from benefit payments made pursuant to this Plan.
ARTICLE IV
4. Plan Administration.
4.1 Administrator. The Plan shall be administered by the
Company, acting through the Boise Cascade Corporation Retirement Committee
(the "Retirement Committee"), which shall have complete and unrestricted
authority to interpret the Plan, issue such administrative rules and
procedures and it deems appropriate, and delegate responsibilities as it deems
appropriate in its sole discretion. The Retirement Committee or its delegate
shall have the duty and responsibility of maintaining records, making the
requisite calculations and disbursing the payments hereunder. The Retirement
Committee's interpretations, determinations, procedures, and calculations
shall be final and binding on all persons and parties concerned.
4.2 Amendment and Termination. The Company may amend or
terminate the Plan at any time, acting through the Executive Compensation
Committee of the Company's board of directors, provided, however, that no such
amendment or termination shall adversely affect a benefit to which a
Participant or his or her beneficiary is entitled under Article III prior to
the effective date of such amendment or termination unless such Participant or
beneficiary becomes entitled to an amount equal to such benefit under another
plan or policy adopted by the Company.
4.3 Payments. The Company will pay all benefits arising under
this Plan and all costs, charges, and expenses relating hereto.
4.4 Nonassignability of Benefits. The benefits payable
hereunder or the right to receive future benefits under the Plan may not be
anticipated, alienated, pledged, encumbered, or subjected to any charge or
legal process, and if any attempt is made to do so, or a person eligible for
any benefit becomes bankrupt, the interest under the Plan of the person
affected may be terminated by the administrator which, in its sole discretion,
may cause the same to be held or applied for the benefit of one or more of the
dependents of such person or make any other disposition of such benefits that
it deems appropriate in its sole discretion.
4.5 Status of Plan. The benefits under this Plan shall not be
funded but shall constitute liabilities by the Company payable when due.
4.6 Nonguarantee of Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Company and any
Participant, or as a right of any Participant to be continued in employment of
the Company, or as a limitation on the right of the Company to terminate the
employment of any of its employees, with or without cause.
4.7 Applicable Law. All questions pertaining to the
construction, validity, and effect of this Plan shall be determined in
accordance with the laws of the United States and, to the extent not preempted
by such laws, by the laws of the state of Delaware.
4.8 Appeals Procedure. Claims for benefits under this Plan
shall be subject to determination and review by the Company. If any
Participant disagrees with the Company's determination of benefits hereunder,
the Participant shall have the right to appeal the Company's determination in
accordance with procedures adopted by the Company applicable to appeals under
the Pension Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data schedule contains summary financial information extracted from
Boise Cascade Office Products Corporation's Balance Sheet at September 30,
1999, and from its Statement of Income for the nine months ended September
30, 1999. The information presented is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,560
<SECURITIES> 0
<RECEIVABLES> 457,762
<ALLOWANCES> 10,042
<INVENTORY> 210,783
<CURRENT-ASSETS> 730,451
<PP&E> 414,294
<DEPRECIATION> 173,759
<TOTAL-ASSETS> 1,498,393
<CURRENT-LIABILITIES> 547,575
<BONDS> 310,774
0
0
<COMMON> 658
<OTHER-SE> 611,015
<TOTAL-LIABILITY-AND-EQUITY> 1,498,383
<SALES> 2,488,469
<TOTAL-REVENUES> 2,488,469
<CGS> 1,848,197
<TOTAL-COSTS> 1,848,197
<OTHER-EXPENSES> 530,850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,180
<INCOME-PRETAX> 92,528
<INCOME-TAX> 39,377
<INCOME-CONTINUING> 53,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,151
<EPS-BASIC> .81
<EPS-DILUTED> .81
</TABLE>
