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 March 31, 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 1-13662
BOISE CASCADE OFFICE PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0477390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 West Bryn Mawr Avenue
Itasca, Illinois
60143
(Address of principal executive offices)
(Zip Code)
(708) 773-5000
(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
as of April 30, 1996, after giving
Class effect to a two-for-one stock split
Common stock, $.01 par value 62,335,518
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended March 31
1996 1995
(expressed in thousands,
except per share data)
Net sales $ 461,423 $ 303,287
Cost of sales, including purchases
from Boise Cascade Corporation
of $42,595,000 and $34,464,000 338,526 231,466
__________ __________
Gross profit 122,897 71,821
__________ __________
Selling and warehouse operating
expense 87,095 54,311
Corporate general and administrative
expense, including amounts paid to
Boise Cascade Corporation of $586,000
and $698,000 6,854 4,761
Goodwill amortization 1,380 440
__________ __________
95,329 59,512
__________ __________
Income from operations 27,568 12,309
Other income (expense), net (1,241) 243
__________ __________
Income before income taxes 26,327 12,552
Income tax expense 10,764 4,833
__________ __________
Net income $ 15,563 $ 7,719
Earnings per common share and
pro forma earnings per common share,
after giving effect to a two-for-one
stock split (based upon 62,305,746
actual average common shares outstanding
for the three months ended March 31,
1996, and 61,387,500 pro forma
average common shares outstanding for
the three months ended March 31, 1995) $ .25 $ .13
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 December 31
1996 1995 1995
(expressed in thousands)
ASSETS
Current
Cash and short-term investments $ 13,138 $ 21 $ 14,082
Receivables, less allowances
of $3,123,000, $1,129,000,
and $2,889,000 232,325 141,413 189,260
Inventories 130,030 88,927 112,538
Deferred income tax benefits 8,156 5,547 7,588
Other 14,218 8,264 12,705
__________ __________ __________
397,867 244,172 336,173
__________ __________ __________
Property
Land 12,411 11,779 12,411
Buildings and improvements 66,342 57,907 66,217
Furniture and equipment 114,634 90,816 102,074
Accumulated depreciation (79,814) (84,201) (91,941)
__________ __________ __________
113,573 76,301 88,761
__________ __________ __________
Goodwill, net of amortization
of $6,961,000, $3,803,000,
and $5,650,000 206,637 57,303 114,919
Other assets 5,319 4,307 4,271
__________ __________ __________
Total assets $ 723,396 $ 382,083 $ 544,124
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 December 31
1996 1995 1995
(expressed in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Notes payable $ 6,000 $ - $ -
Current portion of long-term debt 219 - -
Accounts payable
Trade and other 157,826 76,088 116,363
Boise Cascade Corporation 12,774 - 23,906
__________ __________ __________
170,600 76,088 140,269
__________ __________ __________
Accrued liabilities
Compensation and benefits 14,774 11,932 17,959
Income taxes payable 11,805 - 4,712
Taxes, other than income 7,467 12,241 6,813
Interest payable 562 - -
Other 25,124 12,234 20,596
__________ __________ __________
59,732 36,407 50,080
__________ __________ __________
236,551 112,495 190,349
__________ __________ __________
Other
Deferred income taxes 2,727 3,024 2,534
Long-term debt, less current portion 110,143 - -
Other 18,622 1,817 11,824
__________ __________ __________
131,492 4,841 14,358
__________ __________ __________
Shareholders' equity
Common stock, $.01 par value,
200,000,000 shares authorized;
62,331,258 and 62,292,776 shares
issued and outstanding at
March 31, 1996, and December 31, 1995,
after giving effect to a two-for-one
stock split 623 - 623
Additional paid-in capital 295,793 257,028 295,615
Retained earnings 58,937 7,719 43,179
__________ __________ __________
Total shareholders' equity 355,353 264,747 339,417
__________ __________ __________
Total liabilities and
shareholders' equity $ 723,396 $ 382,083 $ 544,124
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31
1996 1995
(expressed in thousands)
Cash provided by (used for) operations
Net income $ 15,563 $ 7,719
Items in income not using (providing) cash
Depreciation and amortization 5,279 3,495
Deferred income tax benefit 934 (948)
Receivables (3,130) (16,217)
Inventories 5,888 (4,694)
Other current assets 2,561 (1,477)
Accounts payable and accrued liabilities (5,784) (2,113)
Current and deferred income taxes 4,889 (769)
__________ __________
Cash provided by (used for) operations 26,200 (15,004)
__________ __________
Cash provided by (used for) investment
Expenditures for property and equipment (10,587) (5,897)
Acquisitions (129,259) (3,289)
Other, net (3,416) 688
__________ __________
Cash used for investment (143,262) (8,498)
__________ __________
Cash provided by (used for) financing
Notes payable 6,000 -
Additions to long-term debt 110,000 -
Net equity transactions with Boise
Cascade Corporation - 23,595
Other, net 118 (95)
__________ __________
Cash provided by financing 116,118 23,500
__________ __________
Decrease in cash (944) (2)
Balance at beginning of the period 14,082 23
__________ __________
Balance at March 31 $ 13,138 $ 21
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE OFFICE PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION. Boise Cascade Office
Products Corporation (together with its subsidiaries, "the Company")
was operated as the Boise Cascade Office Products Distribution
Division ("the Division") of Boise Cascade Corporation ("BCC") prior
to April 1, 1995. Effective on that date, pursuant to an Asset
Transfer and Subscription Agreement between the Company and BCC, BCC
transferred to the Company (the "Transfer of Assets") substantially
all of the assets and liabilities associated with the Division, other
than $100 million of accounts receivable, in exchange for common
stock of the Company. After the transfer, BCC held a total of
50,750,000 shares, after giving effect to a two-for-one stock split,
of the Company's common stock (see Note 3). The accompanying
historical consolidated income statements include the consolidated
results of operations of the Division.
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. 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 1995 Annual Report.
(2) PUBLIC OFFERINGS. On April 13, 1995, the Company completed the sale
of 10,637,500 shares of common stock at a price of $12.50 per share,
after giving effect to a two-for-one stock split, in an initial
public offering in the United States and in a concurrent
international offering ("the Offerings"). After the Offerings, BCC
owned 82.7% of the Company's outstanding common stock. The net
proceeds to the Company were approximately $123.1 million. A total
of $100 million of such net proceeds was used by the Company to
replace the working capital retained by BCC in the Transfer of
Assets. Of the remaining proceeds, $21.2 million was retained by the
Company and was available for general corporate purposes, and
$1.9 million was paid as a dividend to BCC.
(3) EARNINGS PER COMMON SHARE. Actual earnings per common share of $.25
for the three months ended March 31, 1996, are based upon the average
number of common shares outstanding pursuant to the shares issued to
BCC in the organization of the Company and the Transfer of Assets on
April 1, 1995, the shares issued in the Offerings on April 13, 1995,
common shares issued to effect acquisitions made by the Company, and
shares issued as a result of stock options exercised, all after
giving effect to a two-for-one stock split. The unaudited pro forma
earnings per common share of $.13 for the three months ended
March 31, 1995, have been presented assuming the 50,750,000 common
shares issued to BCC in the organization of the Company and the
10,637,500 common shares issued in the Offerings, after giving effect
to a two-for-one stock split, were issued on January 1, 1995.
In April 1996, the Company's board of directors authorized a two-for-
one split of the Company's common stock in the form of a 100% stock
dividend. Each shareholder of record at the close of business on
May 6, 1996, will receive one additional share for each share held on
that date. The new shares will be distributed on May 20, 1996. All
share amounts, net income per share, and average common shares
outstanding have been restated to reflect the stock split for each
period presented.
(4) DEBT. At March 31, 1996, the Company had a $225 million revolving
credit agreement with a group of banks. Borrowing under this
agreement was $110 million. In addition, the Company had $6 million
of short-term borrowings.
(5) TAXES. The estimated tax provision rate for the first three months
of 1996 was 41% compared with a tax provision rate of 38.5% for the
same period in the prior year. The increase is primarily due to the
amortization of goodwill arising from certain acquisitions that is
not deductible for tax purposes.
(6) ACQUISITIONS. During the first quarter of 1996, the Company made
five 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 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 the Company's operations subsequent to the dates of
acquisition.
On February 5, 1996, the Company completed the acquisition of 100% of
the shares of Grand & Toy Limited (Grand & Toy) from Cara Operations
Limited (Toronto). The negotiated purchase price was approximately
C$140 million (US$104 million). In addition, the Company recorded
liabilities of approximately $7.4 million, which are included in the
recorded purchase price of Grand & Toy, to modify and transition
activities such as distribution, marketing, and other functions.
Further adjustments to the preliminary allocation of the purchase
price may be made within one year of the acquisition date. The
acquisition was funded primarily from borrowings under the Company's
$225 million revolving credit agreement. Grand & Toy owns and
operates six office products distribution centers and approximately
80 retail stores across Canada.
On January 31, 1996, the Company acquired the assets of the contract
stationer business of Sierra Vista Office Products, Inc., based in
Albuquerque, New Mexico. On February 9, 1996, the Company acquired
the stock of the contract stationer businesses of Loring, Short &
Harmon, Inc., based in Portland, Maine, and McAuliffe's based in
Burlington, Vermont. On March 29, 1996, the Company acquired the
stock of the contract stationer and office furniture business of
Office Essentials based in Milwaukee, Wisconsin. These businesses
were acquired for a total of $27.2 million in cash and $7.9 million
payable to the sellers.
Unaudited pro forma results of operations, reflecting these
acquisitions, would have been as follows. If these five businesses
had been acquired on January 1, 1996, the Company's first quarter
1996 sales would have increased to $491 million, net income would
have decreased slightly to $15.4 million and earnings per common
share, after giving effect to a two-for-one stock split, would have
remained $.25. If these businesses had been acquired on January 1,
1995, first quarter 1995 sales would have increased to $370 million,
net income would have decreased to $5.3 million and earnings per
common share, after giving effect to a two-for-one stock split, would
have decreased to $.09. 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 unchanged. 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.
In April 1996, the Company announced it had signed letters of intent
to acquire Crawford's Office Supplies, Inc., based in Seattle,
Washington; Zemlick Brothers, Inc., based in Kalamazoo, Michigan;
Bangs Office Products, Inc., based in Pocatello, Idaho; and Pedersen
Contact based in Melbourne, Australia. The combined annual sales of
the acquisitions at the time of announcement were $63.3 million. The
Company also announced the start-up of new office products
distribution centers in Las Vegas, Nevada, and Miami, Florida.
In April 1996, the Company filed a registration statement with the
Securities and Exchange Commission for additional shares of common
stock, which provides the Company with an uncommitted 4,000,000
registered shares of common stock, after a two-for-one stock split,
to be offered from time to time in connection with future
acquisitions.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
First Quarter of 1996, Compared with First Quarter of 1995
Results of Operations
Net sales in the first quarter of 1996 increased 52% to $461.4 million,
compared with $303.3 million in the first quarter of 1995. The growth in
sales resulted from increased national account business, rapid growth in
direct marketing, acquisitions, and somewhat higher paper prices and
volumes. Excluding the effect of acquisitions since December 31, 1994,
sales increased 18% in the first quarter of 1996.
Cost of goods sold, which includes the cost of merchandise sold and
delivery and occupancy costs, increased to $338.5 million in the first
quarter of 1996, which was 73.4% of net sales. This compares with
$231.5 million reported in the same period of the prior year, which
represented 76.3% of net sales. Gross profit as a percentage of sales was
26.6% and 23.7% for the first quarter of 1996 and 1995. The increase in
margins was due primarily to improved margins in the Company's national
account business and higher paper prices quarter to quarter.
Operating expense was 20.7% of net sales in the first quarter of 1996,
compared with 19.6% in the first quarter of 1995. Within the operating
expense category, selling and warehouse operating expense was 18.9% of net
sales in the first quarter of 1996, compared with 17.9% in the first
quarter of 1995. This increase was primarily the result of changes in the
Company's product and channel mix due to acquisitions. Corporate general
and administrative expense declined slightly to 1.5% of first quarter 1996
net sales from 1.6% of first quarter 1995 net sales.
As a result of the above factors, income from operations in the first
quarter of 1996 increased by $15.3 million to $27.6 million, more than
double the Company's first quarter 1995 operating income, which was
$12.3 million. Net income in the first quarter of 1996 more than doubled
to $15.6 million, or 3.4% of net sales, compared with $7.7 million, or 2.5%
of net sales, in the same period of the prior year.
Liquidity and Capital Resources
The Company's principal requirements for cash have been to fund working
capital needs, upgrade and expand its facilities at existing locations,
open new distribution centers, and make acquisitions. The funding of the
Company's strategy for growth, including acquisitions and the relocation of
several existing distribution centers into new and larger facilities, is
expected to require significant capital outlays by the Company over the
next several years.
To finance the Company's capital requirements, the Company expects to rely
upon funds from a combination of sources. The Company anticipates
continued cash flow from operations. In addition, the Company has a
$225 million revolving credit agreement that expires in 1999 and provides
for variable rates of interest based on customary indexes. The revolving
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 net worth, a
minimum fixed charge coverage ratio, and a maximum leverage ratio. The
lending banks may terminate the revolving credit agreement, and accelerate
the payment of any amounts borrowed thereunder, in the event a Change of
Control (as defined) of the Company occurs. At March 31, 1996,
$110 million was outstanding under this agreement. At March 31, 1996, the
Company had $6 million of short-term borrowings.
In addition to available borrowing capacity under the terms of the
revolving credit agreement, the Company may, subject to the covenants
contained in the revolving credit agreement and to market conditions, raise
additional funds through other external debt or equity financing in the
future.
In April 1996, the Company filed a registration statement with the
Securities and Exchange Commission for additional shares of common stock,
which provides the Company with an uncommitted 4,000,000 registered shares of
common stock, after a two-for-one stock split, to be offered from time to
time in connection with future acquisitions.
Cash provided by operations for the first three months of 1996 was
$26.2 million. This was the result of $21.8 million of net income,
depreciation and amortization, and other noncash items and a $4.4 million
increase in working capital. Net cash used for investment in the first
three months of 1996 was $143.3 million, which included $10.6 million for
capital expenditures and $129.3 million for acquisitions. Net cash
provided by financing was $116.1 million for the first three months of
1996, resulting from borrowings made by the Company to fund acquisitions.
Cash used for operations in the first three months of 1995 was
$15.0 million. This was the result of $10.3 million of net income,
depreciation and amortization, and other noncash items offset by
$25.3 million of negative changes in working capital. Cash used for
investment in the first three months of 1995 was $8.5 million, which
included $5.9 million of expenditures for property and equipment and
$3.3 million for acquisitions. Net cash provided by financing was $23.5
million for the first three months of 1995, almost all of which was net
equity transactions with Boise Cascade Corporation.
Business Cycles
The Company is a major distributor of copy paper. It is uncertain to what
extent or when paper prices might significantly rise or fall and what
favorable or adverse impact those changes might have on the Company's sales
and margins.
The Company's multifaceted growth strategy, including its acquisition
program, has been very successful in recent quarters. The Company believes
that this growth strategy will continue to be successful, but the year-to-
year and quarter-to-quarter results of this strategy will depend in part on
market conditions outside the Company's control. In addition, the pace of
the Company's acquisition program will reflect the extent of opportunities
available to the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the registrant's annual report on Form 10-K for the
year ended December 31, 1995, for information concerning legal proceedings.
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.
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) On February 16, 1996, the Company filed a Form 8-K with the
Securities and Exchange Commission to report that the Company
completed the acquisition of 100% of the shares of Grand & Toy
Limited from Cara Operations Limited (Toronto), on February 5,
1996.
On March 14, 1996, the Company filed a Form 8-K/A. This
amended the registrant's response to Item 7 of the Form 8-K
filed on February 16, 1996, so as to file the Grand & Toy
financial statements and pro forma financial information giving
effect to the acquisition of Grand & Toy.
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: May 10, 1996
BOISE CASCADE OFFICE PRODUCTS CORPORATION
INDEX TO EXHIBITS
Filed With the Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 1996
Number Description Page Number
10 Form of Deferred Compensation and
Benefits Trust dated January 30, 1996
27 Financial Data Schedule