F O R M 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1994
( ) 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 1-5057
BOISE CASCADE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0100960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Jefferson Square
P.O. Box 50
Boise, Idaho 83728-0001
(Address of principal executive offices) (Zip Code)
(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.
Shares Outstanding
Class as of July 31, 1994
Common stock, $2.50 par value 38,054,135
PART I - FINANCIAL INFORMATION
Quarterly Financial Statements
The quarterly financial statements of the Company and its
subsidiaries for the second quarter of 1994 and certain related
notes are presented in the Company's Report to Shareholders for the
Second Quarter of 1994 under the captions "Balance Sheets,"
"Statements of Loss," "Segment Information," "Statements of Cash
Flows," and "Notes to Quarterly Financial Statements" and are filed
herewith as an exhibit and incorporated herein by this reference.
The quarterly financial statements have not been audited by indepen-
dent 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
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.
The statements have been prepared by the Company 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 the Company's 1993 Annual Report.
Supplementary Notes to Quarterly Financial Statements
The following notes supplement the Notes to Quarterly Financial
Statements referred to previously.
(1) NET LOSS PER COMMON SHARE. Net loss per common share was deter-
mined by dividing net loss, as adjusted, by applicable shares
outstanding. The computation of fully diluted net loss per share
was antidilutive in each of the periods presented; therefore, the
amounts reported for primary and fully diluted loss are the same.
For the six-month periods ended June 30, 1994 and 1993, primary
average shares include only common shares outstanding. For these
periods, common stock equivalents attributable to stock options,
Series E conversion preferred stock, and Series G conversion
preferred stock subsequent to issuance in September 1993 were
excluded because they were antidilutive. Excluded common equivalent
shares were 16,714,000 at June 30, 1994, compared with 8,745,000
shares at the same date in the prior year. In addition to common
and common equivalent shares, fully diluted average shares include
common shares that would be issuable upon conversion of the
Company's other convertible securities.
Six Months Ended June 30
1994 1993
(expressed in thousands)
Net loss as reported $ (56,760) $ (29,230)
Preferred dividends (27,276) (19,328)
_________ _________
Primary loss (84,036) (48,558)
Assumed conversions:
Preferred dividends eliminated 21,871 15,064
Interest on 7 percent
debentures eliminated 1,720 1,872
Supplemental ESOP contribution (6,273) (6,278)
_________ _________
Fully diluted loss $ (66,718) $ (37,900)
Average number of common shares
Primary 38,029 37,950
Fully diluted 61,668 53,756
Primary loss includes the aggregate amount of dividends on the
Company's preferred stock. The dividend attributable to the
Company's Series D convertible preferred stock held by the Company's
ESOP (employee stock ownership plan) is net of a tax benefit. To
determine the fully diluted loss, dividends on convertible preferred
stock and interest, net of any applicable taxes, have been added
back to primary loss to reflect assumed conversions. The fully
diluted loss was increased by the after-tax amount of additional
contributions that the Company would be required to make to its ESOP
if the Series D ESOP preferred shares were converted to common
stock.
(2) DEBT. At June 30, 1994, the Company had a $650 million revolving
credit agreement with a group of banks. Borrowing under the
agreement was $370 million.
In July 1994, the Company filed a new shelf registration with the
Securities and Exchange Commission for debt securities. After
incorporating the remaining $20 million from a prior shelf
registration, at July 15, 1994, the Company had $420 million of
shelf capacity for new publicly registered debt.
(3) INVENTORIES. Inventories include the following:
June 30 December 31
1994 1993 1993
(expressed in thousands)
Finished goods and work in process $256,861 $248,297 $255,395
Logs 72,025 54,834 106,649
Other raw materials and supplies 170,168 165,788 167,192
LIFO reserve (84,787) (73,879) (82,627)
________ ________ ________
$414,267 $395,040 $446,609
(4) INCOME TAXES. Effective as of January 1, 1993, the Company adopted new
Financial Accounting Standards Board requirements that govern the way
deferred taxes are calculated and reported. Adoption of these
requirements entailed a one-time adjustment that had no effect on the
Company's first quarter 1993 net loss.
The components of the net deferred tax liability on the Company's
Balance Sheet were determined as follows:
June 30 December 31
1994 1993 1993
Assets Liabil. Assets Liabil. Assets Liabil.
(expressed in millions)
Operating loss
carryover $217.3 $ - $ 93.9 $ - $169.8 $ -
Employee benefits 101.7 14.9 93.1 12.1 98.3 17.4
Property and equipment
and timber and
timberlands 86.6 598.3 86.5 551.4 89.0 589.4
Alternative minimum tax 79.8 - 93.1 - 79.8 -
Tax credit carryovers 46.2 - 44.1 - 47.2 -
Reserves 11.1 1.5 12.5 1.2 11.6 1.5
Inventories 9.8 .4 12.9 .4 9.7 .4
State income taxes 4.3 30.2 4.9 24.8 3.9 29.0
Deferred charges .3 12.3 .4 16.3 .3 14.6
Differences in basis
of nonconsolidated
entities - 19.8 - - - 17.9
Other 12.3 32.5 7.5 51.8 9.8 32.9
______ ______ ______ ______ ______ ______
$569.4 $709.9 $448.9 $658.0 $519.4 $703.1
At June 30, 1994, Canadian subsidiaries of the Company had $177,668,000
of undistributed earnings which have been indefinitely reinvested. It
is not practical to make a determination of the additional U.S. income
taxes that would be due upon remittance of these earnings until the
remittance occurs.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Second Quarter of 1994 Compared With Second Quarter of 1993
Boise Cascade Corporation's net loss was $19.2 million, or 86 cents per
primary and fully diluted share, for the second quarter of 1994. The net
loss for the second quarter of 1993 was $17.1 million, or 72 cents per
primary and fully diluted share, which included a positive Canadian income
tax rate adjustment of $5 million, or 13 cents per share.
Sales for the second quarter of 1994 were $1.075 billion, compared with
$974 million for the same quarter of 1993.
The Company's paper and paper products segment reported a loss of
$35.9 million in the second quarter of 1994, compared with a loss of
$32.2 million in the second quarter of 1993. Segment sales of $479 million
were essentially flat with those of the second quarter of 1993. Average
prices for the Company's largest-volume grades, uncoated free sheet and
newsprint, were down about 6 percent. Average coated paper prices declined
8 percent, while prices for containerboard and market pulp continued to
improve. Weak prices were only partially offset by lower unit manufacturing
costs and increased volume.
Income in the office products segment was $10.1 million in the second
quarter -- slightly higher than the second quarter 1993 level, even after
absorbing start-up costs from new facilities. Second-quarter dollar sales
volume was $212 million, up 31 percent from year-ago levels due to sales from
the Company's new facility in Denver, Colorado, the recently acquired office
products business in Atlanta, Georgia, and the newly acquired direct-mail
business of The Reliable Corporation. Sales on a same-store basis grew
12 percent over last year's levels.
The Company's building products segment reported income of $43.9 million, up
from $33.5 million in the comparison quarter, despite average product prices
that were lower in most cases than in the second quarter of 1993. The
improved performance was due to increased volume in most product lines and
to moderating log costs. The Company's results continued to be enhanced by
an important contribution from its engineered wood products business.
Segment sales of $433 million in the second quarter of 1994 were improved,
compared with $370 million reported in the second quarter 1993.
Interest expense increased slightly to $38.6 million in the second quarter
of 1994, compared with $36.8 million in the same period last year, primarily
due to higher debt levels.
Six Months Ended June 30, 1994, Compared With Six Months Ended June 30, 1993
The Company had a net loss of $56.8 million, or $2.21 per primary and fully
diluted share, for the first six months of 1994. This compares with a net
loss of $29.2 million, or $1.28 per primary and fully diluted share, for the
first six months of 1993, which includes a positive Canadian income tax rate
adjustment of $5 million, or 13 cents per share.
Sales for the first six months of 1994 were $2.089 billion, compared with
$1.958 billion for the same period in 1993.
The operating loss in the Company's paper and paper products segment was
$105.6 million for the first six months of 1994, compared with a loss of
$75.8 million for the same period in 1993. Included in the results for the
first six months of 1993 was a gain of $8.6 million from the sale of the
Company's interest in a specialty paper producer.
Sales of $951 million for the six months ended June 30, 1994, were flat with
those of the prior-year six-month period despite slightly increased sales
volumes. Weighted average paper prices declined marginally between the
comparison periods. Prices for newsprint, one of the Company's key paper
grades, remained below six-month 1993 levels, but are improving as a result
of a price increase implemented during the second quarter of 1994. Average
prices for uncoated free sheet, coated papers, and uncoated groundwood papers
continued to be depressed, while prices for market pulp and containerboard
moderately improved during the period. Manufacturing costs for the first six
months were down from those of the comparison period despite severe winter
weather, maintenance and lack-of-order downtime, and related operating
difficulties at some facilities experienced during the first half of 1994.
Office products segment sales were $403 million for the first six months of
1994, compared with $331 million for the first six months of 1993. The
significant improvement was due to additional sales from existing locations
as well as from new and recently acquired facilities. Segment income for the
first six months of 1994 was up 7 percent, compared with that of the first
six months of 1993.
Sales in the Company's building products segment increased 10 percent in the
first six months of 1994, compared with sales in the first six months of
1993. However, segment income dropped 18 percent from that of the comparison
period due to lower average plywood and lumber sales prices and higher wood
costs in the first six months of 1994. Plywood and lumber sales volumes were
up 10 and 3 percent, compared with those of the same period last year.
Building materials distribution sales improved, while income declined.
Total long- and short-term debt outstanding was $2.3 billion at June 30,
1994, $2.1 billion at June 30, 1993, and $2.0 billion at December 31, 1993.
Interest expense for both six-month periods was $75 million. The Company's
combination of fixed-rate and variable-rate debt results in minimal exposure
from general changes in short-term market interest rates. Capitalized
interest decreased to $791,000 for the six months ended June 30, 1994, down
from $841,000 for the same period in 1993.
Financial Condition
At June 30, 1994, the Company had working capital of $116 million. Working
capital was $240 million at June 30, 1993, and $199 million at December 31,
1993. Cash provided by operations was $78 million for the first six months
of 1994. For the same period in 1993, cash provided by operations was
$118 million.
As of April 15, 1994, the Company entered into a new $650 million unsecured
revolving credit agreement, which replaced its $750 million agreement. The
agreement expires in June 1997, and any amounts outstanding are payable at
that time. Also in April, the $130 million Canadian subsidiary credit
agreement was terminated, and the Canadian subsidiary promptly entered into
short-term loans for an aggregate of $150 million which, unless extended, are
payable on demand by the lenders.
The new revolving credit agreement requires the Company to maintain a minimum
amount of net worth and not to exceed a maximum ratio of debt to net worth.
The Company's net worth at June 30, 1994, exceeded the defined minimum amount
by $102.8 million. The payment of dividends by the Company is dependent upon
the existence of and the amount of net worth in excess of the defined minimum
under this agreement. The Company is also required to maintain a defined
minimum interest coverage in each successive four-quarter period, which the
Company met at June 30, 1994. The cyclical downturn the Company has been
experiencing has reduced the Company's interest coverage. While the Company
currently expects to continue to meet the coverage in each of the succeeding
quarters in 1994, there can be no assurance as to the results of operations
during the balance of 1994. The Company believes it will be able to maintain
adequate liquidity to meet its various financial requirements.
In July 1994, the Company filed a new shelf registration with the Securities
and Exchange Commission for debt securities. After incorporating the
remaining $20 million from a prior shelf registration, at July 15, 1994, the
Company had $420 million of shelf capacity for new publicly registered debt.
The Company expects to complete the previously announced consolidation of its
newsprint and uncoated goundwood businesses into an independent company in
the second half of 1994. The Company will use proceeds from the transaction
to reduce debt and for general corporate purposes. The details of the
transaction have not been finalized.
Capital expenditures for the first six months of 1994 were $250 million,
including purchases of facilities and the assumption of related long-term
debt. Capital expenditures for the first six months of 1993 were
$100 million and for the year ended December 31, 1993, were $221 million.
An expanded discussion and analysis of financial condition is presented on
pages 16 and 17 of the Company's 1993 Annual Report under the captions
"Financial Condition" and "Capital Investment."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the opinion of
management, the Company's recovery, if any, or the Company's liability, if
any, under any pending litigation or administrative proceeding would not
materially affect its financial condition or operations.
Item 2. Changes in Securities
The payment of dividends by the Company is dependent upon the existence of
and the amount of net worth in excess of the defined minimum under certain
of the Company's credit agreements. At June 30, 1994, under these
agreements, the Company's net worth exceeded the defined minimum amount by
$102,834,000.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual shareholders meeting on April 22, 1994. A total
of 46,138,904 shares of common and preferred stock were outstanding and
entitled to vote at the meeting. Of the total outstanding, 41,672,326 shares
were represented at the meeting and 4,466,578 shares were not voted.
Shareholders cast votes for the election of the following directors, whose
terms expire in 1997:
In Favor Withheld
John B. Fery 39,255,635 2,416,691
George J. Harad 39,506,533 2,165,793
James McClure 39,598,161 2,074,165
Edson Spencer 39,689,458 1,982,868
Continuing in office are Robert K. Jaedicke, Paul J. Phoenix, Frank A.
Shrontz, and Ward W. Woods, Jr., whose terms expire in 1996, and Anne L.
Armstrong, Robert E. Coleman, A. William Reynolds, and Robert H. Waterman,
Jr., whose terms expire in 1995.
The shareholders also ratified the appointment of Arthur Andersen & Co. as
the Company's independent auditors for the year 1994 with votes cast
40,002,675 for, 1,305,022 against, and 364,629 abstained.
At the annual shareholders meeting, John B. Fery, chairman of the board and
chief executive officer, announced that he will retire as CEO at the board
meeting on July 29. He will continue to serve as chairman of the board of
directors until the annual shareholders meeting in April 1995. Fery also
announced that president and chief operating officer George Harad had been
elected to succeed him as CEO on July 29.
Item 5. Other Information
Collective bargaining agreements at the Company's four Pacific Northwest pulp
and paper facilities and one converting operation expired in the spring of
1993. The Company is operating these mills without signed collective
bargaining agreements. On February 1, 1994, the Company implemented its
final contract offer at its Wallula, Washington, paper mill. The Company is
in negotiations with unions representing employees at these facilities.
While the Company believes that the Pacific Northwest negotiations can be
resolved without work stoppages or strikes, it is not possible at this time
to predict how the negotiations may conclude.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
A list of the exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which immediately
precedes such exhibits, and is incorporated herein by this
reference.
(b) Reports on Form 8-K.
On June 1, 1994, the Company filed a Form 8-K with the Securities
and Exchange Commission to report the Company issued a news
release relating to combining the majority of the Company's
newsprint, uncoated groundwood, and related assets into the
Canadian subsidiary and another news release relating to the
Canadian subsidiary announcing a public offering of equity
securities in Canada and debt securities in the U.S.
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
As Duly Authorized Officer and
Chief Accounting Officer: /s/Tom E. Carlile
Tom E. Carlile
Vice President and Controller
Date: August 5, 1994
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 1994
Number Description Page Number (1)
4.1(2) Trust Indenture between Boise Cascade
Corporation and Morgan Guaranty Trust Company
of New York, Trustee, dated October 1, 1985,
as amended -
4.2(3) 1994 Revolving Loan Agreement -- $650,000,000,
dated April 15, 1994 -
4.3(4) Shareholder Rights Agreement, as amended
September 25, 1990 -
4.4(5) Certificate of Designation of Convertible
Preferred Stock, Series D, dated July 10, 1989 -
4.5(6) Certificate of Designation of Conversion Preferred
Stock, Series E, dated January 21, 1992 -
4.6(7) Certificate of Designation of Cumulative Preferred
Stock, Series F, dated January 29, 1993 -
4.7(8) Certificate of Designation of Conversion Preferred
Stock, Series G, dated September 22, 1993 -
12 Ratio of Earnings to Fixed Charges 12
20(9) Selected financial statements from Boise
Cascade Corporation's Report to Shareholders
for the Second Quarter of 1994 14
(1) This information appears only in the manually signed original of the
report on Form 10-Q.
(2) The Trust Indenture between Boise Cascade Corporation and Morgan
Guaranty Trust Company of New York, Trustee, dated October 1, 1985,
was filed as Exhibit 4 in the Registration Statement on Form S-3,
No. 33-5673, filed May 13, 1986. The First Supplemental Indenture,
dated December 20, 1989, to the Trust Indenture was filed as
Exhibit 4.2 in the Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-3, No. 33-32584, filed December 20, 1989. The
Second Supplemental Indenture, dated August 1, 1990, to the Trust
Indenture was filed as Exhibit 4.1 in the Company's Current Report
on Form 8-K filed on August 10, 1990. Each of the above documents
referenced in this footnote is incorporated herein by this
reference.
(3) The 1994 Revolving Loan Agreement was filed as Exhibit 4.2 in the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994, and is incorporated herein by this reference.
(4) The Rights Agreement, amended as of September 25, 1990, was filed
as Exhibit 1 in the Company's Form 8-K filed with the Securities and
Exchange Commission on September 25, 1990, and is incorporated
herein by this reference.
(5) The Certificate of Designation of Convertible Preferred Stock,
Series D, dated July 10, 1989, was filed as Exhibit 4.4 in the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989, and is incorporated herein by this reference.
(6) The Certificate of Designation of Conversion Preferred Stock, Series
E, dated January 21, 1992, was filed as Exhibit 3.3 in the Company's
Report on Form 10-K for the year ended December 31, 1991, and is
incorporated herein by this reference.
(7) The Certificate of Designation of Cumulative Preferred Stock, Series
F, dated January 29, 1993, was filed as Exhibit 3.4 in the Company's
Report on Form 10-K for the year ended December 31, 1993, and is
incorporated herein by this reference.
(8) The Certificate of Designation of Conversion Preferred Stock, Series
G, dated September 22, 1993, was filed as Exhibit 3.6 in the
Company's Report on Form 10-K for the year ended December 31, 1993,
and is incorporated herein by this reference.
(9) The Balance Sheets, Statements of Loss, and Statements of Cash Flows
are unaudited financial statements produced as a part of Boise
Cascade Corporation's 1994 Report to Shareholders for the Second
Quarter.