-----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, AM/uU2ieLG9bBFnj+QAzstrb/j76EZW96KRcjcp3Gde4gW/VkKT4gBKxXhMAo3PR 1BMIScASL0FINZYAVW6QNg== 0000938839-97-000014.txt : 19971114 0000938839-97-000014.hdr.sgml : 19971114 ACCESSION NUMBER: 0000938839-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOISE CASCADE OFFICE PRODUCTS CORP CENTRAL INDEX KEY: 0000938839 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 820477390 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13662 FILM NUMBER: 97714405 BUSINESS ADDRESS: STREET 1: 800 WEST BRYN MAWR AVE CITY: ITASCA STATE: IL ZIP: 60143 BUSINESS PHONE: 7087735000 MAIL ADDRESS: STREET 1: 800 WEST BRYN MAWR AVE STREET 2: 1111 WEST JEFFERSON STREET CITY: ITASCA STATE: IL ZIP: 60143 10-Q 1 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, 1997 ( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Transition Period From ____________ to ____________ Commission File number 1-13662 BOISE CASCADE OFFICE PRODUCTS CORPORATION 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, 1997 Common Stock, $.01 par value 65,586,125 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 1997 1996 Net sales $ 679,877 $506,694 Cost of sales, including purchases from Boise Cascade Corporation of $57,231 and $49,285 509,557 379,193 __________ __________ Gross profit 170,320 127,501 __________ __________ Selling and warehouse operating expense 127,373 94,515 Corporate general and administrative expense, including amounts paid to Boise Cascade Corporation of $653 and $564 11,307 9,097 Goodwill amortization 3,159 1,757 __________ __________ 141,839 105,369 __________ __________ Income from operations 28,481 22,132 __________ __________ Interest expense 6,749 2,126 Other income (expense), net 257 (142) __________ __________ Income before income taxes 21,989 19,864 Income tax expense 9,457 8,144 __________ __________ Net income $ 12,532 $ 11,720 Average shares outstanding 63,086,894 62,449,765 Earnings per share $ .20 $ .19 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 1997 1996 Net sales $ 1,878,218 $1,428,884 Cost of sales, including purchases from Boise Cascade Corporation of $163,437 and $137,015 1,408,311 1,055,148 ___________ ___________ Gross profit 469,907 373,736 ___________ ___________ Selling and warehouse operating expense 351,352 270,525 Corporate general and administrative expense, including amounts paid to Boise Cascade Corporation of $1,947 and $1,780 29,886 23,723 Goodwill amortization 7,686 4,815 ___________ ___________ 388,924 299,063 ___________ ___________ Income from operations 80,983 74,673 ___________ ___________ Interest expense 13,895 5,290 Other income (expense), net 390 (100) ___________ ___________ Income before income taxes 67,478 69,283 Income tax expense 28,325 28,406 ___________ ___________ Net income $ 39,153 $ 40,877 Average shares outstanding 62,951,608 62,372,100 Earnings per share $ .62 $ .66 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 1997 1996 1996 Current Cash and short-term investments $ 12,598 $ 9,281 $ 12,762 Receivables, less allowances of $7,055, $4,125, and $3,887 374,484 258,740 285,337 Inventories 186,571 137,537 171,748 Deferred income tax benefits 13,995 7,257 13,963 Other 24,994 16,537 15,378 ___________ __________ __________ 612,642 429,352 499,188 ___________ __________ __________ Property Land 27,900 13,488 13,488 Buildings and improvements 111,981 72,091 72,917 Furniture and equipment 180,154 121,556 137,137 Accumulated depreciation (129,447) (85,791) (90,980) ___________ __________ __________ 190,588 121,344 132,562 ___________ __________ __________ Goodwill, net of amortization of $20,450, $10,172, and $13,138 433,497 221,266 261,706 Other assets 24,804 9,614 11,906 ___________ __________ __________ Total assets $1,261,531 $ 781,576 $ 905,362 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 1997 1996 1996 Current Notes payable $ 1,200 $ 37,300 $ 36,700 Current portion of long-term debt 2,997 203 180 Accounts payable Trade and other 235,880 160,841 185,370 Boise Cascade Corporation 34,530 24,399 21,926 ___________ __________ __________ 270,410 185,240 207,296 ___________ __________ __________ Accrued liabilities Compensation and benefits 30,496 22,068 31,120 Income taxes payable 4,662 2,084 7,100 Taxes, other than income 15,821 8,845 8,351 Other 39,896 24,988 39,800 ___________ __________ __________ 90,875 57,985 86,371 ___________ __________ __________ 365,482 280,728 330,547 ___________ __________ __________ Other Deferred income taxes 371 1,279 4,470 Long-term debt, less current portion 366,731 95,053 140,024 Other 36,043 20,202 25,536 ___________ __________ __________ 403,145 116,534 170,030 ___________ __________ __________ Shareholders' equity Common stock, $.01 par value, 200,000,000 shares authorized; 65,586,125, 62,469,703, and 62,750,318 shares issued and outstanding at each period 656 625 628 Additional paid-in capital 356,565 299,097 304,134 Retained earnings 135,683 84,592 100,023 ___________ __________ __________ Total shareholders' equity 492,904 384,314 404,785 ___________ __________ __________ Total liabilities and shareholders' equity $1,261,531 $ 781,576 $ 905,362 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 1997 1996 Cash provided by (used for) operations Net income $ 39,153 $ 40,877 Items in income not using (providing) cash Depreciation and amortization 29,291 18,861 Deferred income taxes (1,754) 1,290 Receivables (14,933) (24,585) Inventories 9,743 3,064 Other current assets (7,614) 2,546 Accounts payable and accrued liabilities 28,675 8,821 Current and deferred income taxes (7,430) (5,199) __________ __________ Cash provided by operations 75,131 45,675 __________ __________ Cash used for investment Expenditures for property and equipment (44,182) (26,332) Acquisitions (243,984) (145,068) Other, net (20,504) (12,189) __________ __________ Cash used for investment (308,670) (183,589) __________ __________ Cash provided by (used for) financing Additions to long-term debt 219,999 95,000 Notes payable (35,500) 37,300 Sale of stock 48,463 - Other, net 413 813 __________ __________ Cash provided by financing 233,375 133,113 __________ __________ Decrease in cash and short-term investments (164) (4,801) Balance at beginning of the period 12,762 14,082 __________ __________ Balance at September 30 $ 12,598 $ 9,281 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 through its contract stationer business, as well as through its direct marketing channel. At September 30, 1997, Boise Cascade Corporation owned approximately 81% of our outstanding common stock. The quarterly financial statements of the Company and its subsidiaries have not been audited by independent public accountants, but in the opinion of management, all adjustments necessary to present fairly the results for the periods have been included. Except as may be disclosed in the notes to the Financial Statements, the adjustments made were of a normal, recurring nature. Quarterly results are not necessarily indicative of results that may be expected for the year. We have prepared the statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These quarterly financial statements should be read together with the statements and the accompanying notes included in our 1996 Annual Report. (2) EARNINGS PER SHARE. Earnings per share of $.20 and $.19 for the three months ended September 30, 1997 and 1996, and $.62 and $.66 for the nine months ended September 30, 1997 and 1996, are based upon the average number of common shares outstanding including common shares issued to effect acquisitions made by the Company and shares issued as a result of stock options exercised. Earnings per share is computed independently for each period. As a result, the total of the per share results for the first three quarters of 1997 does not equal the per share results for the nine months ended September 30, 1997. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, which will be implemented in the fourth quarter of 1997. The statement will have no significant impact on previously reported earnings per share, which will be renamed basic earnings per share. (3) COMMON STOCK. On September 25, 1997, we issued 2,250,000 shares of common stock at $21.55 per share to Boise Cascade Corporation. (4) DEBT. On June 26, 1997, we entered into a $450 million revolving credit agreement with a group of banks that expires on June 29, 2001, and provides for variable rates of interest based on customary indices. It contains customary restrictive financial and other covenants, including a negative pledge and covenants specifying a minimum fixed charge coverage ratio and a maximum leverage ratio. This agreement replaced our $350 million revolving credit agreement. We may, subject to the covenants contained in the credit agreement and to market conditions, raise additional funds through the agreement and through other external debt or equity financings in the future. At September 30, 1997, borrowing under the revolving credit agreement was $360 million. In addition to the amount outstanding under the revolving credit agreement, we had $1.2 million of short-term notes payable at September 30, 1997. The maximum amount of short-term notes payable during the three and nine months ended September 30, 1997, was $77.4 million. The average amounts of short-term notes payable during the three and nine months ended September 30, 1997, were $42.6 million and $39.5 million. The weighted average interest rate for these borrowings was 5.8% for both periods. (5) TAXES. The estimated tax provision rate for the first nine months of 1997 was 42.0%, compared with a tax provision rate of 41.0% for the same period in the prior year. The increase is primarily due to increased foreign income, including nondeductible goodwill, taxed at a higher rate. (6) ACQUISITIONS. During the first nine months of 1997 we completed seven acquisitions, and during the first nine months of 1996 we completed nine acquisitions, all of which were accounted for under the purchase method of accounting. Accordingly, the purchase prices were allocated to the assets acquired and liabilities assumed based upon their estimated fair values. The initial purchase price allocations may be adjusted within one year of the date of purchase for changes in estimates of the fair values of assets and liabilities. Such adjustments are not expected to be significant to results of operations or the financial position of the Company. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill and is being amortized over 40 years. The results of operations of the acquired businesses are included in our operations subsequent to the dates of acquisition. On January 31, 1997, we acquired the stock of the contract stationer business of The Office Stop, based in Butte, Montana. On February 28, 1997, we acquired the assets of the contract stationer business of Florida Ribbon and Carbon, based in Jacksonville, Florida. On April 17, 1997, we acquired the assets of the contract stationer business of Winterbulk Business Supplies, Ltd., based in Bolton, England. On April 30, 1997, we acquired the assets of the computer consumables business of TDI, based in Raleigh-Durham, North Carolina. On May 30, 1997, we acquired the assets of the computer consumables business of Carlyle Computer Products Ltd., based in Winnipeg, Manitoba, Canada. On May 31, 1997, we acquired the assets of the promotional products business of OstermanAPI, Inc., based in Maumee, Ohio. In conjunction with the acquisition of Osterman, we formed a majority-owned subsidiary, Boise Marketing Services, Inc. ("BMSI"), of which we own 88%. Our previously acquired promotional products company, OWNCO, also became part of BMSI. In January 1997, we also completed a joint venture with Otto Versand, of which we own 50%, to direct market office products in Europe, initially in Germany. These transactions, including the joint venture with Otto and the formation of the majority-owned promotional products subsidiary, were completed for cash of $99.7 million, $2.9 million of our common stock, and the recording of $14.2 million of acquisition liabilities. On July 7, 1997, we acquired 100% of the shares of Jean-Paul Guisset S.A. ("JPG"), a French corporation. JPG is a direct marketer of office products in France. The negotiated purchase price was 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. No liability has been recorded for the price supplement as the amount of payment, if any, is not assured beyond a reasonable doubt. Approximately FF128.5 million (US$20.5 million) was repatriated to the Company from JPG during the third quarter of 1997. In addition to the cash paid, we recorded $5.8 million of acquisition liabilities and assumed $10.1 million of long-term debt. The acquisition was funded by cash flow from operations and borrowings under our revolving credit agreement. On February 5, 1996, we completed the acquisition of 100% of the shares of Grand & Toy Limited ("Grand & Toy") from Cara Operations Limited (Toronto). On January 31, February 9, March 29, April 26, May 31, July 1, and July 31, 1996, we acquired businesses in New Mexico, Maine, Vermont, Wisconsin, Washington, Michigan, Australia, and Oklahoma City for cash of $145.1 million, $1.7 million of our common stock, and the recording of $20.6 million of acquisition liabilities. Unaudited pro forma results of operations reflecting the acquisitions would have been as follows. If the 1997 acquisitions had occurred January 1, 1997, sales for the first nine months of 1997 would have increased to $2.0 billion, net income would have decreased to $38.3 million, and earnings per share would have decreased to $.61. If the 1997 and 1996 acquisitions had occurred January 1, 1996, sales for the first nine months of 1996 would have increased to $1.7 billion, net income would have decreased to $40.2 million, and earnings per share would have decreased to $.65. This unaudited pro forma financial information does not necessarily represent the actual results of operations that would have occurred if the acquisitions had taken place on the dates assumed. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended September 30, 1997, Compared with Three Months Ended September 30, 1996 Results of Operations Net sales in the third quarter of 1997 increased 34% to $679.9 million, compared with $506.7 million in the third quarter of 1996. The growth in sales resulted primarily from acquisitions, new account development, and product line extensions. Third quarter 1997 sales growth was constrained due to the United Parcel Service ("UPS") strike, particularly in our domestic direct marketing channel. Same-location sales increased 15% in the third quarter of 1997, compared with sales in the third quarter of 1996. Excluding our domestic direct marketing channel and holding paper prices constant, our same-location sales growth would have been 20%. Cost of sales, which includes the cost of merchandise sold and delivery and occupancy costs, increased to $509.6 million in the third quarter of 1997, which was 74.9% of net sales. This compares with $379.2 million reported in the same period of the prior year, which represented 74.8% of net sales. Gross profit as a percentage of net sales was 25.1% and 25.2% for the third quarters of 1997 and 1996. The decrease in the third quarter of 1997 was primarily because of competitive pressures on gross profit. Operating expense was 20.9% of net sales in the third quarter of 1997, compared with 20.8% in the third quarter of 1996. Within the operating expense category, selling and warehouse operating expense was 18.7% of net sales in the third quarters of 1997 and 1996. Corporate general and administrative expense was 1.7% of net sales in the third quarter of 1997, compared with 1.8% in 1996. Goodwill amortization increased to $3.2 million in the third quarter of 1997, compared with $1.8 million in the third quarter of 1996. The increase in goodwill amortization was the result of recording goodwill arising from our acquisitions. Income from operations in the third quarter of 1997 increased to $28.5 million, or 4.2% of net sales, compared to our third quarter 1996 operating income of $22.1 million, or 4.4% of net sales. Interest expense was $6.7 million in the third quarter of 1997, compared with $2.1 million in the third quarter of 1996. The increase in interest expense resulted from debt incurred in conjunction with our acquisition and capital spending programs. Net income in the third quarter of 1997 increased to $12.5 million, or 1.8% of net sales, compared with $11.7 million, or 2.3% of net sales in the same period of the prior year. Nine Months Ended September 30, 1997, Compared with Nine Months Ended September 30, 1996 Net sales for the nine months ended September 30, 1997, increased 31% to $1.9 billion, compared with $1.4 billion a year ago. Same- location sales increased 14% year to year. Holding paper prices constant, same-location sales grew 19%. Cost of sales, which includes the cost of merchandise sold and delivery and occupancy costs, increased to $1.4 billion for the nine months ended September 30, 1997, which was 75.0% of net sales. This compares with $1.1 billion reported in the same period of the prior year, which represented 73.8% of net sales. Gross profit as a percentage of net sales was 25.0% and 26.2% for the first nine months of 1997 and 1996. Sales growth in technology-related products and competitive pressures on gross profits contributed to the lower gross profit level in the first nine months of 1997. Operating expense was 20.7% of net sales for the first nine months of 1997, compared with 20.9% in the same period of the prior year. This decrease resulted, in part, from our changing sales mix described above and expense leveraging as, for example, our central procurement and integrated distribution programs ramp up. Within the operating expense category, selling and warehouse operating expense was 18.7% of net sales for the first nine months of 1997, compared with 18.9% in 1996. Corporate general and administrative expense was 1.6% of net sales for the first nine months of 1997 compared with 1.7% in 1996. Goodwill amortization increased to $7.7 million for the first nine months of 1997, compared with $4.8 million in 1996. The increase in goodwill amortization was the result of recording goodwill arising from our acquisitions. Income from operations for the first nine months of 1997 was $81.0 million, or 4.3% of net sales, compared to 1996 operating income of $74.7 million, or 5.2% of net sales. Interest expense was $13.9 million for the first nine months of 1997, compared with $5.3 million in 1996. The increase in interest expense resulted from debt incurred in conjunction with our acquisition and capital spending programs. Net income for the first nine months of 1997 decreased to $39.2 million, or 2.1% of net sales, compared with $40.9 million, or 2.9% of net sales, in the same period of the prior year. Liquidity and Capital Resources Our principal requirements for cash have been to make acquisitions, fund working capital needs, upgrade and expand our facilities at existing locations, and open new distribution centers. The execution of our strategy for growth, including acquisitions and the relocation of several existing distribution centers into new and larger facilities, is expected to require capital outlays over the next several years. To finance our capital requirements, we expect to rely upon funds from a combination of sources. In addition to cash flow from operations, we have a $450 million revolving credit agreement that expires in 2001 and provides for variable rates of interest based on customary indices. The credit agreement is available for acquisitions and general corporate purposes. It contains customary restrictive financial and other covenants, including a negative pledge and covenants specifying a minimum fixed charge coverage ratio and a maximum leverage ratio. At September 30, 1997, $360 million was outstanding under this agreement. We may, subject to the covenants contained in the credit agreement and to market conditions, raise additional funds through the agreement and through other external debt or equity financings in the future. In addition to the amount outstanding under the revolving credit agreement, we had short-term notes payable of $1.2 million at September 30, 1997. The maximum amount of short-term notes payable during the three and nine months ended September 30, 1997, was $77.4 million. The average amounts of short-term notes payable during the three and nine months ended September 30, 1997, were $42.6 million and $39.5 million. The weighted average interest rate for these borrowings was 5.8% for both periods. 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, 1997, 3.5 million shares remained unissued under this registration statement. On September 25, 1997, we issued 2.25 million shares of common stock at $21.55 per share to Boise Cascade Corporation for total proceeds of $48.5 million. Net cash provided by operations in the first nine months of 1997 was $75.1 million. This was the result of $66.7 million of net income, depreciation and amortization, and other noncash items, and an $8.4 million decrease in working capital. Net cash used for investment in the first nine months of 1997 was $308.7 million, which included $44.2 million of expenditures for property and equipment, and $244.0 million for acquisitions. Net cash provided by financing was $233.4 million for the first nine months of 1997, resulting primarily from borrowings we made to fund acquisitions and from proceeds received from the issuance of our common stock. Net cash provided by operations in the first nine months of 1996 was $45.7 million. This was primarily the result of $61.0 million of net income, depreciation and amortization, and other noncash items, offset by a $15.4 million increase in working capital. Net cash used for investment in the first nine months of 1996 was $183.6 million, which included $26.3 million of expenditures for property and equipment, and $145.1 million for acquisitions. Net cash provided by financing was $133.1 million for the first nine months of 1996, resulting primarily from borrowings we made to fund acquisitions. The majority of our 1997 and 1996 acquisitions have been completed for cash, resulting in higher outstanding balances under our credit agreement and short-term borrowing capacity. The increase in borrowings has caused interest expense to increase for the first nine months of 1997 compared to the same period of 1996. Effects of Fluctuations in Foreign Currency Exchange Rates Our operations in Australia, Canada, France, Germany, and the United Kingdom are denominated in currencies other than U.S. dollars. Each of our operations conducts substantially all of its business in its local currency with minimal cross-border product movement. As a result, these operations are not subject to material operational risks associated with fluctuations in exchange rates. Furthermore, our results of operations were not materially impacted by the translation of our other operations' currencies into U.S. dollars. Because we intend to expand the size and scope of our international operations, this exposure to fluctuations in exchange rates may increase. Accordingly, no assurance can be given that our future results of operations will not be adversely affected by fluctuations in foreign currency exchange rates. Although we currently are not engaged in any foreign currency hedging activities, we may consider doing so in the future. Such future hedges would be intended to minimize the effects of foreign exchange rate fluctuations on our investment and would not be done for speculative purposes. New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, which will be implemented in the fourth quarter of 1997. The statement will have no significant impact on previously reported earnings per share, which will be renamed basic earnings per share. Year 2000 Computer Issue Many computer systems in use today were designed and developed using two digits, rather than four, to specify the year. As a result, such systems will recognize the year 2000 as "00". This could cause many computer applications to fail completely or to create erroneous results unless corrective measures are taken. We utilize software and related computer technologies that will be affected by this issue. We are currently implementing, or have plans to implement, several computer system replacements or upgrades before the year 2000. These new computer systems will be year 2000 compliant. We are reviewing what actions will be necessary to make our remaining computer systems year 2000 compliant. The expense associated with these actions has not been determined, but is not expected to be material to the Company. Business Outlook We expect our cross-selling efforts in furniture, computer- related consumables, promotional products, and office papers to result in additional sales to our existing customers. We also expect to grow sales by developing business with new customers. The pace of our revenue growth will partially depend on the success of these initiatives. It will also depend, in part, on our plans to make further acquisitions in the U.S. and internationally. Our level of future acquisition activity will reflect the extent of economically acceptable opportunities available to us. Our gross margins and operating expense ratios vary among our product categories, distribution channels, and geographic locations. As a result, we expect fluctuations in these ratios as our sales mix evolves over time. Office papers and converted paper products represent a significant portion of our sales. Reductions in the cost and selling price of paper, compared to the same quarter last year, impacted our sales growth, gross margins, and operating expense leverage in the current quarter. It is unclear to what extent or when prices might significantly rise or fall and what favorable or adverse impact those changes might have on our future financial results. Risk Factors Associated With Forward Looking Statements The Management's Discussion and Analysis of Financial Condition and Results of Operations includes "forward looking statements" which involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company's expectations. Factors which could cause materially different results include, among others, continued same-location sales growth; the timing and amount of paper price recovery; the changing mix of products sold to our customers; the pace and success of our acquisition program; the success of cost structure improvements; the success of new product line introductions; the uncertainties of expansion into international markets, including currency exchange rates, legal and regulatory requirements, and other factors; and competitive and general economic conditions. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved in any legal or administrative proceedings that it believes could have, either individually or in the aggregate, a material adverse effect on its business or financial condition. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Required exhibits are listed in the Index to Exhibits and are incorporated by reference. (b) Reports on Form 8-K On July 17, 1997, we filed a Form 8-K with the Securities and Exchange Commission to report our acquisition of Jean-Paul Guisset S.A. ("JPG"), a direct marketer of office products in France. On September 26, 1997, we filed a Form 8-K with the Securities and Exchange Commission to report our issuance of 2,250,000 shares of common stock at $21.55 per share to Boise Cascade Corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOISE CASCADE OFFICE PRODUCTS CORPORATION As Duly Authorized Officer and Chief Accounting Officer: /s/Darrell R. Elfeldt Darrell R. Elfeldt Vice President and Controller Date: November 12, 1997 BOISE CASCADE OFFICE PRODUCTS CORPORATION INDEX TO EXHIBITS Filed With the Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997 Number Description Page 11 Computation of Per Share Earnings 27 Financial Data Schedule EX-11 2 EXHIBIT 11 BOISE CASCADE OFFICE PRODUCTS CORPORATION COMPUTATION OF PER SHARE EARNINGS (in thousands, except share information) For the Three Months For the Nine Months Ended September 30 Ended September 30 1997 1996 1997 1996 EARNINGS PER SHARE Shares of Common Stock: Weighted average shares outstanding 63,086,894 62,449,765 62,951,608 62,372,100 Net income $ 12,532 $ 11,720 $ 39,153 $ 40,877 Earnings per share $ .20 $ .19 $ .62 $ .66 FULLY DILUTED EARNINGS PER SHARE Shares of Common Stock: Weighted average shares outstanding 63,086,894 62,449,765 62,951,608 62,372,100 Dilutive effect of options 137,830 185,987 135,759 272,379 Dilutive effect of contingent shares 430,207 465,303 447,267 484,031 __________ __________ __________ __________ Fully Diluted Weighted Average Shares Outstanding 63,654,931 63,101,055 63,534,634 63,128,510 Net income $ 12,532 $ 11,720 $ 39,153 $ 40,877 Fully diluted earnings per share (1) $ .20 $ .19 $ .62 $ .65 (1) Fully diluted earnings per share for the periods presented are not disclosed in the financial statements because the amounts are not considered dilutive under the provisions of Accounting Principles Board Opinion No. 15, "Earnings Per Share." EX-27 3
5 The data schedule contains summary financial information extracted from Boise Cascade Office Products Corporation's Balance Sheet at September 30, 1997, and from its Statement of Income for the nine months ended September 30, 1997. The information presented is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1997 SEP-30-1997 12,598 0 381,539 7,055 186,571 612,642 320,035 129,447 1,261,531 365,482 366,731 0 0 656 492,248 1,261,531 1,878,218 1,878,218 1,408,311 1,408,311 388,924 0 13,895 67,478 28,325 39,153 0 0 0 39,153 0.62 0
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