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 June 30, 1996
( ) 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.)
1111 West Jefferson Street
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, 1996
Common stock, $2.50 par value 48,469,673
PART I - FINANCIAL INFORMATION
STATEMENTS OF INCOME (LOSS)
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(unaudited)
Item 1. Financial Statements
Three Months Ended June 30
1996 1995
(expressed in thousands
except per share data)
Revenues
Sales $1,261,510 $1,270,200
Other income (expense), net (620) (23,120)
__________ __________
1,260,890 1,247,080
__________ __________
Costs and expenses
Materials, labor, and other operating expenses 1,057,730 931,110
Depreciation and cost of company timber
harvested 57,720 60,730
Selling and administrative expenses 139,520 105,160
__________ __________
1,254,970 1,097,000
__________ __________
Equity in net income of affiliates 860 11,880
__________ __________
Income from operations 6,780 161,960
__________ __________
Interest expense (32,890) (35,070)
Interest income 410 970
Foreign exchange gain (loss) (410) 40
Gain on subsidiary's issuance of stock 1,590 60,000
__________ __________
(31,300) 25,940
__________ __________
Income (loss) before income taxes and
minority interest (24,520) 187,900
Income tax provision (benefit) (10,180) 80,640
__________ __________
Income (loss) before minority interest (14,340) 107,260
Minority interest, net of income tax (2,610) (1,340)
__________ __________
Net income (loss) $ (16,950) $ 105,920
Net income (loss) per common share
Primary $ (.55) $ 1.82
Fully diluted $ (.55) $ 1.64
Dividends declared per common share $ .15 $ .15
The accompanying notes are an integral part of these Financial Statements.
SEGMENT INFORMATION
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(unaudited)
Three Months Ended June 30
1996 1995
(expressed in thousands)
Segment sales
Paper and paper products $ 466,260 $ 659,158
Office products 460,767 305,718
Building products 410,972 385,039
Intersegment eliminations and other (76,489) (79,715)
__________ __________
$1,261,510 $1,270,200
Segment operating income (loss)
Paper and paper products $ (15,209) $ 132,273
Office products 24,941 13,637
Building products 6,378 22,796
Equity in net income of affiliates 860 11,880
Corporate and other (10,190) (18,626)
__________ __________
Income from operations $ 6,780 $ 161,960
The accompanying notes are an integral part of these Financial Statements.
STATEMENTS OF INCOME (LOSS)
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(Unaudited)
Six months ended June 30
1996 1995
(expressed in thousands,
except per share data)
Revenues
Sales $2,489,110 $2,493,160
Other income (expense), net 5,640 (21,250)
__________ __________
2,494,750 2,471,910
__________ __________
Costs and expenses
Materials, labor, and other
operating expenses 2,025,350 1,873,630
Depreciation and cost of company
timber harvested 113,060 121,120
Selling and administrative expenses 275,330 202,980
__________ __________
2,413,740 2,197,730
__________ __________
Equity in net income of affiliates 1,950 17,450
__________ __________
Income from operations 82,960 291,630
__________ __________
Interest expense (63,450) (72,300)
Interest income 750 1,280
Foreign exchange gain (loss) (660) 40
Gain on subsidiary's issuance of stock 2,020 60,000
__________ __________
(61,340) (10,980)
__________ __________
Income before income taxes
and minority interest 21,620 280,650
Income tax provision 7,650 116,350
__________ __________
Income before minority interest 13,970 164,300
Minority interest, net of income tax (5,410) (1,340)
__________ __________
Net income $ 8,560 $ 162,960
Net income (loss) per common share
Primary $ (.23) $ 2.75
Fully diluted $ (.23) $ 2.49
Dividends declared per common share $ .30 $ .30
The accompanying notes are an integral part of these Financial Statements.
SEGMENT INFORMATION
BOISE CASCADE CORPORATION AND SUBSIDIARIES
(unaudited)
Six Months Ended June 30
1996 1995
(expressed in thousands)
Segment sales
Paper and paper products $ 962,185 $1,253,078
Office products 922,190 609,005
Building products 758,929 778,477
Intersegment eliminations and other (154,194) (147,400)
__________ __________
$2,489,110 $2,493,160
Segment operating income
Paper and paper products $ 38,218 $ 230,271
Office products 52,556 26,200
Building products 7,266 46,280
Equity in net income of affiliates 1,950 17,450
Corporate and other (17,030) (28,571)
__________ __________
Income from operations $ 82,960 $ 291,630
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(unaudited)
ASSETS
June 30 December 31
1996 1995 1995
(expressed in thousands)
Current
Cash and cash items $ 55,612 $ 37,258 $ 36,876
Short-term investments at cost,
which approximates market 5,644 39,893 14,593
__________ __________ __________
61,256 77,151 51,469
Receivables, less allowances of
$4,818,000, $2,816,000, and
$3,577,000 495,349 458,827 457,608
Inventories 576,400 403,215 568,905
Deferred income tax benefits 59,468 74,934 82,744
Other 150,205 21,996 152,442
__________ __________ __________
1,342,678 1,036,123 1,313,168
__________ __________ __________
Property
Property and equipment
Land and land improvements 41,757 38,277 39,482
Buildings and improvements 483,043 443,372 459,897
Machinery and equipment 4,578,610 4,156,958 4,271,306
__________ __________ __________
5,103,410 4,638,607 4,770,685
Accumulated depreciation (2,241,208) (2,152,386) (2,166,487)
__________ __________ __________
2,862,202 2,486,221 2,604,198
Timber, timberlands, and timber
deposits 385,453 409,630 383,394
__________ __________ __________
3,247,655 2,895,851 2,987,592
__________ __________ __________
Investments in equity affiliates 31,142 225,379 25,803
Other assets 432,545 277,862 329,623
__________ __________ __________
Total assets $5,054,020 $4,435,215 $4,656,186
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31
1996 1995 1995
(expressed in thousands)
Current
Notes payable $ 88,000 $ 110,500 $ 17,000
Current portion of long-term debt 40,654 110,125 20,778
Income taxes payable 2,517 15,786 26,328
Accounts payable 416,470 326,144 379,523
Accrued liabilities
Compensation and benefits 145,506 110,856 159,514
Interest payable 31,227 34,361 27,542
Other 132,672 122,560 139,222
__________ __________ __________
857,046 830,332 769,907
__________ __________ __________
Debt
Long-term debt, less current portion 1,679,880 1,264,780 1,364,835
Guarantee of ESOP debt 210,453 228,212 213,934
__________ __________ __________
1,890,333 1,492,992 1,578,769
__________ __________ __________
Other
Deferred income taxes 279,331 263,324 302,030
Other long-term liabilities 259,808 282,681 243,259
__________ __________ __________
539,139 546,005 545,289
__________ __________ __________
Minority interest 73,807 50,941 67,783
__________ __________ __________
Shareholders' equity
Preferred stock -- no par value;
10,000,000 shares authorized;
Series D ESOP: $.01 stated
value; 6,023,923; 6,178,142;
and 6,117,774 shares outstanding 271,077 278,016 275,300
Deferred ESOP benefit (210,453) (228,212) (213,934)
Series F: $.01 stated value;
115,000 shares outstanding
in each period 111,043 111,043 111,043
Series G: $.01 stated value;
862,500 shares outstanding
in each period 176,404 176,404 176,404
Common stock -- $2.50 par value;
200,000,000 shares authorized;
48,469,108; 47,453,860; and
47,759,946 shares outstanding 121,173 118,635 119,400
Additional paid-in capital 230,557 183,458 205,107
Retained earnings 993,894 875,601 1,021,118
__________ __________ __________
Total shareholders' equity 1,693,695 1,514,945 1,694,438
__________ __________ __________
Total liabilities and shareholders'
equity $5,054,020 $4,435,215 $4,656,186
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30
1996 1995
(expressed in thousands)
Cash provided by (used for) operations
Net income $ 8,560 $ 162,960
Items in income not using (providing) cash
Equity in net income of affiliates (1,950) (17,450)
Depreciation and cost of company timber
harvested 113,060 121,120
Deferred income tax provision 6,785 94,375
Minority interest, net of income tax 5,410 1,340
Amortization and other 11,048 31,570
Gain on subsidiary's issuance of stock (2,020) (60,000)
Receivables 2,538 (47,959)
Inventories 19,610 21,765
Accounts payable and accrued liabilities (19,105) 19,789
Current and deferred income taxes (51,297) 17,457
Other 191 (313)
__________ __________
Cash provided by operations 92,830 344,654
__________ __________
Cash provided by (used for) investment
Expenditures for property and equipment (346,449) (112,089)
Expenditures for timber and timberlands (3,668) (3,256)
Investments in equity affiliates, net (3,009) 2,100
Purchase of facilities (139,188) (9,338)
Other 23,081 (14,412)
__________ __________
Cash used for investment (469,233) (136,995)
__________ __________
Cash provided by (used for) financing
Cash dividends paid
Common stock (14,368) (12,798)
Preferred stock (22,261) (26,339)
__________ __________
(36,629) (39,137)
Notes payable 71,000 54,500
Additions to long-term debt 424,693 -
Payments of long-term debt (89,772) (308,777)
Subsidiary's issuance of stock - 123,076
Other 16,898 10,376
__________ __________
Cash provided by (used for) financing 386,190 (159,962)
__________ __________
Increase in cash and short-term
investments 9,787 47,697
Balance at beginning of the year 51,469 29,454
__________ __________
Balance at June 30 $ 61,256 $ 77,151
The accompanying notes are an integral part of these Financial Statements.
Notes to Quarterly Financial Statements
(1) BASIS OF PRESENTATION. The quarterly financial 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
statements should be read together with the statements and the accom-
panying notes included in the Company's 1995 Annual Report.
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. The net income for the three and six months ended June 30,
1996 and 1995, was subject to seasonal variations and necessarily
involved estimates and accruals. 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.
(2) NET INCOME (LOSS) PER COMMON SHARE. Net income (loss) per common share
was determined by dividing net income, as adjusted, by applicable shares
outstanding. For the three and six months ended June 30, 1996, the
computation of fully diluted net loss per share was antidilutive;
therefore, amounts reported for primary and fully diluted loss were the
same.
For the six months ended June 30, 1996 and 1995, primary average shares
included common shares outstanding and, if dilutive, common stock
equivalents attributable to stock options, Series E conversion preferred
stock prior to converting to shares of the Company's common stock on
January 15, 1995, and Series G conversion preferred stock. For the six
months ended June 30, 1996, common stock equivalents attributable to
stock options and the effect of the Series G conversion preferred stock
were antidilutive. Accordingly, 7,449,000 common equivalent shares are
excluded for that period. 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
1996 1995
(expressed in thousands)
Net income as reported $ 8,560 $ 162,960
Preferred dividends (19,640) (12,777)
_________ _________
Primary income (loss) (11,080) 150,183
Assumed conversions:
Preferred dividends eliminated 14,235 7,372
Interest on 7% debentures eliminated - 1,697
Supplemental ESOP contribution (6,343) (6,302)
_________ _________
Fully diluted income (loss) $ (3,188) $ 152,950
Average number of common shares
Primary 48,080 54,547
Fully diluted 60,492 61,406
Primary income excludes and primary loss includes the aggregate amount
of dividends on the Company's preferred stock, if dilutive. 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 income (loss),
dividends on convertible preferred stock and interest, net of any
applicable taxes, have been added back to primary income (loss) to
reflect assumed conversions. The fully diluted income was reduced by
and 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.
(3) INVENTORIES. Inventories include the following:
June 30 December 31
1996 1995 1995
(expressed in thousands)
Finished goods and work in process $431,917 $276,791 $394,163
Logs 87,383 53,206 116,959
Other raw materials and supplies 167,850 168,333 175,877
LIFO reserve (110,750) (95,115) (118,094)
________ ________ ________
$576,400 $403,215 $568,905
(4) INCOME TAXES. The estimated tax provision rate, excluding the effect of
not providing taxes related to "Gain on subsidiary's issuance of stock,"
for the first six months of 1996 was 39%. The estimated tax provision
rate for the first six months of 1995, before any effects of unusual
items, was 38%.
(5) DEBT. At June 30, 1996, the Company had a $600 million revolving credit
agreement with a group of banks. Borrowing under the agreement was
$100 million. In the first quarter of 1996, the Company guaranteed
amounts outstanding under a loan agreement between a group of banks and
a wholly owned subsidiary. At June 30, 1996, amounts outstanding under
this agreement were $199.8 million. Additionally, the Company's
majority-owned subsidiary, Boise Cascade Office Products Corporation
("BCOP"), had a $350 million revolving credit agreement with a group of
banks. Borrowing under this agreement was $100 million. On June 5,
1996, the revolving credit agreement was amended to extend the
termination date from June 30, 1999, to June 30, 2001, and the aggregate
of all commitments that can be outstanding was increased from
$225 million to $350 million.
On January 24, 1996, the Company sold $125 million of 7.35% debentures
due 2016.
(6) BOISE CASCADE OFFICE PRODUCTS CORPORATION. During the first six months
of 1996, BCOP, the Company's majority-owned subsidiary, made seven
acquisitions 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 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 BCOP's operations subsequent to the dates of
acquisition.
On January 31, 1996, BCOP acquired the contract stationer business of
Sierra Vista Office Products, Inc., based in Albuquerque, New Mexico.
On February 5, 1996, BCOP acquired Grand & Toy Limited, a Canadian
office products distributor. On February 9, 1996, BCOP acquired the
contract stationer businesses of Loring, Short & Harmon, Inc., based in
Portland, Maine, and McAuliffe's based in Burlington, Vermont. On
March 29, 1996, BCOP acquired the contract stationer and office
furniture business of Office Essentials based in Milwaukee, Wisconsin.
On April 26, 1996, BCOP acquired the contract stationer business of
Crawford's Office Supplies based in Seattle, Washington. On May 31,
1996, BCOP acquired the contract stationer business of Zemlick Brothers,
Inc., based in Kalamazoo, Michigan. These acquisitions, including
Grand & Toy, were purchased for cash of $130.9 million, $1.6 million
of BCOP's common stock issued to the sellers, and the recording of
$19.3 million of liabilities.
Unaudited pro forma results of operations, reflecting these
acquisitions, would have been as follows. If these businesses had been
acquired on January 1, 1996, the Company's sales for the first six
months of 1996 would have increased by $34 million, net income and
primary and fully diluted earnings per common share would have been
unchanged. If these businesses had been acquired on January 1, 1995,
the Company's sales for the first six months of 1995 would have
increased by $135 million, net income would have decreased by
$3 million, and primary and fully diluted earnings per common share
would have decreased by $.05. In the first quarter of 1995, Grand & Toy
Limited recorded a restructuring charge. Excluding the impact of this
restructuring charge, pro forma net income and earnings per share would
have been essentially the same as the historical amounts reported for
the six months ended June 30, 1995. This unaudited pro forma financial
information does not necessarily represent the actual consolidated
results of operations that would have resulted if the acquisitions had
occurred on the dates assumed.
The Company also started up office products distribution centers in
Las Vegas, Nevada, and Miami, Florida, in the second quarter of 1996.
On July 1, 1996, the Company acquired the contract stationer business of
Pedersen Contact based in Melbourne, Australia. At the time of
announcement of this acquisition, annualized sales were approximately
US$49 million.
In April, BCOP's board of directors authorized a two-for-one split of
BCOP common stock in the form of a 100% stock dividend. Each BCOP
shareholder of record at the close of business on May 6, 1996, received
one additional share for each share held on that date. The new shares
were distributed on May 20, 1996.
(7) SHAREHOLDER'S EQUITY. On January 15, 1995, the Company's Series E
preferred stock converted to 8,625,000 shares of common stock.
In October 1995, the Company announced that its board of directors had
authorized the Company to purchase up to 4,300,000 shares of its common
stock or common stock equivalents. In April 1996, the Company announced
that because of recent weakness in paper and wood products markets, it
had slowed the purchase of its common stock or common stock equivalents.
The repurchase program was to be in effect for 12 to 18 months, but that
period may be extended. Since October 1995, the Company purchased
621,795 shares of stock through June 30, 1996.
(8) INVESTMENTS IN EQUITY AFFILIATES. In October 1994, Rainy River Forest
Products Inc. ("Rainy River"), the Company's former Canadian subsidiary,
completed an initial public offering of units of its equity and debt
securities. As a result of the offering, the Company owned 49% of the
outstanding voting common shares and 60% of the total equity of Rainy
River. During 1995, Rainy River was accounted for on the equity method
in the Company's consolidated financial statements. For the three and
six months ended June 30, 1995, Rainy River's results of operations were
included in "Equity in net income of affiliates." In November 1995, the
Company divested its remaining interest in Rainy River through Rainy
River's merger with Stone-Consolidated Corporation. At June 30, 1996,
the Company held 6,646,217 shares of Stone-Consolidated common stock,
representing less than 10% of Stone-Consolidated's outstanding common
stock. In addition, the Company held 801,560 shares of
Stone-Consolidated's redeemable preferred stock. The Company accounts
for its holdings in Stone-Consolidated on the cost method. The
investment in Stone-Consolidated stock totaled $94.4 million at June 30,
1996. The investment has been classified as available for sale and is
being marked to market. At June 30, 1996, "Retained Earnings" was
reduced by $9.8 million, including the impact of foreign currency
translation and deferred income taxes, for this market adjustment.
On October 16, 1995, the Company announced its intent to form a joint
venture with Companhia Suzano de Papel e Celulose ("Suzano"), a
Brazilian pulp and paper producer, to acquire, operate, and expand the
Company's pulp and paper mill, timberlands, sawmill, and wastepaper
recycling plant in Jackson, Alabama. In April 1996, the Company
announced that it had discontinued talks with Suzano regarding formation
of the joint venture. Regardless, the Company will complete the
expansion of the mill, including construction of a new uncoated free
sheet paper machine, which represents a $290 million capital investment.
The Company will consider other financing alternatives, but there is no
assurance that any such alternative will be acceptable to the Company.
The new paper machine should begin production in the second quarter of
1997.
(9) OTHER. In April 1996, the Company completed the previously announced
reconfiguration of its Vancouver, Washington, paper mill by permanently
shutting down the mill's three paper machines and recycled wastepaper
operations. The mill will operate as a paper converting facility,
converting papers made elsewhere by the Company primarily into security
papers. In the fourth quarter of 1995, the Company recorded a pretax
charge of $74.9 million, most of which was related to the
reconfiguration of this mill.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Second Quarter of 1996, Compared With Second Quarter of 1995
Boise Cascade Corporation's net loss for the second quarter of 1996 was
$17.0 million, compared with net income of $105.9 million for the second
quarter of 1995. Primary and fully diluted loss per common share for the
second quarter of 1996 were $.55. For the same quarter in 1995, primary
earnings per common share were $1.82, while fully diluted earnings per common
share were $1.64. Sales for the second quarter of 1996 and 1995 were
$1.3 billion.
The Company's paper segment reported an operating loss of $15.2 million in the
second quarter of 1996, compared with operating income of $151.3 million
before reserves of $19 million for the write-down of certain paper-related
assets in the second quarter of 1995. Sales fell 29% to $466.3 million in the
second quarter of 1996 from $659.2 million in the second quarter of 1995. The
decline in results was due primarily to a decrease in orders for paper and
lower paper prices. Average prices for most of the Company's paper grades
declined from second-quarter 1995 levels. Uncoated free sheet papers fell
$217 a ton, or 22%; coated papers fell $149 a ton, or 15%; containerboard fell
$166 a ton, or 35%; newsprint rose $37 a ton, or 7%; and market pulp fell $382
a ton, or 57%. Sales volumes for the second quarter of 1996 were 656,000 tons,
compared with 742,000 tons in the second quarter of 1995. During the second
quarter of this year, production downtime totaled 75,000 tons, including a
significant amount of maintenance downtime at two mills.
In April 1996, the Company completed the previously announced reconfiguration
of its Vancouver, Washington, paper mill by permanently shutting down the
mill's three paper machines and recycled wastepaper operations. The mill will
operate as a paper converting facility, converting papers made elsewhere by
the Company primarily into security papers. In the fourth quarter of 1995,
the Company recorded a pretax charge of $74.9 million, most of which was
related to the reconfiguration of this mill.
Paper segment manufacturing costs in the second quarter of 1996 were $594 per
ton compared with $579 per ton in the comparison quarter. The increase is
primarily due to fixed costs being spread over a smaller number of tons of
paper produced.
Operating income in the office products segment improved in the second quarter
of 1996 to $24.9 million, compared with $13.6 million in the prior-year
quarter. Total sales rose 51% to $460.8 million, compared with $305.7 million
in the second quarter of 1995. The growth in sales resulted from increased
national account business, continued growth in the Company's direct marketing
business, product line extensions, and acquisitions. Excluding the effect of
acquisitions since March 31, 1995, sales increased 10% in the second quarter
of 1996 compared with sales in the second quarter of 1995. Operating margins
were significantly higher in the second quarter of 1996 relative to the year-
ago second quarter primarily because of improved margins on office papers.
For the second quarter of 1996, the operating margin was 5.4% compared with
4.2% in the prior year second quarter.
Building products operating income decreased from $23.0 million for the year-
ago second quarter to $6.4 million in the second quarter of 1996. Results for
the quarter just ended were weaker than those of a year ago, largely because
of lower prices for plywood and residual wood chips. Relative to the year-ago
quarter, average prices for lumber increased 3%, while plywood prices
decreased 11%. Unit sales volume for lumber increased 7%, while plywood sales
volume increased 12% compared with the year-ago volume. In the engineered
wood products business, sales increased 43% while the price for I-joists
declined 2% compared with last year. Sales for the building products segment
increased 7% to $411.0 million in the second quarter of 1996 from
$385.0 million in the second quarter of 1995. For the second quarter of 1996,
building materials distribution sales were up 25% from the comparison quarter,
while income more than doubled.
In October 1994, Rainy River Forest Products Inc. ("Rainy River"), the
Company's former Canadian subsidiary, completed an initial public offering of
units of its equity and debt securities. As a result of the offering, the
Company owned 49% of the outstanding voting common shares and 60% of the total
equity of Rainy River. During 1995, Rainy River was accounted for on the
equity method in the Company's consolidated financial statements. For the
three and six months ended June 30, 1995, Rainy River's results of operations
were included in "Equity in net income of affiliates." In November 1995, the
Company divested its remaining interest in Rainy River through Rainy River's
merger with Stone-Consolidated Corporation. At June 30, 1996, the Company
held 6,646,217 shares of Stone-Consolidated common stock, representing less
than 10% of Stone-Consolidated's outstanding common stock. In addition, the
Company held 801,560 shares of Stone-Consolidated's redeemable preferred
stock. The Company accounts for its holdings in Stone-Consolidated on the
cost method. The investment in Stone-Consolidated stock totaled $94.4 million
at June 30, 1996. The investment has been classified as available for sale
and is being marked to market. At June 30, 1996, "Retained Earnings" has been
reduced by $9.8 million, including the impact of foreign currency translation
and deferred income taxes, for this market adjustment.
Interest expense was $32.9 million in the second quarter of 1996, compared
with $35.1 million in the same period last year. The Company's debt is
predominately fixed rate. Consequently, when there are changes in short-term
market interest rates, the Company experiences only modest changes in interest
expense.
Six Months Ended June 30, 1996, Compared With Six Months Ended June 30, 1995
The Company had net income of $8.6 million for the first six months of 1996,
compared with net income of $163.0 million for the first six months of 1995.
Primary and fully diluted loss per common share for the first six months of
1996 were $.23. Primary earnings per common share for 1995 were $2.75 and
fully diluted earnings per common share were $2.49. Sales for the first six
months of 1996 and 1995 were $2.5 billion.
Operating income in the Company's paper and paper products segment was $38.2
million for the first six months of 1996, compared with $249.3 million, before
considering a $19 million reserve for the write-down of certain paper-related
assets, for the first six months of 1995. Average prices for nearly all of
the Company's paper grades decreased sharply during the first six months of
1996, compared with a year ago.
Paper segment manufacturing costs for the first six months of 1996 were $593
per ton compared with $571 per ton in the comparison period. The increase is
primarily due to fixed costs being spread over a smaller number of tons of
paper produced.
Paper segment sales declined 23% to $1 billion for the six months ended
June 30, 1996, compared with sales of $1.3 billion for the six months ended
June 30, 1995. Sales volumes for the first six months of 1996 were 1,258,000
tons, compared with 1,481,000 tons for the first six months of 1995.
Office products segment income for the first six months of 1996 was $52.6
million, double that of the $26.2 million reported for the first six months of
1995.
Segment sales were up 51% to $922.2 million for the first six months of 1996,
compared with $609.0 million for the first six months of 1995. The
significant improvement in sales was largely the result of increased national
account business, continued growth in direct marketing, product line
extensions, and acquisitions. Same location sales increased 14%. Operating
margins increased to 5.7% in the first six months of 1996, from 4.1% in 1995.
The increase was primarily the result of improved margins in office paper and
improved margins in the Company's national account business.
Operating income for the Company's Building Products segment dropped from
$46.3 million reported in the first six months of 1995 to $7.3 million in the
first six months of 1996. The decrease was mainly due to lower prices for
plywood and residual wood chips. Segment sales decreased 3% in the first six
months of 1996 to $758.9 million from $778.5 million in the first six months
of 1995. Plywood sales volumes were up 7% while lumber sales were down 1%
compared to those of the same period last year. Building materials
distribution sales were up 13%, while income was up 58%.
Total long- and short-term debt outstanding was $2.0 billion at June 30, 1996,
compared with $1.6 billion at December 31, 1995.
Financial Condition
At June 30, 1996, the Company had working capital of $485.6 million. Working
capital was $205.8 million at June 30, 1995, and $543.3 million at
December 31, 1995. Cash provided by operations was $92.8 million for the
first six months of 1996, compared with $344.7 million for the same period in
1995.
The Company's 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, 1996, exceeded the defined minimum
amount by $137 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. The
Company met this requirement at June 30, 1996. In July 1996, Moody's
Investors Service (Moody's) announced that it had placed the credit ratings of
the Company under review for possible downgrade.
Capital expenditures for the first six months of 1996 and 1995 were
$510.9 million and $124.7 million. Capital expenditures for the year ended
December 31, 1995, were $427.5 million. The increase in capital expenditures
is primarily due to acquisitions by the Company's majority-owned subsidiary,
Boise Cascade Office Products Corporation, and capital spending related to the
Jackson, Alabama, paper mill expansion.
On October 16, 1995, the Company announced its intent to form a joint venture
with Companhia Suzano de Papel e Celulose ("Suzano"), a Brazilian pulp and
paper producer, to acquire, operate, and expand the Company's pulp and paper
mill, timberlands, sawmill, and wastepaper recycling plant in Jackson,
Alabama. In April 1996, the Company announced that it had discontinued talks
with Suzano regarding formation of the joint venture. Regardless, the Company
will complete the expansion of the mill, including construction of a new
uncoated free sheet paper machine, which represents a $290 million capital
investment. The Company will consider other financing alternatives, but there
is no assurance that any such alternative will be acceptable to the Company.
The new paper machine should begin production in the second quarter of 1997.
An expanded discussion and analysis of financial condition is presented on
pages 18 and 19 of the Company's 1995 Annual Report under the captions
"Financial Condition" and "Capital Investment."
Market Conditions
If market conditions improve, paper prices stabilize, and significant
production downtime is averted, the Company's paper business could earn a
modest operating profit in the third quarter. The office products business is
expected to continue to perform well and the performance of the building
products business should be on par with that of the quarter just ended.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1996, for information concerning certain legal
proceedings.
As reported in the Company's annual report on Form 10-K for the year ended
December 31, 1995, the Company has been notified that it is a "potentially
responsible party" under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) or similar federal and state laws with
respect to a number of sites where hazardous substances or other contaminants
are located. In 1993, the Company filed a lawsuit in State District Court in
Boise, Idaho, against its current and previous insurance carriers seeking
insurance coverage for response costs the Company has incurred or may incur at
these sites. The Company has settled with most carriers, and settlement
negotiations with the remaining two carriers are currently in progress. The
trial, originally set for June 3, 1996, has been continued pending further
settlement efforts. The Company cannot predict with certainty the total
response and remedial costs, the Company's share of the total costs, the
extent to which contributions will be available from other parties, or the
amount of time necessary to complete the cleanups. However, based on the
Company's investigations, the Company's experience with respect to cleanup of
hazardous substances, the fact that expenditures will, in many cases, be
incurred over extended periods of time, and the number of solvent potentially
responsible parties, the Company does not presently believe that the known
actual and potential response costs will, in the aggregate, have a material
adverse effect on its financial condition or the results of operations.
The Company is involved in other 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 proceedings, including
that described in the preceding paragraph, 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 the Company's
revolving credit agreement. At June 30, 1996, under this agreement, the
Company's net worth exceeded the defined minimum amount by $137 million.
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 19, 1996. A total
of 54,823,916 shares of common and preferred stock were outstanding and
entitled to vote at the meeting. Of the total outstanding, 49,782,993 shares
were represented at the meeting and 5,040,923 shares were not voted.
Shareholders cast votes for election of the following directors whose terms
expire in 1999:
In Favor Withheld
Robert K. Jaedicke 48,830,301 952,692
Paul J. Phoenix 48,840,838 942,155
Frank A. Shrontz 48,956,824 826,169
Ward W. Woods, Jr. 48,737,332 1,045,661
Continuing in office are Anne L. Armstrong, Robert E. Coleman, A. William
Reynolds, and Robert H. Waterman, Jr., whose terms expire in 1998, and
George J. Harad, Donald S. Macdonald, James A. McClure, Jane E. Shaw, and
Edson W. Spencer whose terms expire in 1997.
The shareholders also ratified the appointment of Arthur Andersen LLP, as the
Company's independent auditors for the year 1996 with votes cast 49,140,602
for, 424,275 against, and 218,116 abstained.
The shareholders approved an amendment to the 1984 Key Executive Stock Option
Plan (KESOP) with votes cast 39,289,188 for, 8,437,351 against, and 1,445,950
abstained. The amendment increased by 1,100,000 the number of shares of the
Company's common stock which may be available under the plan. As a result, a
total of 1,532,434 shares of the Company's common stock will be available for
issuance pursuant to exercise of options which may be granted under the KESOP.
Item 5. Other Information
Not applicable.
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.
No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
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 12, 1996
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 1996
Number Description Page Number
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule