-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
SvXMkJh4F5Jfm6uGaLVcPl4eBrH6GUCRTBjKFb5BnZvdtzfmfxPcNLXqZHNMbL0P
bPszuCGyuDGNq8aUvhNbJw==
UNITED STATES (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to __________________ BOISE CASCADE CORPORATION Delaware 82-0100960 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1111 West Jefferson Street (Address of principal executive officers) (Zip Code) Shares Outstanding PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Three Months Ended ------------------------------------------ 2000 1999 ---------------- ----------------- (unaudited) Revenues Sales $ 1,921,223 $ 1,789,237 ---------------- ----------------- Costs and expenses Materials, labor, and other operating expenses 1,530,241 1,385,602 Depreciation, amortization, and cost of company Selling and distribution expenses 196,904 179,988 General and administrative expenses 33,040 30,647 Other (income) expense, net (95,903 ) 1,802 ---------------- ----------------- 1,737,352 1,671,296 ---------------- ----------------- Equity in net income (loss) of affiliates (427 ) 2,066 ---------------- ----------------- Income from operations 183,444 120,007 ---------------- ----------------- Interest expense (39,324 ) (35,839 ) Interest income 223 700 Foreign exchange gain (loss) (2,216 ) 60 ---------------- ----------------- (41,317 ) (35,079 ) ---------------- ----------------- Income before income taxes and minority interest 142,127 84,928 Income tax provision (57,561 ) (32,868 ) ---------------- ----------------- Income before minority interest 84,566 52,060 Minority interest, net of income tax 34 (3,012 ) ---------------- ----------------- Net income $ 84,600 $ 49,048 ========= ========== Net income per common share Basic $ 1.42 $ 0.80 ========= ========== Diluted $ 1.33 $ 0.74 ========= ========== The accompanying notes are an integral part of these Financial Statements. Nine Months Ended ------------------------------------------ 2000 1999 ---------------- ----------------- (unaudited) Revenues Sales $ 5,793,835 $ 5,078,398 ---------------- ----------------- Costs and expenses Materials, labor, and other operating expenses 4,586,100 3,929,618 Depreciation, amortization, and cost of company Selling and distribution expenses 600,203 546,953 General and administrative expenses 94,166 94,310 Other (income) expense, net (88,518 ) (30,904 ) ---------------- ----------------- 5,415,703 4,753,712 ---------------- ----------------- Equity in net income of affiliates 3,609 6,024 ---------------- ----------------- Income from operations 381,741 330,710 ---------------- ----------------- Interest expense (113,759 ) (107,598 ) Interest income 1,278 1,878 Foreign exchange gain (loss) (2,680 ) 133 ---------------- ----------------- (115,161 ) (105,587 ) ---------------- ----------------- Income before income taxes and minority interest 266,580 225,123 Income tax provision (107,965 ) (91,175 ) ---------------- ----------------- Income before minority interest 158,615 133,948 Minority interest, net of income tax (3,444 ) (9,695 ) ---------------- ----------------- Net income $ 155,171 $ 124,253 ========= ========== Net income per common share Basic $ 2.54 $ 2.01 ========= ========== Diluted $ 2.39 $ 1.88 ========= ========== The accompanying notes are an integral part of these Financial Statements. ASSETS September 30 December 31 ------------------------------------------- ------------------- 2000 1999 1999 ----------------- ----------------- ------------------- (unaudited) Current Cash $ 143,468 $ 67,891 $ 57,720 Cash equivalents 6,273 2,226 9,215 ----------------- ----------------- ------------------- 149,741 70,117 66,935 Receivables, less allowances of $7,337, $11,722, and $11,289 742,093 698,027 663,609 Inventories 661,614 652,825 703,984 Deferred income tax benefits 53,643 72,171 53,148 Other 35,734 48,536 43,432 ----------------- ----------------- ------------------- 1,642,825 1,541,676 1,531,108 ----------------- ----------------- ------------------- Property Property and equipment Land and land improvements 68,686 67,301 70,441 Buildings and improvements 631,345 600,934 613,729 Machinery and equipment 4,378,322 4,231,362 4,300,250 ----------------- ----------------- ------------------- 5,078,353 4,899,597 4,984,420 Accumulated depreciation (2,551,920 ) (2,344,495 ) (2,427,415 ) ----------------- ----------------- ------------------- 2,526,433 2,555,102 2,557,005 Timber, timberlands, and timber deposits 290,396 272,868 294,663 ----------------- ----------------- ------------------- 2,816,829 2,827,970 2,851,668 ----------------- ----------------- ------------------- Goodwill, net of amortization of $50,649, $48,750, and $52,506 406,582 505,088 488,339 Investments in equity affiliates 42,290 37,336 37,418 Other assets 234,024 232,424 229,881 ----------------- ----------------- ------------------- Total assets $ 5,142,550 $ 5,144,494 $ 5,138,414 ========== ========== =========== The accompanying notes are an integral part of these Financial Statements. LIABILITIES AND SHAREHOLDERS' EQUITY September 30 December 31 ----------------------------------------- -------------------- 2000 1999 1999 ---------------- ---------------- -------------------- (unaudited) Current Short-term borrowings $ 21,600 $ 152,171 $ 71,800 Current portion of long-term debt 40,836 107,951 118,168 Income taxes payable 19,838 687 19,998 Accounts payable 556,164 575,773 589,278 Accrued liabilities Compensation and benefits 134,373 153,589 148,035 Interest payable 28,467 27,566 29,606 Other 120,336 186,633 147,794 ---------------- ---------------- -------------------- 921,614 1,204,370 1,124,679 ---------------- ---------------- -------------------- Debt Long-term debt, less current portion 1,725,788 1,571,116 1,584,528 Guarantee of ESOP debt 125,523 149,506 132,809 ---------------- ---------------- -------------------- 1,851,311 1,720,622 1,717,337 ---------------- ---------------- -------------------- Other Deferred income taxes 377,509 301,384 311,346 Other long-term liabilities 236,266 252,170 239,940 ---------------- ---------------- -------------------- 613,775 553,554 551,286 ---------------- ---------------- -------------------- Minority interest 9,506 126,814 130,999 ---------------- ---------------- -------------------- Shareholders' equity Preferred stock -- no par value; 10,000,000 shares authorized; Series D ESOP: $.01 stated value; 4,741,862; Deferred ESOP benefit (125,523 ) (149,506 ) (132,809 ) Common stock -- $2.50 par value; 200,000,000 143,323 142,842 142,894 Additional paid-in capital 454,631 448,267 449,040 Retained earnings 1,069,899 883,329 942,702 Accumulated other comprehensive income (loss) (9,370 ) (12,260 ) (11,913 ) ---------------- ---------------- -------------------- Total shareholders' equity 1,746,344 1,539,134 1,614,113 ---------------- ---------------- -------------------- Total liabilities and shareholders' equity $ 5,142,550 $ 5,144,494 $ 5,138,414 ========= ========= =========== Nine Months Ended ------------------------------------------------ 2000 1999 -------------------- -------------------- (unaudited) Cash provided by (used for) operations Net income $ 155,171 $ 124,253 Items in net income not using (providing) cash Equity in net income of affiliates (3,609 ) (6,024 ) Depreciation, amortization, and cost of 223,752 213,735 Deferred income tax provision 50,040 77,929 Minority interest, net of income tax 3,444 9,695 Restructuring activity - (36,322 ) Other 2,680 (133 ) Gain on sale of assets (97,775 ) - Receivables 16,843 (128,018 ) Inventories 17,782 25,892 Accounts payable and accrued liabilities 32,084 49,358 Current and deferred income taxes 4,750 (5,623 ) Other (7,632 ) 10,100 -------------------- -------------------- Cash provided by operations 397,530 334,842 -------------------- -------------------- Cash provided by (used for) investment Expenditures for property and equipment (190,874 ) (161,032 ) Expenditures for timber and timberlands (12,479 ) (2,855 ) Investments in equity affiliates, net (1,273 ) (80 ) Purchase of minority interest (216,087 ) - Purchases of facilities (15,536 ) (97,842 ) Sale of assets 157,818 - Other (30,517 ) (16,728 ) -------------------- -------------------- Cash used for investment (308,948 ) (278,537 ) -------------------- -------------------- Cash provided by (used for) financing Cash dividends paid Common stock (25,756 ) (25,438 ) Preferred stock (8,173 ) (8,796 ) -------------------- -------------------- (33,929 ) (34,234 ) Short-term borrowings (34,072 ) 22,659 Additions to long-term debt 174,930 143,834 Payments of long-term debt (107,847 ) (206,220 ) Other (4,858 ) 13,405 -------------------- -------------------- Cash used for financing (5,776 ) (60,556 ) -------------------- -------------------- Increase (decrease) in cash and cash equivalents 82,806 (4,251 ) Balance at beginning of year 66,935 74,368 -------------------- -------------------- Balance at September 30 $ 149,741 $ 70,117 =========== =========== The accompanying notes are an integral part of these Financial Statements. (1) BASIS OF PRESENTATION. We have prepared the quarterly financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Some information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These statements should be read together with the statements and the accompanying notes
included in our 1999 Annual Report. (2) OTHER (INCOME) EXPENSE, NET. "Other (income) expense, net" includes gains and losses on the sale and disposition of property and other miscellaneous income and expense items. The components of "Other (income) expense, net"
in our Statements of Income are as follows: Three Months Ended Nine Months Ended --------------------------------- --------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (expressed in thousands) Deferred software write-down $ - $ - $ 2,639 $ - Restructuring activity - - - (35,526 ) Sale of European operations (97,775 ) - (97,775 ) - Other, net 1,872 1,802 6,618 4,622 ------------ ------------ ------------ ------------ $ (95,903 ) $ 1,802 $ (88,518 ) $ (30,904 ) ======= ======= ======= =======
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Commission File Number: 1-5057
(Exact name of registrant as specified in its charter)
P.O. Box 50
Boise, Idaho
83728-0001
(208) 384-6161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Common Stock, $2.50 par value
as of October 31, 2000
57,333,633
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(expressed in thousands, except per share data)
September 30
timber harvested
73,070
73,257
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(expressed in thousands, except per share data)
September 30
timber harvested
223,752
213,735
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands)
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(expressed in thousands, except share amounts)
5,032,492; and 4,982,209 shares outstanding
213,384
226,462
224,199
shares authorized; 57,331,175; 57,136,920;
and 57,157,558 shares outstanding
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(expressed in thousands)
September 30
company timber harvested
NOTES TO QUARTERLY FINANCIAL STATEMENTS
The quarterly financial statements have not been audited by independent public accountants, but in the opinion of management, all adjustments necessary to present fairly the results for the periods have been included. Net income for the three and nine
months ended September 30, 2000 and 1999, necessarily involved estimates and accruals. Actual results may vary from those estimates. Except as may be disclosed within these "Notes to Quarterly Financial Statements," the adjustments made were of a
normal, recurring nature. Quarterly results are not necessarily indicative of results that may be expected for the year.
September 30
September 30
For discussion of the restructuring activity see Note 14, and for discussion of the sale of the European operations see Note 10. |
(3) |
NET INCOME PER COMMON SHARE. Net income per common share was determined by dividing net income, as adjusted, by applicable shares outstanding. |
Three Months Ended |
Nine Months Ended |
|||||||||||||||
--------------------------------- |
--------------------------------- |
|||||||||||||||
2000 |
1999 |
2000 |
1999 |
|||||||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
(expressed in thousands) |
||||||||||||||||
BASIC |
||||||||||||||||
Net income as reported |
$ |
84,600 |
$ |
49,048 |
$ |
155,171 |
$ |
124,253 |
||||||||
Preferred dividends (a) |
(3,330 |
) |
(3,429 |
) |
(9,912 |
) |
(10,284 |
) |
||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
Basic income |
$ |
81,270 |
$ |
45,619 |
$ |
145,259 |
$ |
113,969 |
||||||||
======= |
======= |
======= |
======= |
|||||||||||||
Average shares outstanding used to |
||||||||||||||||
determine basic income per common |
||||||||||||||||
share |
57,331 |
57,078 |
57,273 |
56,685 |
||||||||||||
======= |
======= |
======= |
======= |
|||||||||||||
DILUTED |
||||||||||||||||
Basic income |
$ |
81,270 |
$ |
45,619 |
$ |
145,259 |
$ |
113,969 |
||||||||
Preferred dividends eliminated |
3,330 |
3,429 |
9,912 |
10,284 |
||||||||||||
Supplemental ESOP contribution |
(2,844 |
) |
(2,930 |
) |
(8,471 |
) |
(8,790 |
) |
||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
Diluted income |
$ |
81,756 |
$ |
46,118 |
$ |
146,700 |
$ |
115,463 |
||||||||
======= |
======= |
======= |
======= |
|||||||||||||
Average shares outstanding used |
57,331 |
|
57,273 |
|
||||||||||||
Stock options and other |
214 |
499 |
253 |
430 |
||||||||||||
Series D convertible preferred stock |
3,839 |
4,090 |
3,902 |
4,178 |
||||||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
Average shares used to determine |
|
|
|
|
||||||||||||
======= |
======= |
======= |
======= |
|||||||||||||
(a) |
Dividend attributable to our Series D convertible preferred stock held by our ESOP (Employee Stock Ownership Plan) is net of a tax benefit. |
(4) |
COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) for the periods include the following: |
Three Months Ended |
Nine Months Ended |
|||||||||||||||
--------------------------------- |
--------------------------------- |
|||||||||||||||
2000 |
1999 |
2000 |
1999 |
|||||||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
(expressed in thousands) |
||||||||||||||||
Net income |
$ |
84,600 |
$ |
49,048 |
$ |
155,171 |
$ |
124,253 |
||||||||
Other comprehensive income (loss) |
||||||||||||||||
Cumulative foreign currency |
7,327 |
|
|
|
|
|
|
|
||||||||
------------ |
------------ |
------------ |
------------ |
|||||||||||||
Comprehensive income (loss), net of |
|
|
|
|
|
|
|
|
||||||||
======= |
======= |
======= |
======= |
(5) |
RECEIVABLES. In late September 1998, we sold fractional ownership interests in a defined pool of trade accounts receivable. At September 30, 2000, $150 million of sold accounts receivable were excluded from receivables and at September 30, 1999, and December 31, 1999, $100 million of sold accounts receivable were excluded from receivables in the accompanying balance sheets. The portion of fractional ownership interest retained by us is included in accounts receivable in the balance sheets. The increase in sold accounts receivable over the amounts at December 31, 1999 and 1998, of $50 million and $21 million represents an increase in cash provided by operations for the nine months ended September 30, 2000 and 1999. This program consists of a revolving sale of receivables committed to by the purchasers for 364 days and is subject to renewal. Costs related to the program are included in "Other (income) expense, net" in our Statements of Income. Under the accounts receivable sale agreement, the maximum amount available from time to time is subject to change based on the level of eligible receivables, restrictions on concentrations of receivables, and the historical performance of the receivables we sell. The company is currently authorized to sell up to $300 million of fractional ownership interests in its trade accounts receivable. |
(6) |
DEFERRED SOFTWARE COSTS. We defer software costs that benefit future years. These costs are amortized on the straight-line method over the expected life of the software. "Other assets" in the balance sheets includes
deferred software costs of $52.9 million, $51.3 million, |
(7) |
INVENTORIES. Inventories include the following: |
September 30 |
December 31 |
||||||||||
------------------------------------- |
------------------- |
||||||||||
2000 |
1999 |
1999 |
|||||||||
-------------- |
-------------- |
------------------- |
|||||||||
(expressed in thousands) |
|||||||||||
Finished goods and work in process |
$ |
518,639 |
$ |
506,614 |
$ |
538,712 |
|||||
Logs |
60,609 |
63,246 |
89,764 |
||||||||
Other raw materials and supplies |
147,247 |
145,167 |
136,555 |
||||||||
LIFO reserve |
(64,881 |
) |
(62,202 |
) |
(61,047 |
) |
|||||
-------------- |
-------------- |
------------------- |
|||||||||
$ |
661,614 |
$ |
652,825 |
$ |
703,984 |
||||||
======== |
======== |
========== |
(8) |
INCOME TAXES. We used estimated annual tax provision rates of 40.5% for the nine months ended September 30, 2000 and 1999, and 40.5% and 38.7% for the three months ended September 30, 2000 and 1999. In 1999, our
actual annual tax provision rate was 40.0%. |
(9) |
DEBT. We have a revolving credit agreement with 25 major banks that permits us to borrow as much as $600 million at variable interest rates based on the London Interbank Offered Rate (LIBOR). At September 30,
2000, the rate was 6.9%. When the agreement expires in June 2002, any amount outstanding will be due and payable. The revolving credit agreement contains financial covenants relating to minimum net worth, minimum interest coverage ratios, and ceiling
ratios of debt to capitalization. Under this agreement, the payment of dividends is dependent upon the existence of and the amount of net worth in excess of the defined minimum. Our net worth at September 30, 2000, exceeded the defined minimum by
$151.2 million. At September 30, 2000, there were $550 million of borrowings outstanding under this agreement. |
(10) |
BOISE CASCADE OFFICE PRODUCTS CORPORATION. In December 1999, we announced a proposal to acquire the 18.9% minority public shares of BCOP's outstanding common stock. In March 2000, with the recommendation of BCOP's board of
directors, we commenced a tender offer for these shares at $16.50 per share in cash. The tender offer was successfully completed on April 19, 2000. Effective April 20, 2000, BCOP became a wholly owned subsidiary of Boise Cascade Corporation.
The purchase price, including payments to shareholders and stock option holders and transaction costs, totaled $216.1 million and was funded from borrowings under our revolver and short-term borrowings. |
(11) |
BUILDING PRODUCTS ACQUISITIONS. On June 30, 2000, we completed the acquisition of Alliance Forest Products-Joists, Inc. AllJoist). Formerly a subsidiary of Alliance Forest Products, Inc., AllJoist operates a wood I-joist
manufacturing plant in Edmundston, New Brunswick, Canada. The purchase price was $14.6 million cash. |
(12) |
NEW ACCOUNTING STANDARDS. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," delaying the effective date of SFAS No. 133. In June 2000, the FASB issued SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - An Amendment of FASB Statement No. 133." We plan to adopt SFAS No. 133 and No. 138 in the first quarter of 2001. Adoption of these statements is not expected
to have a significant impact on our results of operations or financial position. |
(13) |
FINANCIAL INSTRUMENTS. In anticipation of our acquisition in October of the Blue Star Business Supplies Group in Australia and New Zealand, we entered into forward contracts for the purchase of $60 million of Australian dollars. These contracts resulted in foreign exchange losses of $1.7 million for the three and nine months ended September 30, 2000. |
(14) |
RESTRUCTURING ACTIVITIES. In the first quarter of 1999, our corporate and other segment recorded $4.4 million of additional restructuring expense related to the early retirement program announced in fourth quarter 1998.
The noncash charge was for the present value of unrecorded early retirement benefits. These charges were accrued when the retiring individuals legally accepted the early retirement offer. |
Restructuring reserve liability activity related to the 1998 charges through September 30, 2000, was as follows: |
Asset |
Employee- |
Other |
|
|||||||||
------------ |
----------------- |
------------ |
------------- |
|||||||||
(expressed in thousands) |
||||||||||||
1998 expense recorded |
$ |
53,500 |
$ |
34,900 |
$ |
30,500 |
$ |
118,900 |
||||
Assets written down |
(53,500 |
) |
- |
- |
(53,500 |
) |
||||||
Pension liability recorded |
- |
(11,200 |
) |
- |
(11,200 |
) |
||||||
Charges against reserve |
- |
(4,200 |
) |
(4,600 |
) |
(8,800 |
) |
|||||
------------ |
----------------- |
------------ |
------------- |
|||||||||
Restructuring reserve at December 31, 1998 |
- |
19,500 |
25,900 |
45,400 |
||||||||
Expense recorded |
- |
4,400 |
- |
4,400 |
||||||||
Pension liability recorded |
- |
(4,400 |
) |
- |
(4,400 |
) |
||||||
Reclass from other accounts |
- |
500 |
- |
500 |
||||||||
Reclass from pension liability |
- |
2,200 |
- |
2,200 |
||||||||
Reserves credited to income |
- |
(7,900 |
) |
(19,700 |
) |
(27,600 |
) |
|||||
Proceeds from sale of assets |
- |
- |
1,700 |
1,700 |
||||||||
Charges against reserve |
- |
(10,400 |
) |
(2,700 |
) |
(13,100 |
) |
|||||
------------ |
----------------- |
------------ |
------------- |
|||||||||
Restructuring reserve at December 31, 1999 |
- |
3,900 |
5,200 |
9,100 |
||||||||
Charges against reserve |
- |
(2,600 |
) |
(1,900 |
) |
(4,500 |
) |
|||||
------------ |
----------------- |
------------ |
------------- |
|||||||||
Restructuring reserve at September 30, 2000 |
$ |
- |
$ |
1,300 |
$ |
3,300 |
$ |
4,600 |
||||
======= |
========= |
======= |
======= |
(15) |
SEGMENT INFORMATION. There are no differences from our last annual report in our basis of segmentation or in our basis of measurement of segment profit or loss. An analysis of our operations by segment is as follows: |
Income |
||||||||||||
(Loss) |
||||||||||||
Before |
||||||||||||
Sales |
Taxes and |
|||||||||||
-------------------------------------------------------------------- |
Minority |
|||||||||||
Trade |
Intersegment |
Total |
Interest (a) |
|||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
(expressed in thousands) |
||||||||||||
Three Months Ended September 30, 2000 |
||||||||||||
Office products |
$ |
935,525 |
$ |
94 |
$ |
935,619 |
$ |
136,296 |
(b) |
|||
Building products |
600,858 |
7,632 |
608,490 |
6,673 |
||||||||
Paper and paper products |
378,478 |
103,666 |
482,144 |
53,695 |
||||||||
Corporate and other |
6,362 |
12,156 |
18,518 |
(15,213) |
(c) |
|||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Total |
1,921,223 |
123,548 |
2,044,771 |
181,451 |
||||||||
Intersegment eliminations |
- |
(123,548 |
) |
(123,548 |
) |
- |
||||||
Interest expense |
- |
- |
- |
(39,324) |
||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Consolidated totals |
$ |
1,921,223 |
$ |
- |
$ |
1,921,223 |
$ |
142,127 |
||||
============ |
=========== |
============ |
============ |
|||||||||
Three Months Ended September 30, 1999 |
||||||||||||
Office products |
$ |
838,395 |
$ |
125 |
$ |
838,520 |
$ |
34,753 |
||||
Building products |
585,198 |
9,015 |
594,213 |
60,247 |
||||||||
Paper and paper products |
357,583 |
91,734 |
449,317 |
35,287 |
||||||||
Corporate and other |
8,061 |
14,041 |
22,102 |
(9,520) |
||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Total |
1,789,237 |
114,915 |
1,904,152 |
120,767 |
||||||||
Intersegment eliminations |
- |
(114,915 |
) |
(114,915 |
) |
- |
||||||
Interest expense |
- |
- |
- |
(35,839) |
||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Consolidated totals |
$ |
1,789,237 |
$ |
- |
$ |
1,789,237 |
$ |
84,928 |
||||
============ |
=========== |
============ |
============ |
(a) |
Interest income has been allocated to our segments in the amounts of $194,000 and $674,000 for the three months ended September 30, 2000 and 1999. |
|
(b) |
Includes a $97.8 million gain from the sale of our European operations (see Note 10). |
|
(c) |
Includes $1.7 million of foreign exchange loss related to forward contracts for the purchase of Australian dollars (see Note 13). |
Income |
||||||||||||
(Loss) |
||||||||||||
Before |
||||||||||||
Sales |
Taxes and |
|||||||||||
-------------------------------------------------------------------- |
Minority |
|||||||||||
Trade |
Intersegment |
Total |
Interest (a) |
|||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
(expressed in thousands) |
||||||||||||
Nine Months Ended September 30, 2000 |
||||||||||||
Office products |
$ |
2,775,436 |
$ |
432 |
$ |
2,775,868 |
$ |
202,574 |
(b) |
|||
Building products |
1,850,126 |
24,220 |
1,874,346 |
50,039 |
||||||||
Paper and paper products |
1,148,263 |
309,900 |
1,458,163 |
162,527 |
||||||||
Corporate and other |
20,010 |
35,561 |
55,571 |
(34,801) |
(c) |
|||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Total |
5,793,835 |
370,113 |
6,163,948 |
380,339 |
||||||||
Intersegment eliminations |
- |
(370,113 |
) |
(370,113 |
) |
- |
||||||
Interest expense |
- |
- |
- |
(113,759) |
||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Consolidated totals |
$ |
5,793,835 |
$ |
- |
$ |
5,793,835 |
$ |
266,580 |
||||
============ |
=========== |
============ |
============ |
|||||||||
Nine Months Ended September 30, 1999 |
||||||||||||
Office products |
$ |
2,488,080 |
$ |
388 |
$ |
2,488,468 |
$ |
110,430 |
(d) |
|||
Building products |
1,555,140 |
25,124 |
1,580,264 |
198,742 |
(e) |
|||||||
Paper and paper products |
1,012,017 |
257,690 |
1,269,707 |
57,763 |
(f) |
|||||||
Corporate and other |
23,161 |
41,002 |
64,163 |
(34,214) |
(g) |
|||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Total |
5,078,398 |
324,204 |
5,402,602 |
332,721 |
||||||||
Intersegment eliminations |
- |
(324,204 |
) |
(324,204 |
) |
- |
||||||
Interest expense |
- |
- |
- |
(107,598) |
||||||||
--------------------- |
------------------- |
--------------------- |
--------------------- |
|||||||||
Consolidated totals |
$ |
5,078,398 |
$ |
- |
$ |
5,078,398 |
$ |
225,123 |
||||
============ |
=========== |
============ |
============ |
(a) |
Interest income has been allocated to our segments in the amounts of $1,166,000 and $1,834,000 for the nine months ended September 30, 2000 and 1999. |
|
(b) |
Includes a $97.8 million gain from the sale of our European operations (see Note 10). |
|
(c) |
Includes $1.7 million of foreign exchange loss related to forward contracts for the purchase of Australian dollars (see Note 13). |
|
(d) |
Includes a $4.0 million gain related to restructuring activity (see Note 14). |
|
(e) |
Includes a $35.5 million gain related to restructuring activity (see Note 14). |
|
(f) |
Includes a $1.2 million gain related to restructuring activity (see Note 14). |
|
(g) |
Includes a $4.4 million loss related to restructuring activity (see Note 14). |
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS
Three Months Ended |
Nine Months Ended |
||||||
-------------------------------------- |
-------------------------------------- |
||||||
2000 |
1999 |
2000 |
1999 |
||||
------------------ |
------------------ |
------------------ |
------------------ |
||||
Sales |
$ 1.9 billion |
$ 1.8 billion |
$ 5.8 billion |
$ 5.1 billion |
|||
Net income |
$84.6 million |
$49.0 million |
$155.2 million |
$124.3 million |
|||
Net income per basic share |
$1.42 |
$0.80 |
$2.54 |
$2.01 |
|||
Net income per diluted share |
$1.33 |
$0.74 |
$2.39 |
$1.88 |
|||
Net income before nonroutine items |
$27.4 million |
$49.0 million |
$ 98.0 million |
$102.4 million |
|||
Net income per basic share before nonroutine |
|||||||
items |
$0.42 |
$0.80 |
$1.54 |
$1.62 |
|||
Net income per diluted share before nonroutine |
|||||||
items |
$0.40 |
$0.74 |
$1.46 |
$1.52 |
|||
(percentage of sales) |
|||||||
Materials, labor, and other operating expenses |
79.6% |
77.4% |
79.2% |
77.4% |
|||
Selling and distribution |
10.2% |
10.1% |
10.4% |
10.8% |
|||
General and administrative expenses |
1.7% |
1.7% |
1.6% |
1.9% |
In third quarter 2000, our office products distribution business sold its European office products operations to Guilbert S.A. of France. The sale resulted in a pretax gain for the three and nine months ended September 30, 2000, of $97.8
million, which is recorded in "Other income (expense), net" and in the office products segment. We also entered into forward contracts for the purchase of Australian dollars in anticipation of our acquisition in October 2000 of the Blue Star Business
Supplies Group of US Office Products in Australia and New Zealand. These contracts resulted in foreign exchange losses in our corporate and other segment of $1.7 million for the three and nine months ended September 30, 2000.
The net impact of these year 2000 nonroutine items on the three and nine months ended September 30, 2000, increased net income $57.2 million, or $1.00 per basic share and $0.93 per diluted share.
In second quarter 1999, our building products segment reversed $35.5 million of previously recorded restructuring charges when we decided to continue operations at our sawmill in Elgin, Oregon, and at our plywood plant in Yakima, Washington. Also
in second quarter 1999, we reversed $4.0 million in our office products segment when the office products restructuring in the United Kingdom proved to be less costly than anticipated. Additionally, we reversed $1.2 million of 1998 restructuring
charges in our paper and paper products segment to reflect actual experience. Also in the first quarter of 1999, our corporate and other segment recorded $4.4 million of additional restructuring expense related to an early retirement program
announced in fourth quarter 1998. The noncash charge was for the present value of unrecorded early retirement benefits. These adjustments were recorded primarily in "Other (income) expense, net" in our Statements of Income.
The net impact of all of the 1999 nonroutine items described above for the nine months ended September 30, 1999, increased net income $21.9 million, or $0.39 per basic share and $0.36 per diluted share.
The sales increase between the three months ended September 30, 2000, and the same period in 1999, was a result of a 12% increase in office products sales, a 7% increase in paper and paper products sales, and a 2% increase in building products
sales. The sales increase between the nine months ended September 30, 2000, and the same period in 1999, was a result of a 12% increase in office products sales, a 15% increase in paper and paper products sales, and a 19% increase in building
products sales. See the discussion of the results of operations by segment for additional detail.
For the three months ended September 30, 2000, net income before nonroutine items decreased, compared with net income for the three months ended September 30, 1999, as a result of a 52% increase in paper and paper products operating income and
an 11% increase in office products operating income, offset by an 89% decrease in building products operating income. For the nine months ended September 30, 2000, net income before nonroutine items decreased, compared with net income before
nonroutine items for the nine months ended September 30, 1999, as a result of a 187% increase in paper and paper products operating income offset by a 2% decrease in office products operating income and a 69% decrease in building products operating
income. See the discussion of the results of operations by segment for additional detail.
Materials, labor, and other operating expenses as a percent of sales increased in both periods of 2000 because of lower margins in our office products segment, reduced margins due to lower plywood and lumber sales prices in building products, and higher
energy costs in paper and paper products. See the results of operations by segment for additional detail. Selling and distribution expense as a percent of sales improved for the nine months ended September 30, 2000, compared with the same period in
1999 because of the increase in paper and paper products sales without a corresponding increase in selling and distribution expenses. General and administrative expenses decreased as a percent of sales for the nine months ended September 30, 2000,
compared with the same period in 1999 due to our cost-reduction efforts and to leveraging fixed costs over higher sales.
Interest expense was $39.3 million and $35.8 million for the three months ended September 30, 2000 and 1999, compared with $113.8 million and $107.6 million for the nine months ended September 30, 2000 and 1999. The
increase was due to higher debt levels.
We used estimated annual tax provision rates of 40.5% for the nine months ended September 30, 2000 and 1999, and 40.5% and 38.7% for the three months ended September 30, 2000 and 1999. In 1999, our actual annual tax provision rate was 40.0%.
The changes in our tax rates were due primarily to the sensitivity of the rate to changing income levels and the mix of domestic and foreign sources of income.
OFFICE PRODUCTS DISTRIBUTION
Three Months Ended |
Nine Months Ended |
||||||||||||
------------------------------------------- |
------------------------------------------------ |
||||||||||||
2000 |
1999 |
2000 |
1999 |
||||||||||
-------------------- |
-------------------- |
---------------------- |
---------------------- |
||||||||||
Sales |
$ |
935.6 million |
$ |
838.5 million |
$ |
2,775.9 million |
$ |
2,488.5 million |
|||||
Segment income |
$ |
136.3 million |
$ |
34.8 million |
$ |
202.6 million |
$ |
110.4 million |
|||||
Segment income before nonroutine |
|||||||||||||
items |
$ |
38.5 million |
$ |
34.8 million |
$ |
104.8 million |
$ |
106.4 million |
|||||
(percentage of sales) |
|||||||||||||
Gross profit |
24.0% |
24.8% |
24.2% |
25.7% |
|||||||||
Operating expenses |
19.9% |
20.7% |
20.5% |
21.3% |
|||||||||
Operating expenses before nonroutine |
|||||||||||||
items |
19.9% |
20.7% |
20.5% |
21.5% |
|||||||||
Operating profit |
14.6% |
4.1% |
7.3% |
4.4% |
|||||||||
Operating profit before nonroutine |
|||||||||||||
items |
4.1% |
4.1% |
3.8% |
4.3% |
On September 28, 2000, BCOP sold its European operations to Guilbert S.A. of France for approximately $157.8 million of cash, net of debt repayments, and a note receivable totaling $155.2 million (in euros 175.8 million) to be paid on
January 3, 2001. The sale resulted in a pretax gain for the three and nine months ended September 30, 2000, of $97.8 million, which is recorded in "Other income (expense), net." Sales for the operations sold for the nine months ended
September 30, 2000 and 1999, totaled $240.5 million and $238.2 million.
BCOP also formed a joint venture with Guilbert to provide global service capabilities for both companies' customers. Through the new joint venture, BCOP will service Guilbert's customers in North America, Australia, and New Zealand. Guilbert will
service BCOP's customers throughout Europe and parts of the Middle East.
During the second quarter of 1999, BCOP revised the amount of a restructuring reserve for its United Kingdom operations. The restructuring program was less costly than originally anticipated due to lower legal and professional fees, a sublease of one of
the facilities, a decision to retain a small printing portion of the business, and fewer terminations of employees. As a result, BCOP recorded an increase to operating income of approximately $4.0 million. The increase to income included $0.5 million
for reduced employee-related costs and $3.5 million for other exit costs including lower lease costs and lower-than-expected inventory write-downs of about $0.8 million.
The increase in sales for the periods presented resulted from same-location sales growth. Same-location sales increased 11% for both the three months and nine months ended September 30, 2000, compared with the same periods in 1999. Segment income
for the three months ended September 30, 2000, compared with the same period a year ago, rose due to the increased sales growth. Overall, operating profit as a percent of sales before nonroutine items was flat period over period. However, the gross
profit margin decreased due to higher product costs. This was offset by a decrease in operating expenses before nonroutine items as a percent of sales due to leveraging fixed costs over higher sales. Segment income before nonroutine items for the nine
months ended September 30, 2000, compared with the same period a year ago, decreased slightly despite the increased sales. This decrease arose from the lower gross profit margins due to higher product costs, particularly in the second quarter. On a
year-to-date basis, this lower gross profit margin was only partially offset by lower operating expenses.
In December 1999, we announced a proposal to acquire the 18.9% minority public shares of BCOP's outstanding common stock. In March 2000, with the recommendation of BCOP's board of directors, we commenced a tender offer for these shares at $16.50 per
share in cash. The tender offer was successfully completed on April 19, 2000. Effective April 20, 2000, BCOP became a wholly owned subsidiary of Boise Cascade Corporation. The purchase price, including payments to shareholders and stock option
holders and transaction costs, totaled $216.1 million and was funded from borrowings under our revolver and short-term borrowings.
On September 15, 2000, BCOP acquired B & I Furnishings, a full-service furniture dealer of quality office products in Portland, Oregon, for $0.9 million cash. B & I Furnishings had sales of approximately $3.5 million for its
fiscal year ended December 31, 1999.
On October 6, 2000, BCOP acquired Blue Star Business Supplies Group of US Office Products, a distributor of office and educational supplies in Australia and New Zealand, for $114.7 million cash and the recording of acquisition liabilities.
Blue Star had sales of approximately $300 million for its fiscal year ended April 29, 2000.
Also on October 19, 2000, BCOP merged its majority owned promotional products subsidiary, Boise Marketing Services, Inc. (BMSI), with American Identity, a division of IdentityNow. As a result of the merger, BCOP now has approximately a 22
percent equity position in IdentityNow and will account for its investment under the equity method of accounting subsequent to the merger. Sales for BMSI for the nine months ended September 30, 2000 and 1999, totaled $63.2 million and $71.1 million.
The acquisitions of the minority public shares, the Blue Star Business Supplies Group, B & I Furnishings, the office supply business of Wallace Computer Services, and Supply West 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 our results of operations or financial position. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded
as goodwill and is being amortized over its expected useful life not to exceed 40 years. The results of operations of the acquired businesses are included in our operations subsequent to the dates of acquisition.
If the minority shares acquisition, the Blue Star Business Supplies Group acquisition, the B & I Furnishings acquisition, the European operations sale, and the BMSI merger had occurred on January 1, 2000, pro forma sales for the first nine months of
2000 would have decreased by $73.0 million, while pro forma net income and pro forma basic and diluted income per share would not have materially changed. If the Wallace Computer Services acquisition, the Supply West acquisition, the BCOP minority
shares acquisition, the Blue Star Business Supplies Group acquisition, the B & I Furnishings acquisition, the European operations sale, and the BMSI merger had occurred on January 1, 1999, pro forma sales for the first nine months of 1999 would have
decreased by $47.8 million. Pro forma net income for the first nine months of 1999 would have increased by $7.1 million, and pro forma basic and diluted earnings per share would have increased by $0.12.
The above unaudited pro forma financial information does not necessarily represent the actual results of operations that would have occurred if the acquisitions and divestitures had taken place on the dates assumed.
BUILDING PRODUCTS
Three Months Ended |
Nine Months Ended |
||||||||||
------------------------------------------- |
--------------------------------------------- |
||||||||||
2000 |
1999 |
2000 |
1999 |
||||||||
-------------------- |
-------------------- |
--------------------- |
--------------------- |
||||||||
Sales |
$ |
608.5 million |
$ |
594.2 million |
$ |
1,874.3 million |
$ |
1,580.3 million |
|||
Segment income |
$ |
6.7 million |
$ |
60.2 million |
$ |
50.0 million |
$ |
198.7 million |
|||
Segment income before nonroutine items |
$ |
6.7 million |
$ |
60.2 million |
$ |
50.0 million |
$ |
163.2 million |
|||
Sales Volumes |
|||||||||||
Plywood (1,000 sq. ft. 3/8" basis) |
479,320 |
358,092 |
1,423,547 |
1,137,649 |
|||||||
OSB (1,000 sq. ft. 3/8" basis) (a) |
98,228 |
96,880 |
302,853 |
284,327 |
|||||||
Lumber (1,000 board ft.) |
103,102 |
138,398 |
346,202 |
395,849 |
|||||||
LVL (100 cubic ft.) |
16,822 |
16,086 |
48,930 |
43,068 |
|||||||
I-joists (1,000 equivalent lineal ft.) |
43,765 |
37,885 |
110,153 |
104,628 |
|||||||
Particleboard (1,000 sq. ft. 3/4" basis) |
48,850 |
46,367 |
146,399 |
142,819 |
|||||||
Building materials distribution (in millions) |
$ |
407 |
$ |
344 |
$ |
1,232 |
$ |
874 |
|||
Average Net Selling Prices |
|||||||||||
Plywood (1,000 sq. ft. 3/8" basis) |
$ |
227 |
$ |
310 |
$ |
237 |
$ |
288 |
|||
OSB (1,000 sq. ft. 3/8" basis) |
$ |
144 |
$ |
239 |
$ |
189 |
$ |
205 |
|||
Lumber (1,000 board ft.) |
$ |
415 |
$ |
538 |
$ |
479 |
$ |
521 |
|||
LVL (100 cubic ft.) |
$ |
1,555 |
$ |
1,596 |
$ |
1,556 |
$ |
1,594 |
|||
I-joists (1,000 equivalent lineal ft.) |
$ |
941 |
$ |
1,015 |
$ |
965 |
$ |
1,006 |
|||
Particleboard (1,000 sq. ft. 3/4" basis) |
$ |
287 |
$ |
314 |
$ |
294 |
$ |
286 |
(a) Includes 100% of the sales of Voyageur Panel, of which we own 47%.
The increase in sales in both periods was due to increased sales in building materials distribution resulting from the acquisition of Furman Lumber, Inc., in the third quarter of 1999. Sales increased 2% and 19% for the three and nine months ended
September 30, 2000, when compared with the same periods of the prior year. The reduction in operating income before nonroutine items for both periods was due to significantly lower structural panel and lumber prices. For the three months ended
September 30, 2000, plywood prices were down 27% from a year ago while lumber prices declined 23%. For the nine months ended September 30, 2000, compared with the same period in 1999, plywood prices were down 17% and lumber prices declined 8%.
Our plywood mill in Medford, Oregon, which was rebuilt following a fire in 1998, became fully operational during the first quarter of 2000. Our plywood plant in Elgin, Oregon, which was damaged by fire in May 1999, began operations at the end of 1999.
Plywood unit sales volume increased 34% and 25% over the third quarter and year-ago sales volumes.
On June 30, 2000, we completed the acquisition of Alliance Forest Products-Joists, Inc. AllJoist). Formerly a subsidiary of Alliance Forest Products, Inc., AllJoist operates a wood I-joist manufacturing plant in Edmundston, New Brunswick, Canada. The
purchase price was $14.6 million cash.
On September 16, 1999, we completed the acquisition of Furman Lumber, Inc., a U.S. building materials distributor headquartered in Billerica, Massachusetts, with 12 locations in the East, Midwest, and South. The purchase price was $92.7 million,
including cash payments of $90.2 million and the assumption of $2.5 million of debt.
These acquisitions 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 our results of operations or financial position. The excess
of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill and is being amortized over its expected useful life not to exceed 40 years. The results of operations of the acquired businesses are included in our
operations subsequent to the date of acquisition.
If the AllJoist acquisition had occurred on January 1, 2000, pro forma sales for the first nine months of 2000 would have increased by $11 million, while pro forma net income and pro forma basic and diluted income per share would not have
materially changed. If the AllJoist and Furman acquisitions had occurred on January 1, 1999, pro forma sales for the nine months ended September 30, 1999, would have increased $521 million, pro forma net income would have increased by $1.3
million, and pro forma basic and diluted earnings per share would have increased by $0.02 This unaudited pro forma financial information does not necessarily represent the actual results of operations that would have resulted if the acquisitions had
occurred on the dates assumed.
PAPER AND PAPER PRODUCTS
Three Months Ended |
Nine Months Ended |
||||||||||
---------------------------------------- |
------------------------------------------- |
||||||||||
2000 |
1999 |
2000 |
1999 |
||||||||
------------------- |
------------------- |
-------------------- |
-------------------- |
||||||||
Sales |
$ |
482.1 million |
$ |
449.3 million |
$ |
1,458.2 million |
$ |
1,269.7 million |
|||
Segment income |
$ |
53.7 million |
$ |
35.3 million |
$ |
162.5 million |
$ |
57.8 million |
|||
Segment income before nonroutine items |
$ |
53.7 million |
$ |
35.3 million |
$ |
162.5 million |
$ |
56.6 million |
|||
Sales Volumes |
|||||||||||
(thousands of short tons) |
|||||||||||
Uncoated free sheet |
343 |
362 |
1,056 |
1,061 |
|||||||
Containerboard |
170 |
164 |
508 |
481 |
|||||||
Newsprint |
100 |
110 |
314 |
314 |
|||||||
Other |
33 |
36 |
114 |
111 |
|||||||
------------------- |
------------------- |
--------------------- |
-------------------- |
||||||||
Total |
646 |
672 |
1,992 |
1,967 |
|||||||
========== |
========== |
============ |
============ |
||||||||
Average Net Selling Prices |
|||||||||||
(per short ton) |
|||||||||||
Uncoated free sheet |
$ |
761 |
$ |
709 |
$ |
771 |
$ |
681 |
|||
Containerboard |
$ |
416 |
$ |
354 |
$ |
403 |
$ |
322 |
|||
Newsprint |
$ |
470 |
$ |
383 |
$ |
441 |
$ |
415 |
The increase in sales in both periods of 2000 was due to increases in weighted average paper prices. In the third quarter of 2000, weighted average paper prices increased 12%, while sales volume decreased 4%. For the year, weighted average paper prices
increased 15%, while sales volumes increased 1%. During the third quarter of 2000, we took about 27,000 tons of market-related curtailment, bringing the total to 79,000 tons for the year. In the third quarter of 1999, we took about 25,000 tons of
market-related curtailment and 86,000 tons for the nine months of 1999. Operating income improved significantly for both periods in 2000 due to price increases which were partially offset by higher energy costs. Energy costs increased 37% in third
quarter 2000, compared with third quarter 1999. Energy costs increased 27% for the first nine months of 2000, compared with the same period in 1999. Overall, paper segment manufacturing costs per ton in the third quarter of 2000 were 4% higher than in
the comparison quarter and were 4% higher for the nine months of 2000, compared with the nine months of 1999.
FINANCIAL CONDITION AND LIQUIDITY
Operating Activities. For the first nine months of 2000, operations provided $397.5 million in cash compared with $334.8 million for the same period in 1999. For the nine months ended September 30, 2000, we generated $333.7
million of cash from net income items, and favorable working capital items added $63.8 million. For the first nine months of 1999, net income provided $383.1 million, and unfavorable working capital items, primarily receivables, used $48.3
million. In late September 1998, we sold fractional ownership interests in a defined pool of trade accounts receivable. At September 30, 2000, $150 million of sold accounts receivable were excluded from receivables and at September 30,
1999, and December 31, 1999, $100 million of sold accounts receivable were excluded from receivables in the accompanying balance sheets. The increase in sold accounts receivable over the amounts at December 31, 1999 and 1998, of $50
million and $21 million represents an increase in cash provided by operations for the nine months ended September 30, 2000 and 1999. The company is currently authorized to sell up to $300 million of fractional ownership interests in its
trade accounts receivable. Our current ratio was 1.78:1 at September 30, 2000, compared with 1.28:1 at September 30, 1999, and 1.36:1 at December 31, 1999.
Investing Activities. Cash used for investment was $308.9 million for the first nine months of 2000 and $278.5 million for the same period in 1999. The purchase of BCOP minority interest shares in April 2000 used $216.1 million.
This was partially offset by the sale of BCOP European operations in September 2000, which provided $157.8 million. Cash expenditures for property and equipment, timber and timberlands, and investments in equity affiliates totaled $204.6
million in 2000 and $164.0 million in 1999. Cash purchases of facilities totaled $15.5 million for the first nine months of 2000 and $97.8 million, primarily for the Furman acquisition, in 1999.
In addition to the $157.8 million cash from the sale of the BCOP European operations, we recorded a receivable for $155.2 million due January 3, 2001. Through November 13, 2000, we have experienced a foreign exchange loss on the euro
denominated receivable and cash still held in euros. The final amount of cash collected is dependent upon the exchange rate in effect at the time we convert the euros to U.S. dollars.
In 2000 we expect to spend $335 million to $365 million in capital expenditures, excluding acquisitions. These amounts include approximately $66 million for our environmental compliance program, of which about $50 million will be
spent at our DeRidder paper mill, to allow us to meet new air and water standards that go into effect in April 2001. The balance of our spending will be for quality and efficiency projects, replacement, and modest purchases of timber and timberlands.
We expect to begin construction of a new wood-plastic composite facility in Washington in the fourth quarter of 2000. The total cost of this facility is expected to be $50 million to $60 million, with most of the spending occurring in 2001.
Financing Activities. Cash used for financing was $5.8 million for the first nine months of 2000. Cash used for financing was $60.6 million for the first nine months of 1999. Dividend payments totaled $33.9 million and $34.2
million for the first nine months of 2000 and 1999. In both years, our quarterly dividend was 15 cents per common share. For the first nine months of 2000, short-term borrowings, primarily notes payable and commercial paper, decreased $34.1 million
compared with an increase of $22.7 million for the first nine months of 1999. Long-term debt increased $67.1 million in the first nine months of 2000 and decreased $62.4 million in the first nine months of 1999. In March 2000, we retired
our $100 million, 9.9% notes. In February 1999, we redeemed our $100 million, 9.875% notes.
At September 30, 2000 and 1999, we had $1.9 billion and $2.0 billion of debt outstanding. At December 31, 1999, we had $1.9 billion of debt outstanding. After we collect the receivable from the sale of our BCOP European
operations in January of 2001, we expect our debt to decrease to approximately $1.8 billion. Our debt-to-equity ratio was 1.10:1 and 1.29:1 at September 30, 2000 and 1999. Our debt-to-equity ratio was 1.18:1 at December 31, 1999.
Our debt and debt-to-equity ratio include the guarantee by the company of the remaining $125.5 million of debt incurred by the trustee of our leveraged Employee Stock Ownership Plan. While that guarantee has a negative impact on our debt-to-equity
ratio, it has virtually no effect on our cash coverage ratios or on other measures of our financial strength.
At September 30, 2000, we had $21.6 million of short-term borrowings outstanding. At September 30, 1999, we had $152.2 million of short-term borrowings outstanding. The maximum amount of short-term borrowings outstanding during the
nine months ended September 30, 2000 and 1999, was $164.5 million and $293.3 million. The average amount of short-term borrowings outstanding during the nine months ended September 30, 2000 and 1999, was $93.3 million and
$162.2 million. The average interest rate for these borrowings was 6.6% for 2000 and 5.4% for 1999.
We have a revolving credit agreement with 25 major banks that permits us to borrow as much as $600 million at variable interest rates based on the London Interbank Offered Rate (LIBOR). At September 30, 2000, the rate was 6.9%. When the
agreement expires in June 2002, any amount outstanding will be due and payable. The revolving credit agreement contains financial covenants relating to minimum net worth, minimum interest coverage ratios, and ceiling ratios of debt to capitalization.
Under this agreement, the payment of dividends is dependent upon the existence of and the amount of net worth in excess of the defined minimum. Our net worth at September 30, 2000, exceeded the defined minimum by $151.2 million. At
September 30, 2000, there were $550 million of borrowings outstanding under this agreement.
Our wholly owned subsidiary, Boise Cascade Office Products Corporation (BCOP), has a $450 million revolving credit agreement with 17 major banks that expires in June 2001 and provides variable interest rates based on LIBOR. The BCOP revolving
credit facility contains financial restrictions, including a negative pledge and covenants specifying a minimum fixed charge coverage ratio and a maximum leverage ratio. There were no borrowings under BCOP's agreement at September 30, 2000.
In October 1998, we entered into an interest rate swap with a notional amount of $75 million and an effective fixed rate of 5.1% with respect to $75 million of our revolving credit agreement borrowings. We also entered into an interest rate
swap with a notional amount of $25 million and an effective fixed interest rate of 5.0% with respect to $25 million of revolving credit agreement borrowings. Both swaps expired in October 2000.
Additional information about our credit agreements and debt is in Note 9 accompanying our financial statements.
In July 2000, a registration statement filed with the Securities and Exchange Commission (SEC) covering $300 million in universal shelf capacity became effective. Under this filing, we may offer and sell in one or more offerings common stock, preferred
stock, debt securities, warrants, and purchase contracts.
In April 1998, BCOP registered $300 million of shelf capacity with the SEC. In May 1998, BCOP issued $150 million of 7.05% notes under this registration statement. The notes are due in May 2005. BCOP has no intent to use the remaining shelf
capacity.
At September 30, 2000, we had $430 million of unused borrowing capacity registered with the SEC for additional debt securities.
Our cash requirements going forward will be funded through a combination of cash flows from operations, borrowings under our existing credit facilities, issuance of new debt or equity securities, and possible asset sales.
We believe inflation has not had a material effect on our financial condition or results of operations; however, there can be no assurance that we will not be affected by inflation in the future. Our overall sales are not subject to significant seasonal
variations.
OUTLOOK
The company expects that financial results in fourth quarter 2000 may be weaker than results in third quarter 2000 and considerably weaker than fourth quarter 1999 results before nonroutine items. Reasons for the weakness can be found in all three
business segments.
In office products, we expect sales to grow at a healthy rate in the fourth quarter, compared to year-ago sales. Internal growth will come from initiatives now in place that are broadening our product and service offerings and addressing new markets.
However, office products is likely to feel the negative impact of transition costs related to the acquisition of US Office Products' Blue Star business in Australia and New Zealand. Operating income is expected to be between 3.5% and 4.0% of sales,
similar to where it has been on average in the first nine months of this year.
In building products, we don't expect average commodity wood product prices to be substantially different in the fourth quarter than they were in third-quarter 2000, suggesting that financial performance of this segment will likely be similar to
third-quarter performance.
In paper, energy and chemical costs are continuing to climb rapidly in the fourth quarter, relative to the third, and average paper price increases are likely to be modest. During October, we reduced uncoated free sheet production by approximately
9,000 tons to balance inventories with customer orders. We expect similar monthly curtailments throughout the remainder of the fourth quarter. As a result of these factors, we expect paper segment performance in fourth-quarter 2000 to be below levels
reached in fourth-quarter 1999 and third-quarter 2000.
In addition, the company has a receivable of 175.8 million euros due on January 3, 2001, which is related to the previously announced sale of its European office products distribution operations to Guilbert. This receivable is not hedged financially,
and the company may realize more or less than the U.S. dollar value of the receivable recorded on September 28, 2000.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," delaying the effective date of SFAS No. 133. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities - An Amendment of FASB Statement No. 133." We plan to adopt SFAS No. 133 and No. 138 in the first quarter of 2001. Adoption of these statements is not expected to have a significant impact on our
results of operations or financial position.
The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," must be implemented by fourth quarter 2000. Implementation of this SAB is not expected to have a significant impact on our results of operations or
financial position.
TIMBER SUPPLY AND ENVIRONMENTAL ISSUES
In September 2000, the Rainforest Action Network (RAN), an extreme environmental activist group, announced a public campaign targeting the company and its stakeholders, including several of our major customers. On October 24, 2000, three RAN activists
illegally accessed the roof of the company's Boise headquarters in an attempt to rappel down the side of the building. They were arrested and charged. RAN continues to disseminate false allegations about the company through mail, the Internet, and
public print media. We are responding to this campaign by publicly refuting these allegations and by providing accurate information on our forestry practices and proactive environmental efforts to our stakeholders. Though disruptive, the campaign has
not had a significant impact on our results of operations or financial position.
For further information on timber supply and environmental issues, see our 1999 Annual Report on Form 10-K, Exhibit 13.1, Financial Review, and see PART II - OTHER INFORMATION, ITEM 1. LEGAL PROCEEDINGS in our quarterly report on Form 10-Q for the
quarter ended June 30, 2000.
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis includes forward-looking statements. Actual results may differ materially from those expressed in or implied by the statements. Factors that could cause actual results to differ from projected results include, among
other things, changes in general economic conditions, both domestically and abroad; changes in foreign and domestic competition; changes in production capacity across paper and wood products markets; fluctuations in energy, chemical, and other raw
material costs; the impact of industry consolidation; the impact of environmental regulations on our capital expenditures; fluctuations in foreign exchange rates; the impact of adverse weather on our operations; our ability to maintain cost structure
improvements; the level of housing starts and remodeling activities; the occurrence of natural disasters such as fire and windstorm; and other factors included in our other filings with the Securities and Exchange Commission.
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Changes in interest rates and currency rates expose the company to financial market risk. Our debt is predominantly fixed-rate. We experience only modest changes in interest expense when market interest rates change. Most foreign currency
transactions have been conducted in the local currencies, limiting our exposure to changes in currency rates. Consequently, our market risk-sensitive instruments do not normally subject us to material market risk exposure. Changes in our debt and our
continued international expansion could increase these risks. To manage volatility relating to these exposures, we may enter into various derivative transactions such as interest rate swaps, rate hedge agreements, and forward exchange contracts.
Interest rate swaps and rate hedge agreements are used to hedge underlying debt obligations or anticipated transactions. For qualifying hedges, the interest rate differential is reflected as an adjustment to interest expense over the life of the swap or
underlying debt. Gains and losses related to qualifying hedges of foreign currency firm commitments and anticipated transactions are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. All
other forward exchange contracts are marked to market, and unrealized gains and losses are included in current period net income. In connection with the sale of our European office products operations on September 28, 2000, we recorded a note
receivable totaling $155.2 million (in euros 175.8 million) which is to be paid on January 3, 2001. The euro denominated note receivable and cash from the sale still held in euros subjects us to risk of foreign exchange loss if the euro
declines in comparison to the U.S. dollar. Through November 13, 2000, we have experienced a foreign exchange loss. The final amount of the exchange gain or loss is dependent upon the exchange rates in effect at the time we convert the euros to U.S.
dollars. We had no material exposure to losses from derivative financial instruments held at September 30, 2000. We do not use derivative financial instruments for trading purposes.
PART II - OTHER INFORMATION
ITEM 1. |
LEGAL PROCEEDINGS |
In December 1999, nine purported class action lawsuits were filed against the company, Boise Cascade Office Products Corporation, and BCOP's directors arising out of our proposal to acquire BCOP's outstanding minority public shares for $13.25 in cash.
All nine cases were filed in the Delaware Court of Chancery. The lawsuits allege, among other things, that our offer was wrongful, unfair, and harmful to BCOP public stockholders and that the individual defendants could not fairly discharge their
fiduciary duties. The lawsuits sought, among other things, injunctive relief against consummation of the proposed transaction, rescission of the transaction if it were consummated, damages, and attorneys' fees and expenses. On January 19, 2000, the
court, upon stipulation of the parties, signed a consolidation order that combined the nine cases into one matter. On March 20, 2000, the parties to the litigation entered into a Memorandum of Understanding regarding a proposed settlement of the
lawsuits. On October 12, 2000, the court approved the settlement. The settlement provides for full releases of the defendants and their affiliates and extinguishes all claims that have been, could have been, or could be asserted by or on behalf of any
member of the class against the defendants. The settlement also provides for the payment of $700,000 in plaintiffs attorneys' fees and $20,000 for expenses.
During 1998 and 1999, five potential class action lawsuits were filed against the company arising out of its former manufacture and sale of hardboard siding products. These lawsuits allege that siding manufactured by the company was inherently defective
when used as exterior cladding for buildings. In February and May 2000, two of these lawsuits were voluntarily dismissed in their entirety with no payment from Boise Cascade. These cases had been pending in the U.S. District Court in Oregon and in the
District Court of Jefferson County, Texas. Two of the remaining lawsuits are pending in the Circuit Court of Champaign County, Illinois, and the District Court of Jefferson County, Texas. The case in Illinois seeks certification of a statewide class
consisting of all owners of structures bearing hardboard siding manufactured by the company. The case pending in Texas state court seeks certification of a nationwide class of mobile home owners having siding manufactured by the company. To date, no
court has granted class certification. In the third action, pending in the U.S. District Court for the Eastern District of Texas, class certification was denied by the court in November 2000. This action sought certification of a statewide class of all
owners of mobile homes bearing hardboard siding manufactured by the company. The court entered a subsequent order in November 2000 dismissing the action in its entirety. The remaining two lawsuits seek to declare the company financially responsible for
the repair and replacement of the siding, to make restitution to the class members, and to award each class member compensatory and enhanced damages. The company discontinued manufacturing the hardboard siding product that is the subject of these
lawsuits in 1984. We believe there are valid factual and legal defenses to these cases and will resist the certification of any class and vigorously defend all claims alleged by the plaintiffs.
See our Annual Report on Form 10-K for the year ended December 31, 1999, and our quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 2000, for information concerning other legal proceedings.
ITEM 2. |
CHANGES IN SECURITIES |
None. |
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
None. |
ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None. |
ITEM 5. |
OTHER INFORMATION |
None. |
ITEM 6. |
EXHIBITS AND REPORTS ON FORM 8-K |
(a) |
Exhibits. |
(b) |
Reports on Form 8-K. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BOISE CASCADE CORPORATION |
||
|
Date: November 13, 2000 |
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2000
Number |
Description |
Page Number |
---------------------- |
----------------------------------------------------------------------------------- |
---------------------- |
12.1 |
Ratio of Earnings to Fixed Charges |
28 |
12.2 |
Ratio of Earnings to Combined Fixed Charges and Preferred Dividend Requirements |
|
27 |
Financial Data Schedule |
30 |
EXHIBIT 12.1
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
Nine Months |
|||||||||||||||||||||||
Year Ended December 31 |
Ended September 30 |
||||||||||||||||||||||
------------------------------------------------------------------------------------- |
------------------------------ |
||||||||||||||||||||||
1995 |
1996 |
1997 |
1998 |
1999 |
1999 |
2000 |
|||||||||||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
-------------- |
|||||||||||||||||
(dollar amounts expressed in thousands) |
|||||||||||||||||||||||
Interest costs |
$ |
135,130 |
$ |
128,360 |
$ |
137,350 |
$ |
159,870 |
$ |
146,124 |
$ |
109,096 |
$ |
114,627 |
|||||||||
Guarantee of interest on ESOP debt |
19,339 |
17,874 |
16,341 |
14,671 |
12,856 |
9,707 |
8,238 |
||||||||||||||||
Interest capitalized during the period |
3,549 |
17,778 |
10,575 |
1,341 |
238 |
212 |
743 |
||||||||||||||||
Interest factor related to noncapitalized leases (a) |
8,600 |
12,982 |
11,931 |
11,308 |
13,065 |
9,571 |
8,710 |
||||||||||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
-------------- |
|||||||||||||||||
Total fixed charges |
$ |
166,618 |
$ |
176,994 |
$ |
176,197 |
$ |
187,190 |
$ |
172,283 |
$ |
128,586 |
$ |
132,318 |
|||||||||
======== |
======== |
========= |
========= |
======== |
======= |
======== |
|||||||||||||||||
Income (loss) before income taxes, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Undistributed (earnings) losses of less than 50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fixed charges |
166,618 |
176,994 |
176,197 |
187,190 |
172,283 |
128,586 |
132,318 |
||||||||||||||||
Less: Interest capitalized |
(3,549 |
) |
(17,778 |
) |
(10,575 |
) |
(1,341 |
) |
(238 |
) |
(212 |
) |
(743 |
) |
|||||||||
Guarantee of interest on ESOP debt |
(19,339 |
) |
(17,874 |
) |
(16,341 |
) |
(14,671 |
) |
(12,856 |
) |
(9,707 |
) |
(8,238 |
) |
|||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------ |
-------------- |
|||||||||||||||||
Total earnings before fixed charges |
$ |
696,279 |
$ |
171,392 |
$ |
125,531 |
$ |
158,091 |
$ |
509,014 |
$ |
337,766 |
$ |
386,308 |
|||||||||
======== |
======== |
========= |
========= |
======== |
======= |
======== |
|||||||||||||||||
Ratio of earnings to fixed charges |
4.18 |
- |
- |
- |
2.95 |
2.63 |
2.92 |
||||||||||||||||
Excess of fixed charges over earnings before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(a) Interest expense for operating leases with terms of one year or longer is based on an imputed interest rate for each lease. |
EXHIBIT 12.2
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Combined Fixed Charges
and Preferred Dividend Requirements
Nine Months |
|||||||||||||||||||||||
Year Ended December 31 |
Ended September 30 |
||||||||||||||||||||||
------------------------------------------------------------------------------------- |
----------------------------- |
||||||||||||||||||||||
1995 |
1996 |
1997 |
1998 |
1999 |
1999 |
2000 |
|||||||||||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
------------- |
|||||||||||||||||
Interest costs |
$ |
135,130 |
$ |
128,360 |
$ |
137,350 |
$ |
159,870 |
$ |
146,124 |
$ |
109,096 |
$ |
114,627 |
|||||||||
Interest capitalized during the period |
3,549 |
17,778 |
10,575 |
1,341 |
238 |
212 |
743 |
||||||||||||||||
Interest factor related to noncapitalized leases (a) |
8,600 |
12,982 |
11,931 |
11,308 |
13,065 |
9,571 |
8,710 |
||||||||||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
------------- |
|||||||||||||||||
Total fixed charges |
147,279 |
159,120 |
159,856 |
172,519 |
159,427 |
118,879 |
124,080 |
||||||||||||||||
Preferred stock dividend requirements -- pretax |
59,850 |
65,207 |
44,686 |
19,940 |
17,129 |
16,940 |
15,807 |
||||||||||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
------------- |
|||||||||||||||||
Combined fixed charges and preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
======== |
======== |
========= |
========= |
======== |
======= |
======= |
|||||||||||||||||
Income (loss) before income taxes, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Undistributed (earnings) losses of less than 50% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total fixed charges |
147,279 |
159,120 |
159,856 |
172,519 |
159,427 |
118,879 |
124,080 |
||||||||||||||||
Less interest capitalized |
(3,549 |
) |
(17,778 |
) |
(10,575 |
) |
(1,341 |
) |
(238 |
) |
(212 |
) |
(743 |
) |
|||||||||
-------------- |
-------------- |
---------------- |
---------------- |
-------------- |
------------- |
------------- |
|||||||||||||||||
Total earnings before fixed charges |
$ |
696,279 |
$ |
171,392 |
$ |
125,531 |
$ |
158,091 |
$ |
509,014 |
$ |
337,766 |
$ |
386,308 |
|||||||||
======== |
======== |
========= |
========= |
======== |
======= |
======= |
|||||||||||||||||
Ratio of earnings to combined fixed charges and |
|
|
|
|
|
|
|
||||||||||||||||
Excess of combined fixed charges and preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(a) Interest expense for operating leases with terms of one year or longer is based on an imputed interest rate for each lease. |