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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 1-5057
A Delaware BOISE CASCADE CORPORATION I.R.S. Employer
Corporation 1111 West Jefferson Street Identification
P.O. Box 50 No. 82-0100960
Boise, Idaho 83728-0001
(208)384-6161
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $2.50 par value New York, Chicago, and
Pacific Stock Exchanges
American & Foreign Power Company Inc.
Debentures, 5% Series due 2030 New York Stock Exchange
Common Stock Purchase Rights New York, Chicago, and
Pacific Stock Exchanges
$2.35 Depositary Shares, evidenced by
Depositary Receipts for Series F,
Cumulative Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, Series F
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price at which the stock was sold as
of the close of business on February 28, 1998: $1,862,758,869
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date.
Shares Outstanding
Class as of February 28, 1998
Common Stock, $2.50 par value 56,234,230
Documents incorporated by reference
1. The registrant's annual report for the fiscal year ended December 31,
1997, portions of which are incorporated by reference into Parts I,
II, and IV of this Form 10-K, and
2. Portions of the registrant's proxy statement relating to its 1998
annual meeting of shareholders to be held on April 17, 1998 ("Boise
Cascade's proxy statement"), are incorporated by reference
into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
Item Page
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
PART I
ITEM 1. BUSINESS
As used in this annual report, the term "Boise Cascade" and "we" includes
Boise Cascade Corporation and its consolidated subsidiaries and predecessors.
Boise Cascade Corporation is an integrated paper and forest products company
headquartered in Boise, Idaho, with domestic and international operations. We
manufacture and distribute paper and wood products, distribute office products
and building materials, and own and manage more than 2 million acres of
timberland in the U.S. We were incorporated under the laws of Delaware in
1931 under the name Boise Payette Lumber Company of Delaware, as a successor
to an Idaho corporation formed in 1913. In 1957, our name was changed to its
present form.
We are a participant with equity affiliates in connection with certain of our
businesses. Our principal investments in affiliates include a 47% interest in
Voyageur Panel and a 25% interest in Ponderosa Fibres of Washington.
Additionally, our majority-owned subsidiary, Boise Cascade Office Products
Corporation ("BCOP"), has a 50% interest with Otto Versand in a joint venture
that direct markets office products in Europe. (See Note 8 of the Notes to
Financial Statements of our 1997 Annual Report. This information is
incorporated by reference.)
Financial information pertaining to each of our industry segments and to each
of our geographic areas for the years 1997, 1996, and 1995 is presented in
Note 10, "Segment Information," of the Notes to Financial Statements of our
1997 Annual Report and is incorporated by reference.
Our sales and income are affected by the industry supply of product relative
to the level of demand and by changing economic conditions in the markets it
serves. Demand for paper and paper products and for office products
correlates closely with real growth in the gross domestic product. Paper and
paper products operations are also affected by demand in international markets
and by inventory levels of users of these products. Our building products
businesses are dependent on repair-and-remodel activity, housing starts, and
commercial and industrial building, which in turn are influenced by the
availability and cost of mortgage funds. Declines in building activity that
may occur during winter affect our building products businesses. In addition,
energy and some operating costs may increase at facilities affected by cold
weather. Seasonal influences, however, are generally not significant.
The management practices followed by Boise Cascade with respect to working
capital conform to those of the paper and forest products industry and common
business practice in the United States.
We engage in acquisition discussions with other companies and make
acquisitions from time to time. It is our policy to review our operations
periodically and to dispose of assets which fail to meet our criteria for
return on investment or which cease to warrant retention for other reasons.
(See Notes 1, 6, and 8 of the Notes to Financial Statements of our 1997 Annual
Report. This information is incorporated by reference.)
PAPER AND PAPER PRODUCTS
Boise Cascade is a major North American pulp and paper producer with five
paper mills. The total annual practical capacity of the mills was
approximately 2.8 million tons at December 31, 1997. Our products are sold to
distributors and industrial customers primarily by our own sales personnel.
The products manufactured by Boise Cascade, made both from virgin and recycled
fibers, include uncoated business, printing, forms, and converting papers;
newsprint; containerboard; and market pulp. These products are available for
sale to the related paper markets, and certain of these products are sold
through our office products distribution operations. In addition,
containerboard is used by Boise Cascade in the manufacture of corrugated
containers.
Our paper mills are supplied with pulp principally from our own integrated
pulp mills. Pulp mills in the Northwest manufacture chemical pulp primarily
from wood waste produced as a byproduct of wood products manufacturing. Pulp
mills in the Midwest and South manufacture chemical, thermomechanical, and
groundwood pulp mainly from pulpwood logs and, to some extent, from purchased
wood waste and pulp from deinked recycled fiber. Wood waste is provided by
our sawmills and plywood mills in the Northwest and, to a lesser extent, in
the South, and the remainder is purchased from outside sources.
Boise Cascade currently manufactures corrugated containers at seven plants,
which have annual practical capacity of approximately five billion square
feet. The containers produced at our plants are used to package fresh fruit
and vegetables, processed food, beverages, and many other industrial and
consumer products. We sell our corrugated containers primarily through our
own sales personnel.
We also have a wave flute facility which became operational in 1996. Wave
flute is a substitute for many packaging and display products.
The following table sets forth sales volumes of paper and paper products for
the years indicated:
1997 1996 1995 1994 1993
______ ______ ______ ______ ______
(thousands of short tons)
Paper
Uncoated free sheet 1,314 1,167 1,177 1,271 1,215
Containerboard 604 563 602 595 559
Newsprint(1) 440 411 416 415 860
Market pulp 161 230 217 212 205
Discontinued grades(1) - 260 428 447 717
______ ______ ______ ______ ______
2,519 2,631 2,840 2,940 3,556
(millions of square feet)
Corrugated Containers 3,568 3,201 3,114 3,237 2,961
(1) Newsprint for 1995 and 1994 excludes production from Rainy River, which
was reported on the equity method from January 1, 1994, through
November 1, 1995. On November 1, 1995, Rainy River merged with
Stone-Consolidated Corporation (now Abitibi-Consolidated).
In November 1996, we completed the sale of our coated publication paper
business to The Mead Corporation. (See Note 1 of the Notes to Financial
Statements of our 1997 Annual Report. This information is incorporated by
reference.)
In October 1994, Rainy River Forest Products ("Rainy River"), our former
Canadian subsidiary, completed an initial offering of units of its equity and
debt securities. As a result of the offering, we owned 49% of the outstanding
voting common shares and 60% of the total equity of Rainy River.
In November 1995, we divested our remaining interest in Rainy River through
Rainy River's merger with Stone-Consolidated Corporation and we received cash
of approximately $183,482,000 and Stone-Consolidated stock. We used the
proceeds from this transaction to reduce debt. In 1996, we sold the Stone-
Consolidated stock for $133,628,000. After consideration of a previously
recorded bulk-sale reserve, the transaction was at approximately book value.
OFFICE PRODUCTS
In April 1995, our then wholly owned subsidiary, Boise Cascade Office Products
Corporation ("BCOP"), completed an initial public offering 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 the form of a dividend in May 1996. After the
offering, Boise Cascade owned 82.7% of BCOP's outstanding common stock. At
December 31, 1997, we owned 81.4% of BCOP's outstanding common stock. (See
Note 6 of the Notes to Financial Statements of our 1997 Annual Report. This
information is incorporated by reference.)
BCOP distributes a broad line of items for the office, including office and
computer supplies, furniture, paper products, and promotional products. All
of the products sold by this segment are purchased from manufacturers or from
industry wholesalers, except office papers which are sourced primarily from
Boise Cascade's paper operations. BCOP sells these office products directly
to corporate, government, and other offices in the United States, Australia,
Canada, France, and the United Kingdom, as well as to individuals, home
offices, and small- and medium-sized offices in the United States, Canada,
France, Germany, Spain, and the United Kingdom.
Customers with multisite locations across the country are often serviced via
national contracts that provide consistent pricing and product offerings and,
if desired, summary billings, usage reporting, and other special services. At
February 28, 1998, BCOP operated 72 distribution centers. During 1997, BCOP
completed acquisitions of eight businesses. BCOP also operates four retail
office supply stores in Hawaii and approximately 70 retail stores in Canada.
The following table sets forth sales dollars for BCOP for the years indicated:
1997 1996 1995 1994 1993
______ ______ ______ ______ ______
Sales (millions) $2,597 $1,986 $1,316 $ 909 $ 683
BUILDING PRODUCTS
Boise Cascade is a major producer of lumber, plywood, and particleboard,
together with a variety of specialty wood products. We also manufacture
engineered wood products consisting of laminated veneer lumber (LVL), which is
a high-strength engineered structural lumber product, and wood I-joists that
incorporate the LVL technology. Most of our production is sold to independent
wholesalers and dealers and through our own wholesale building materials
distribution outlets. Our wood products are used primarily in housing,
industrial construction, and a variety of manufactured products. Wood
products manufacturing sales for 1997, 1996, and 1995 were $913 million,
$867 million, and $977 million.
The following table sets forth annual practical capacities of our wood
products facilities as of December 31, 1997:
Number of
Mills Practical Capacity
_________ __________________
(millions)
Plywood and veneer 12 1,935 square feet (3/8" basis)
Lumber 11 635 board feet
Particleboard 1 200 square feet (3/4" basis)
Oriented strand board(1) 1 400 square feet
Laminated veneer lumber(2) 2 10.4 cubic feet
(1) In 1995, we formed a joint venture to build an oriented strand board
(OSB) plant in Barwick, Ontario, Canada. We own 47% of the joint
venture. The 400 million square feet of annual capacity represents 100%
of the production volume. The plant began production in 1997.
(2) A portion of LVL production is used in the manufacture of I-joists.
Boise Cascade operates 15 wholesale building materials distribution
facilities. In 1997, we started up a facility in Minnesota. These operations
market a wide range of building materials, including lumber, plywood,
particleboard, engineered wood products, roofing, insulation, doors, builders'
hardware, and related products. These products are distributed to retail
lumber dealers, home centers specializing in the do-it-yourself market, and
industrial customers. A portion (approximately 32% in 1997) of the wood
products required by our Building Materials Distribution Division is provided
by our manufacturing facilities, and the balance is purchased from outside
sources.
The following table sets forth sales volumes of wood products and sales
dollars for engineered wood products and the building materials distribution
business for the years indicated:
1997 1996 1995 1994 1993
______ ______ ______ ______ ______
(millions)
Plywood (square feet - 3/8" basis) 1,836 1,873 1,865 1,894 1,760
Lumber (board feet) 657 692 711 754 760
Particleboard (square feet - 3/4" basis) 195 195 196 194 182
Oriented strand board (square feet
3/8" basis)(1) 151 - - - -
Laminated veneer lumber (cubic feet) 2.7 2.2 1.8 1.4 1.1
I-joists (eq. lineal feet) 82 74 61 55 49
Building materials distribution
(sales dollars) $ 732 $ 690 $ 598 $ 657 $ 590
(1) Includes 100% of the sales volume from our joint venture, of which we own
47%.
TIMBER RESOURCES
Boise Cascade owns or controls approximately 2.4 million acres of timberland
in the U.S. The amount of timber we harvest each year from our timber
resources, compared with the amount we purchase from outside sources, varies
according to the price and supply of timber for sale on the open market and
according to what we deem to be in the interest of sound management of our
timberlands. During 1997, our mills processed approximately 1.1 billion board
feet of sawtimber and 1.5 million cords of pulpwood; 33% of the sawtimber and
44% of the pulpwood were harvested from our timber resources, and the balance
was acquired from various private and government sources. Approximately 68%
of the 1,037,000 bone-dry units of hardwood and softwood chips consumed by our
Northwest pulp and paper mills in 1997 were provided from a whole-log chipping
facility, our cottonwood fiber farm, and our Northwest wood products
manufacturing facilities as residuals from the processing of solid wood
products. Of the 636,000 bone-dry units of residual chips used in the South,
40% were provided by our Southern wood products manufacturing facilities.
At December 31, 1997, the acreages of owned or controlled timber resources by
geographic area and the approximate percentages of total fiber requirements
available from our respective timber resources in these areas and from the
residuals from processed purchased logs are shown in the following table:
Northwest(1) Midwest(2) South(3) New England(4) Total(5)
___________________ ______________ ______________ _______________ ______________________
1997 1996 1995 1997 1996 1995 1997 1996 1995 1997 1996 1995 1997 1996 1995
_____ _____ _____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ______ ______ ______
(thousands of acres)
Fee 1,331 1,328 1,329 308 308 308 418 419 419 - - 667 2,057 2,055 2,723
Leases and contracts 51 51 49 - - - 284 290 290 - - - 335 341 339
_____ _____ _____ ____ ____ ____ ____ ____ ____ ____ ____ ____ _____ _____ _____
1,382 1,379 1,378 308 308 308 702 709 709 - - 667 2,392 2,396 3,062
Approximate % of
total fiber
requirements
available from:(6)
Owned and controlled
timber resources 25% 21% 22% 23% 23% 22% 25% 25% 26% - - 57% 25% 23% 27%
Residuals from
processed purchased
logs 13 14 17 - - - 6 6 7 - - - 9 9 10
_____ _____ _____ ____ ____ ____ ____ ____ ____ ____ ____ ____ _____ _____ _____
Total 38% 35% 39% 23% 23% 22% 31% 31% 33% - - 57% 34% 32% 37%
(1) Principally sawtimber.
(2) Principally pulpwood.
(3) Sawtimber and pulpwood.
(4) In 1996, we sold 667,000 acres of timberland to The Mead Corporation in connection
with the sale of our coated publication paper business in Rumford, Maine.
(5) On December 31, 1997, our inventory of merchantable sawtimber was approximately
7.7 billion board feet, and our inventory of pulpwood was approximately 7.8 million
cords. At December 31, 1996, these inventories were approximately 7.6 billion board
feet and approximately 7.6 million cords, and at December 31, 1995, these inventories
were approximately 9.0 billion board feet and approximately 15.9 million cords.
(6) Assumes harvesting of company-owned and controlled timber resources on a sustained
timber yield basis and operation of our paper and wood products manufacturing
facilities at practical capacity. Percentages shown represent weighted average
consumption on a cubic volume basis.
Long-term leases generally provide Boise Cascade with timber harvesting rights
and carry with them the responsibility for management of the timberlands. The
average remaining life of all leases and contracts is in excess of 40 years.
In addition, we have an option to purchase approximately 203,000 acres of
timberland under lease and/or contract in the South.
We seek to maximize the utilization of our timberlands through efficient
management so that the timberlands will provide a continuous supply of wood
for future needs. Site preparation, planting, fertilizing, thinning, and
logging techniques are being improved through a variety of methods, including
genetic research and computerization.
We assume substantially all risks of loss from fire and other casualties on
all the standing timber we own, as do most owners of timber tracts in the U.S.
Additional information pertaining to our timber resources is presented under
the caption "Timber Supply" of the Financial Review of our 1997 Annual Report.
This information is incorporated by reference.
COMPETITION
The markets we serve are highly competitive, with a number of substantial
companies operating in each. We compete in our markets principally through
price, service, quality, and value-added products and services.
ENVIRONMENTAL ISSUES
Our discussion of environmental issues is presented under the caption
"Environmental Issues" of the Financial Review of our 1997 Annual Report.
This information is incorporated by reference. In addition, environmental
issues are discussed under "Item 3. Legal Proceedings," of this Form 10-K.
EMPLOYEES
As of December 31, 1997, we had 22,514 employees, 6,176 of whom were covered
under collective bargaining agreements. In 1997, we obtained a labor contract
extension effective until 2000 for our west coast timber employees.
No major negotiations are scheduled for 1998.
IDENTIFICATION OF EXECUTIVE OFFICERS
Information with respect to our executive officers is set forth in Item 10 of
this Form 10-K and is incorporated into this Part I by reference.
CAPITAL INVESTMENT
Boise Cascade's capital expenditures in 1997 were $579 million, compared with
$832 million in 1996 and $428 million in 1995. Details of 1997 spending by
segment and by type are as follows:
Replacement,
Quality/ Timber and Environmental,
Expansion Efficiency(1) Timberlands and Other Total
_________ __________ ___________ ____________ _______
(expressed in millions)
Paper and paper products $ 66 $ 22 $ - $ 82 $ 170
Office products(2) 296 26 - 25 347
Building products 23 9 - 18 50
Timber and timberlands - - 6 - 6
Other 1 - - 5 6
______ ______ _______ ______ ______
Total $ 386 $ 57 $ 6 $ 130 $ 579
(1) Quality and efficiency projects include quality improvements,
modernization, energy, and cost-saving projects.
(2) Capital expenditures include acquisitions made by BCOP through the
issuance of common stock, assumption of debt, and the recording of
liabilities.
The level of capital investment in 1998 is expected to be about $400 million,
excluding acquisitions, and will be allocated to cost-saving, modernization,
expansion, replacement, maintenance, environmental, and safety projects.
ENERGY
The paper and paper products segment is our primary energy user. Self-
generated energy sources in this segment, such as wood wastes, pulping
liquors, and hydroelectric power, provided 57% of total 1997 energy
requirements, compared with 53% in 1996 and 52% in 1995. The energy
requirements fulfilled by purchased sources in 1997 were as follows: natural
gas, 29%; electricity, 13%; and residual fuel oil, 1%.
ITEM 2. PROPERTIES
We own substantially all of our facilities other than those in our office
products subsidiary. The majority of the office products facilities are
rented under operating leases. Regular maintenance, renewal, and new
construction programs have preserved the operating suitability and adequacy of
those properties. We own substantially all equipment used in our facilities.
Following is a list of our facilities by segment as of February 28, 1998.
Information concerning timber resources is presented in Item 1 of this
Form 10-K.
PAPER AND PAPER PRODUCTS
5 pulp and paper mills located in Alabama, Louisiana, Minnesota, Oregon, and
Washington. In 1996, we sold our mill in Rumford, Maine.
6 regional service centers located in California, Georgia, Illinois,
New Jersey, Oregon, and Texas.
2 converting facilities located in Oregon and Washington. In 1996, we
completed the reconfiguration of our Vancouver, Washington, mill by shutting
down its paper making abilities and operating it only as a paper converting
facility.
7 corrugated container plants located in Idaho (2), Nevada, Oregon, Utah, and
Washington (2).
1 wave flute facility located in California.
OFFICE PRODUCTS
72 distribution centers located in Arizona, California (2), Colorado,
Connecticut, Delaware, Florida (3), Georgia, Hawaii, Idaho, Illinois,
Kentucky, Maine, Maryland, Massachusetts, Michigan (3), Minnesota (2),
Missouri (2), Montana, Nevada (2), New Mexico, New York (2),
North Carolina (2), Ohio (3), Oklahoma, Oregon (2), Pennsylvania (2),
Tennessee, Texas (2), Utah, Vermont, Virginia, Washington (2), Wisconsin,
Australia (8), Canada (9), France (2), Germany, and Spain, and United
Kingdom (2).
Approximately 74 retail outlets located in Hawaii and Canada.
BUILDING PRODUCTS
11 sawmills located in Alabama, Idaho (2), Louisiana, Oregon (4), and
Washington (3).
12 plywood and veneer plants located in Idaho, Louisiana (2), Oregon (7), and
Washington (2).
1 particleboard plant located in Oregon.
2 laminated veneer lumber/wood I-joists plants located in Oregon and
Louisiana.
1 wood beam plant located in Idaho.
47% owned oriented strand board joint venture located in Barwick, Ontario,
Canada.
15 wholesale building materials units located in Arizona, Colorado (2),
Idaho (2), Minnesota, Montana, New Mexico, Oklahoma, Texas, Utah, and
Washington (4).
ITEM 3. LEGAL PROCEEDINGS
We have been notified that we are a "potentially responsible party" under the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
or similar federal and state laws with respect to 33 active sites where
hazardous substances or other contaminants are located. We cannot predict
with certainty the total response and remedial costs, our 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
our investigations, our 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, we do not presently believe that the known actual and potential
response costs will, in the aggregate, have a material adverse effect on our
financial condition or the results of operations.
We are involved in various litigation and administrative proceedings arising
in the normal course of our business. In the opinion of management, our
recovery, if any, or our liability, if any, under any pending litigation or
administrative proceeding, including those described in the preceding
paragraph, would not materially affect our financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is listed on the New York, the Chicago, and the Pacific Stock
Exchanges. The high and low sales prices for our common stock, as well as the
frequency and amount of dividends paid on such stock, is included in
"Quarterly Results of Operations," in our 1997 Annual Report. Additional
information concerning dividends on common stock is presented under the
caption "Dividends" of the Financial Review section of our 1997 Annual Report,
and information concerning restrictions on the payments of dividends is
included in Note 4, "Debt," of the Notes to Financial Statements in our
1997 Annual Report. The approximate number of common shareholders, based upon
actual record holders at year-end, is presented under the caption "Financial
Highlights" of our 1997 Annual Report. The information under these captions
is incorporated by reference.
SHAREHOLDER RIGHTS PLAN
Pursuant to the shareholder rights plan adopted in December 1988 and amended
in September 1990, holders of common stock received a distribution of one
right for each common share held. The rights become exercisable ten days
after a person or group acquires 15% of our outstanding voting securities or
ten business days after a person or group commences or announces an intention
to commence a tender or exchange offer that could result in the acquisition of
15% of these securities. Each full Right, if it becomes exercisable, entitles
the holder to purchase one share of common stock at a purchase price of $175
per share, subject to adjustment. In addition, upon the occurrence of certain
events, and upon payment of the then-current purchase price, the Rights may
"flip in" and entitle holders to buy common stock or "flip over" and entitle
holders to buy common stock in an acquiring entity in such amount that the
market value is equal to twice the purchase price. The Rights are nonvoting
and may be redeemed by the company for one cent per Right at any time prior to
the tenth day after an individual or group acquires 15% of our voting stock,
unless extended, and expire in 1998. In September 1997, the company renewed
its shareholder rights plan by entering into a Renewed Rights Agreement. The
Renewed Rights Agreement will take effect and the company will distribute new
rights upon the expiration of the existing rights plan. Additional details
are set forth in the Renewed Rights Agreement filed with the Securities and
Exchange Commission as Exhibit 4.2 in our Form 10-Q dated September 30, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth our selected financial data for the years
indicated and should be read in conjunction with the disclosures in Item 7 and
Item 8 of this Form 10-K:
1997 1996 1995 1994 1993
(1)(2) (4)(5) (10) (11)(12)
(3) (6)(7) (13)
(8)(9)
______ ______ ______ ______ ______
(expressed in millions, except
per-common-share amounts)
Assets
Current assets $1,354 $1,355 $1,313 $ 918 $ 887
Property and equipment, net 2,630 2,554 2,604 2,494 3,010
Other 986 802 739 882 616
______ ______ ______ ______ ______
$4,970 $4,711 $4,656 $4,294 $4,513
Liabilities and
Shareholders' Equity
Current liabilities $ 894 $ 933 $ 770 $ 658 $ 688
Long-term debt, less
current portion 1,726 1,330 1,365 1,625 1,593
Guarantee of ESOP debt 177 196 214 231 247
Minority interest 105 82 68 - -
Other 455 490 545 415 480
Shareholders' equity 1,613 1,680 1,694 1,365 1,505
______ ______ ______ ______ ______
$4,970 $4,711 $4,656 $4,294 $4,513
Net sales $5,494 $5,108 $5,074 $4,140 $3,958
Net income (loss) $ (30) $ 9 $ 352 $ (63) $ (77)
Net income (loss) per common share
Basic $(1.19) $ (.63) $ 6.62 $(3.08) $(3.17)
Diluted (14) $(1.19) $ (.63) $ 5.39 $(3.08) $(3.17)
Cash dividends declared
per common share $ .60 $ .60 $ .60 $ .60 $ .60
(1) Includes a pretax gain of approximately $40,395,000 as a result of the
sale of our coated publication paper business. In addition, approximately
$15,341,000 of pretax expense arising from related tax indemnification
requirements was recorded. Assets were reduced by $632,246,000 as a
result of the sale.
(2) Includes $9,955,000 before taxes for the write-down of certain paper
assets.
(3) Includes a gain of $2,880,000 as a result of shares issued by BCOP for
stock options and to effect various acquisitions.
(4) Includes a charge of $74,900,000 before taxes related primarily to the
write-down of certain paper assets under the provisions of Financial
Accounting Standards Board Statement 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
(5) Includes a pretax gain of $68,900,000 as a result of the sale of our
remaining interest in Rainy River.
(6) Includes a gain of $6,160,000 as a result of shares issued by BCOP to
effect various acquisitions.
(7) Includes a gain of $60,000,000 from the BCOP initial public offering.
(8) Includes $32,500,000 of income taxes for the tax effect of the difference
in the book and tax bases of our stock ownership in Rainy River.
(9) Includes a pretax charge of $19,000,000 for the establishment of reserves
for the write-down of certain paper assets. Also included is our addition
to existing reserves of $5,000,000 before taxes for environmental and
other contingencies.
(10) Includes a charge of $10,200,000 before taxes as a result of the sale of
securities by Rainy River. Also includes the recognition of a noncash
charge of $20,200,000 for U.S. taxes on previously undistributed Canadian
earnings.
(11) In the third quarter of 1993, the U.S. federal government increased the
statutory tax rate from 34% to 35%, effective as of the beginning of 1993.
Income tax benefits reported have been decreased by $7,120,000 as a result
of adjusting net deferred tax liabilities for the change in rates. Also
included in 1993 was a net pretax gain of $5,300,000 which was primarily
attributable to an asset sale.
(12) In the second quarter of 1993, the Canadian federal government reduced the
statutory tax rate applicable to Boise Cascade. Effective as of the
beginning of 1993, the rate decreased from 23.8% to 22.8%, and a further
reduction to 21.8% was effective at the beginning of 1994. Income tax
benefits reported have been increased by $5,020,000, as a result of
adjusting net Canadian deferred tax liabilities for the changes in rates.
(13) In 1993, we sold our interest in a specialty paper producer at a pretax
gain of $8,644,000.
(14) The computation of diluted net loss per common share was antidilutive in
the years 1997, 1996, 1994, and 1993; therefore, the amounts reported for
basic and diluted loss per share are the same. In 1997, we adopted SFAS
No. 128, "Earnings Per Share," effective December 15, 1997. As a result,
our basic earnings per share for 1995 increased 69 cents to $6.62 over the
previously reported primary income per common share. The accounting
change had no effect on any of the other reported amounts.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations are presented under the caption "Financial Review" of our 1997
Annual Report and are incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning quantitative and qualitative disclosures about market
risk is included under the caption, "Disclosures of Certain Financial Market
Risks" in our management's discussion and analysis of financial condition and
results of operations, and is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and related notes, together with the
report of the independent public accountants, are presented in our 1997 Annual
Report and are incorporated by reference. Selected quarterly financial data
is presented under, "Quarterly Results of Operations," in our 1997 Annual
Report and is incorporated by reference.
The consolidated income statement for the three months ended December 31,
1997, is presented in our Fact Book for the fourth quarter of 1997 and is
incorporated by reference.
The 9.85% Notes issued in June 1990, the 9.9% Notes issued in March 1990, and
the 9.45% Debentures issued in October 1989 each contain a provision under
which in the event of the occurrence of both a designated event (change of
control), as defined, and a rating decline, as defined, the holders of these
securities may require Boise Cascade to redeem the securities.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The directors and nominees for directors are presented under the caption
"Election of Directors" in our proxy statement. This information is
incorporated by reference.
Executive Officers as of February 28, 1998
Date First
Elected as
Name Age Position or Office an Officer
________________________ ___ _____________________________ __________
George J. Harad(1) 53 Chairman of the Board and
Chief Executive Officer 5/11/82
Peter G. Danis Jr.(2) 66 Executive Vice President 7/26/77
Theodore Crumley 52 Senior Vice President and
Chief Financial Officer 5/10/90
A. Ben Groce 56 Senior Vice President 2/8/91
John W. Holleran 43 Senior Vice President and
General Counsel 7/30/91
Terry R. Lock 56 Senior Vice President 2/17/77
Christopher C. Milliken(3) 52 Senior Vice President 2/3/95
Richard B. Parrish 59 Senior Vice President 2/27/80
N. David Spence 62 Senior Vice President 12/8/87
A. James Balkins III(4) 45 Vice President 9/5/91
Stanley R. Bell 51 Vice President 9/25/90
John C. Bender 58 Vice President 2/13/90
Charles D. Blencke 54 Vice President 12/11/92
Tom E. Carlile 46 Vice President and Controller 2/4/94
Karen E. Gowland 39 Vice President and
Corporate Secretary 9/25/97
J. Michael Gwartney 57 Vice President 4/25/89
Vincent T. Hannity 53 Vice President 7/26/96
Irving Littman 57 Vice President and Treasurer 11/1/84
Jeffrey G. Lowe 56 Vice President 12/11/92
Richard W. Merson 55 Vice President 12/12/97
Carol B. Moerdyk(5) 47 Vice President 5/10/90
David A. New 47 Vice President 4/30/97
Terry M. Plummer 44 Vice President 9/28/95
J. Kirk Sullivan 62 Vice President 9/30/81
Gary M. Watson 50 Vice President 2/5/93
(1) Chairman of the Board, Boise Cascade Office Products Corporation
(2) Chief Executive Officer, Boise Cascade Office Products Corporation
(3) President, Boise Cascade Office Products Corporation
(4) Senior Vice President, Chief Financial Officer, Treasurer, and
Corporate Secretary, Boise Cascade Office Products Corporation
(5) Senior Vice President, U.S. Contract Operations, Boise Cascade Office
Products Corporation
All of the officers named above except for David A. New, who joined the
company in 1997, have been employees of Boise Cascade or one of its
subsidiaries for at least five years.
J. Ray Barbee, vice president, resigned from his position with Boise Cascade
effective August 13, 1997. H. John Leusner, vice president, retired from his
position with Boise Cascade effective December 31, 1997.
On February 10, 1998, it was announced that Peter G. Danis will retire from
his positions with Boise Cascade and BCOP on April 21, 1998. Mr. Danis will
continue to serve on BCOP's Board of Directors. It was also announced that
Christopher C. Milliken was elected senior vice president of Boise Cascade.
He will succeed Mr. Danis as president of BCOP, effective immediately, and as
chief executive officer on April 21, 1998. Mr. Milliken was also elected as a
director of BCOP by BCOP's Board of Directors.
Karen E. Gowland was elected vice president and corporate secretary in
September 1997. In 1981, Ms. Gowland received a B.S. degree in accounting
from the University of Idaho and in 1984, she received her J.D. from the
University of Idaho. Ms. Gowland joined Boise Cascade's legal department in
1984.
Richard W. Merson was elected vice president in December 1997. In 1965,
Mr. Merson received a B.S. degree in chemical engineering from the University
of Maryland. In 1989, he attended the University of Tennessee Executive
Development Program. Mr. Merson joined Boise Cascade in 1981. He has held
various positions with Boise Cascade's paper group.
David A. New was elected vice president in April 1997. In 1973, Mr. New
received a B.S. degree in forestry from Purdue University. Mr. New joined
Boise Cascade in 1997. Prior to joining Boise Cascade, Mr. New was a
technical manager for Fletcher Challenge Ltd.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning compensation of Boise Cascade's executive officers for
the year ended December 31, 1997, is presented under the caption "Compensation
Tables" in our proxy statement. This information is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Information concerning the security ownership of certain beneficial
owners as of December 31, 1997, is set forth under the caption
"Beneficial Ownership" in Boise Cascade's proxy statement and is
incorporated by reference.
(b) Information concerning security ownership of management as of
December 31, 1997, is set forth under the caption "Security
Ownership of Directors and Executive Officers" in Boise Cascade's
proxy statement and is incorporated by reference.
(c) Information concerning compliance with Section 16 of the Securities
and Exchange Act of 1934 is set forth under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in Boise
Cascade's proxy statement and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions during
1997 is set forth under the caption "Legal Services" in Boise Cascade's proxy
statement and is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Form 10-K for
Boise Cascade:
(1) Financial Statements
(i) The Income Statement for the three months ended
December 31, 1997, is incorporated by reference from
Boise Cascade's Fact Book for the fourth quarter of
1997.
(ii) The Financial Statements, the Notes to Financial
Statements, the Report of Independent Public
Accountants the Report of Management, and the
Quarterly Results of Operations listed below are
incorporated by reference from Boise Cascade's 1997
Annual Report.
- Balance Sheets as of December 31, 1997 and 1996.
- Statements of Income (Loss) for the years ended
December 31, 1997, 1996, and 1995.
- Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995.
- Statements of Shareholders' Equity for the years
ended December 31, 1997, 1996, and 1995.
- Notes to Financial Statements.
- Report of Independent Public Accountants.
- Report of Management.
- Quarterly Results of Operations.
(2) Financial Statement Schedules.
None required.
(3) Exhibits.
A list of the exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which immedi-
ately precedes such exhibits, and is incorporated by
reference.
(b) Reports on Form 8-K.
No Form 8-K's were filed during the fourth quarter of 1997. On
February 23, 1998, we filed a Form 8-K with the Securities and
Exchange Commission to file our financial information as of
December 31, 1997. The Form 8-K also reported the ratio of earnings
to fixed charges.
(c) Exhibits.
See Index to Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By George J. Harad
George J. Harad
Chairman of the Board and
Chief Executive Officer
Dated: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 26, 1998.
Signature Capacity
(i) Principal Executive Officer:
George J. Harad Chairman of the Board and
______________________________ Chief Executive Officer
George J. Harad
(ii) Principal Financial Officer:
Theodore Crumley Senior Vice President and
______________________________ Chief Financial Officer
Theodore Crumley
(iii) Principal Accounting Officer
Tom E. Carlile Vice President
______________________________ and Controller
Tom E. Carlile
(iv) Directors:
George J. Harad Paul J. Phoenix
______________________________ _________________________
George J. Harad Paul J. Phoenix
Anne L. Armstrong A. William Reynolds
______________________________ _________________________
Anne L. Armstrong A. William Reynolds
Philip J. Carroll Jane E. Shaw
______________________________ _________________________
Philip J. Carroll Jane E. Shaw
Robert K. Jaedicke Frank A. Shrontz
_____________________________ _________________________
Robert K. Jaedicke Frank A. Shrontz
Donald S. Macdonald Edson W. Spencer
______________________________ _________________________
Donald S. Macdonald Edson W. Spencer
Gary G. Michael Ward W. Woods, Jr.
______________________________ _________________________
Gary G. Michael Ward W. Woods, Jr.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we consent to the incorporation of
our report dated January 29, 1998, incorporated by reference in this Form 10-K
for the year ended December 31, 1997, into Boise Cascade Corporation's
previously filed post-effective amendment No. 1 to Form S-8 registration
statement (File No. 33-28595); post-effective amendment No. 1 to Form S-8
registration statement (File No. 33-21964); the registration statement on
Form S-8 (File No. 33-31642); the registration statement on Form S-8 (File
No. 33-45675); the registration statement on Form S-3 (File No. 33-54533); the
registration statement on Form S-3 (File No. 33-55396); the registration
statement on Form S-8 (File No. 33-62263); the registration statement on Form
S-8 (File No. 333-22707); and the pre-effective amendment No. 1 to Form S-3
registration statement (File No. 333-41033).
ARTHUR ANDERSEN LLP
Boise, Idaho
March 26, 1998
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed with the Annual Report
on Form 10-K for the
Year Ended December 31, 1997
Page
Number Description Number
_______ ___________________________________________________ _______
2 (1) Acquisition Agreement Among Boise Cascade Corporation,
Oxford Paper Company, Mead Oxford Corporation, and
The Mead Corporation, dated September 28, 1996 -
3.1 (2) Restated Certificate of Incorporation, as restated to date -
3.2 (3) Bylaws, as amended, September 29, 1994 -
4.1 (4) Trust Indenture between Boise Cascade Corporation and
Morgan Guaranty Trust Company of New York, Trustee,
dated October 1, 1985, as amended -
4.2 (5) 1997 Revolving Loan Agreement -- $600,000,000, dated
as of March 11, 1997, as amended September 25, 1997 -
4.3 (6) Shareholder Rights Plan, as amended September 25, 1990 -
4.4 (7) Renewed Rights Agreement dated as of September 25, 1997 -
9 Inapplicable -
10.1 (8) Key Executive Performance Plan for Executive Officers,
as amended through December 7, 1995 -
10.2 (8) 1986 Executive Officer Deferred Compensation Plan,
as amended through December 7, 1995 -
10.3 (9) 1983 Board of Directors Deferred Compensation Plan,
as amended through July 26, 1996 -
10.4 (8) 1982 Executive Officer Deferred Compensation Plan,
as amended through December 7, 1995 -
10.5 (10) Executive Officer Severance Pay Policy -
10.6 (8) Supplemental Early Retirement Plan for Executive Officers,
as amended through December 7, 1995 -
10.7 (11) Boise Cascade Corporation Supplemental Pension Plan,
effective as of January 1, 1994 -
10.8 (9) 1987 Board of Directors Deferred Compensation Plan,
as amended through July 26, 1996 -
10.9 1984 Key Executive Stock Option Plan and Form of Agreement,
as amended through December 12, 1997 0
10.10 (10) Executive Officer Group Life Insurance Plan description -
10.11 (8) Executive Officer 1980 Split-Dollar Life Insurance Plan,
as amended through December 7, 1995 -
10.12 (8) Forms of Agreements with Executive Officers, as amended
through December 7, 1995 -
10.13 (12) Supplemental Health Care Plan for Executive Officers,
as revised July 31, 1996 -
10.14 (10) Nonbusiness Use of Corporate Aircraft Policy, as amended -
10.15 (10) Executive Officer Financial Counseling Program description -
10.16 (10) Family Travel Program description -
10.17 (13) Form of Directors' Indemnification Agreement, as revised
June 1997 -
10.18 (12) Deferred Compensation and Benefits Trust, as amended and
restated as of December 13, 1996 -
10.19 (8) Director Stock Compensation Plan, as amended through
December 7, 1995 -
10.20 (8) Boise Cascade Corporation Director Stock Option Plan,
as amended through December 7, 1995 -
10.21 (8) 1995 Executive Officer Deferred Compensation Plan,
effective January 1, 1996 -
10.22 (8) 1995 Board of Directors Deferred Compensation Plan,
effective January 1, 1996 -
10.23 (8) Boise Cascade Corporation 1995 Split-Dollar Life Insurance
Plan, as amended through December 7, 1995 -
10.24 1997 and 1998 Performance Criteria for the Key Executive
Performance Plan for Executive Officers
11 Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
13.1 Incorporated sections of the Boise Cascade Corporation
1997 Annual Report
13.2 Incorporated sections of the Boise Cascade Corporation
Fact Book for the fourth quarter of 1997
16 Inapplicable -
18 Inapplicable -
21 Significant subsidiaries of the registrant
22 Inapplicable -
23 Consent of Arthur Andersen LLP (See page 21) -
24 Inapplicable -
27 Financial Data Schedule
28 Inapplicable -
99 Inapplicable -
(1) Exhibit 2 was filed under the same exhibit number in Boise Cascade's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
and is incorporated by reference.
(2) The Restated Certificate of Incorporation was filed as Exhibit 3 in
Boise Cascade's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, and is incorporated by reference.
(3) The Bylaws, as amended September 29, 1994, were filed as Exhibit 3 in
Boise Cascade's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, and are incorporated by reference.
(4) The Trust Indenture between Boise Cascade Corporation and Morgan
Guaranty Trust Company of New York, Trustee, dated October 1, 1985, as
amended, 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 between
Boise Cascade Corporation and Morgan Guaranty Trust Company of New
York, Trustee, dated October 1, 1985, 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 Boise Cascade's Current Report on Form 8-K filed on
August 10, 1990. Each of the documents referenced in this footnote is
incorporated by reference.
(5) Exhibit 4.2 was filed under the same exhibit number in Boise Cascade's
1996 Annual Report on Form 10-K. The Form of First Amendment to 1997
Revolving Credit Agreement dated as of September 25, 1997, was filed as
Exhibit 4.1 in Boise Cascade's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997. Each of the documents referenced in
this footnote is incorporated by reference.
(6) The Rights Agreement, dated as of December 13, 1988, as amended
September 25, 1990, was filed as Exhibit 1 in Boise Cascade's Form 8-K
filed with the Securities and Exchange Commission on September 25,
1990, and is incorporated by reference.
(7) The Renewed Rights Agreement dated as of September 25, 1997, was filed
as Exhibit 4.2 in Boise Cascade's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, and is incorporated by reference.
(8) Exhibits 10.1, 10.2, 10.4, 10.6, 10.11, 10.12, 10.19, 10.20, 10.21,
10.22, and 10.23 were filed under the same exhibit numbers in Boise
Cascade's 1995 Annual Report on Form 10-K and are incorporated by
reference.
(9) The 1983 Board of Directors Deferred Compensation Plan and 1987 Board of
Directors Deferred Compensation Plan were filed as Exhibits 10.1 and
10.2, respectively, in Boise Cascade's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, and are incorporated by reference.
(10) Exhibits 10.5, 10.10, 10.14, 10.15, and 10.16 were filed under the same
exhibit numbers in Boise Cascade's 1993 Annual Report on Form 10-K and
are incorporated by reference.
(11) Exhibit 10.7 was filed under the same exhibit number in Boise Cascade's
1994 Annual Report on Form 10-K and is incorporated by reference.
(12) Exhibits 10.13 and 10.18 were filed under the same exhibit numbers in
Boise Cascade's 1996 Annual Report on Form 10-K and are incorporated by
reference.
(13) The Form of Directors' Indemnification Agreement, as revised June 1997,
was filed as Exhibit 10 in Boise Cascade's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997, and is incorporated by reference.