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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, 1998
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 and Chicago
Stock Exchanges
American & Foreign Power Company Inc.
Debentures, 5% Series due 2030 New York Stock Exchange
Common Stock Purchase Rights New York and Chicago
Stock Exchanges
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 [x].
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 26, 1999: $1,751,052,982
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 26, 1999
Common Stock, $2.50 par value 56,371,927
Documents incorporated by reference
1. The registrant's annual report for the fiscal year ended December 31,
portions of which are incorporated by reference into Parts I,
and IV of this Form 10-K, and
2. Portions of the registrant's proxy statement relating to its 1999
annual meeting of shareholders to be held on April 15, 1999 ("Boise
Cascade's proxy statement"), are incorporated by reference into
Part III of this Form 10-K, and
3. The registrant's Income Statement from the fourth quarter fact book
for the three months ended December 31, 1998 is incorporated by
reference into Parts II and IV 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 terms "Boise Cascade" and "we" include Boise
Cascade Corporation and its consolidated subsidiaries and predecessors.
Boise Cascade Corporation is a major distributor of office products and building
materials and an integrated manufacturer and distributor of paper and wood
products. We are headquartered in Boise, Idaho, with domestic and international
operations. We own and manage over 2 million acres of timberland in the United
States 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.
Financial information pertaining to each of our industry segments and to each of
our geographic areas for the years 1998, 1997, and 1996 is presented in Note 9,
"Segment Information," of the Notes to Financial Statements of our 1998 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 we serve.
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 and Boise Cascade Office
Products with respect to working capital conform to those of the paper and
forest products industry and the office products industry and the common
business practices in the United States.
We engage in acquisition and divestiture discussions with other companies and
make acquisitions and divestitures 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 1998 Annual Report. This information is incorporated by reference.)
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,
1998, we owned 81.2% of BCOP's outstanding common stock. (See Note 6 of the
Notes to Financial Statements of our 1998 Annual Report. This information is
incorporated by reference.)
BCOP distributes a broad line of items for the office, including office
supplies, computer consumables, office 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 small-and medium-sized
offices in the United States, Australia, Belgium, Canada, France, 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 26, 1999, BCOP operated 68 distribution centers. During 1998, BCOP
completed acquisitions of six businesses. BCOP also operates three 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:
1998 1997 1996 1995 1994
______ ______ ______ ______ ______
Sales (millions) $3,067 $2,597 $1,986 $1,316 $ 909
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 1998, 1997, 1996, 1995, and 1994 were $861 million,
$913 million, $867 million, $977 million, and $997 million.
The following table sets forth annual practical capacities of our wood products
facilities as of December 31, 1998:
Number of
Mills Practical Capacity
_________ __________________
(millions)
Plywood and veneer(1)(2) 11 1,555 square feet (3/8" basis)
Lumber(2) 8 520 board feet
Particleboard 1 200 square feet (3/4" basis)
Oriented strand board(3) 1 400 square feet
Laminated veneer lumber(4) 2 14 cubic feet
(1) Number of mills and capacity excludes the Medford plywood plant which was
severely damaged by fire in 1998. A portion of the plant is being rebuilt.
(2) Includes our Yakima, Washington plywood plant and our Elgin, Oregon lumber
mill which will close in 1999.
(3) 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 and
account for it on the equity method. The 400 million square feet of annual
capacity represents 100% of the production volume. The plant began
production in 1997.
(4) A portion of LVL production is used in the manufacture of I-joists.
Boise Cascade operates 16 wholesale building materials distribution facilities.
In January 1999, we started up a facility in Chicago, Illinois. 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 31% in 1998) of the wood products required
by our building materials distribution facilities is provided by our
manufacturing facilities, and the balance is purchased from outside sources.
The following table sets forth sales volumes of our manufactured wood products
and sales dollars for building materials distribution business for the years
indicated:
1998 1997 1996 1995 1994
______ ______ ______ ______ ______
(millions)
Plywood (square feet -
3/8" basis) 1,815 1,836 1,873 1,865 1,894
Lumber (board feet) 572 657 692 711 754
Particleboard (square feet -
3/4" basis) 190 195 195 196 194
Oriented strand board (square
feet 3/8" basis)(1) 347 151 - - -
Laminated veneer lumber
(cubic feet) 3.8 2.7 2.2 1.8 1.4
I-joists (eq. lineal feet) 106 82 74 61 55
Building materials distribution
(sales dollars) $861 $ 732 $ 690 $ 598 $ 657
(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
1998, our mills processed approximately 1.0 billion board feet of sawtimber and
1.5 million cords of pulpwood; 35% of the sawtimber and 42% of the pulpwood were
harvested from our timber resources, and the balance was acquired from various
private and government sources. Approximately 67% of the 1.0 million bone-dry
units of hardwood and softwood chips consumed by our Northwest pulp and paper
mills in 1998 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 559,000 bone-dry
units of residual chips used in the South, 41% were provided by our Southern
wood products manufacturing facilities. Our timberlands are managed as part of
our building products and paper and paper products segments. The impact of our
timberlands on our results of operations is included in these segments.
At December 31, 1998, 1997, and 1996 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) Total(4)
___________________ ___________________ ___________________ ___________________
1998 1997 1996 1998 1997 1996 1998 1997 1996 1998 1997 1996
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
(thousands of acres)
Fee 1,333 1,331 1,328 308 308 308 418 418 419 2,059 2,057 2,055
Leases and contracts 44 51 51 - - - 285 284 290 329 335 341
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
1,377 1,382 1,379 308 308 308 703 702 709 2,388 2,392 2,396
Approximate % of
total fiber
requirements
available from:(5)
Owned and controlled
timber resources 29% 25% 21% 23% 23% 23% 39% 25% 25% 32% 25% 23%
Residuals from
processed purchased
logs 11 13 14 - - - 4 6 6 7 9 9
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total 40% 38% 35% 23% 23% 23% 43% 31% 31% 39% 34% 32%
(1) Principally sawtimber.
(2) Principally pulpwood.
(3) Sawtimber and pulpwood.
(4) On December 31, 1998, our inventory of merchantable sawtimber was
approximately 7.7 billion board feet, and our inventory of pulpwood was
approximately 8.0 million cords. At December 31, 1997, these inventories
were approximately 7.7 billion board feet and approximately 7.8 million
cords, and at December 31, 1996, these inventories were approximately
7.6 billion board feet and approximately 7.6 million cords.
(5) 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 204,000 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 and Environmental Issues" of the Financial Review of our
1998 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, 1998. 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 by-product 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 5.0 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.
The following table sets forth sales volumes of paper and paper products for the
years indicated:
1998 1997 1996 1995 1994
______ ______ ______ ______ ______
(thousands of short tons)
Paper
Uncoated free sheet 1,403 1,314 1,167 1,177 1,271
Containerboard 624 604 563 602 595
Newsprint 431 440 411 416 415
Market pulp 129 161 230 217 212
Discontinued grades - - 260 428 447
______ ______ ______ ______ ______
2,587 2,519 2,631 2,840 2,940
(millions of square feet)
Corrugated Containers 4,182 3,568 3,201 3,114 3,237
In November 1996, we completed the sale of our coated publication paper
business, consisting primarily of our pulp and paper mill in Rumford, Maine, and
667,000 acres of timberlands, to The Mead Corporation.
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. Beginning
January 1, 1994, we accounted for Rainy River on the equity method. In November
1995, we divested our remaining interest in Rainy River through Rainy River's
merger with Stone-Consolidated Corporation (now Abitibi-Consolidated).
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 "Timber
Supply and Environmental Issues" of the Financial Review of our 1998 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, 1998, we had 23,039 employees, 5,899 of whom were covered
under collective bargaining agreements. In 1998, we obtained a labor contract
extension effective until 2004 for our West Coast paper employees. In April
1999, contracts covering our International Falls, Minnesota, pulp and paper mill
are scheduled to expire.
IDENTIFICATION OF EXECUTIVE OFFICERS
Information with respect to our executive officers is set forth in "Item 10.
Directors and Executive Officers of the Registrant" of this Form 10-K and is
incorporated into this Part I by reference.
CAPITAL INVESTMENT
Information concerning our capital expenditures is presented under the caption
"Investing Activities" and in the table titled "1998 Capital Investment by
Business" of the Financial Review section of our 1998 Annual Report. This
information is incorporated by reference.
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 59% of total 1998 energy requirements, compared
with 57% in 1997 and 53% in 1996. The energy requirements fulfilled by
purchased sources in 1998 were as follows: natural gas, 28%; electricity, 12%;
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 26, 1999.
Information concerning timber resources is presented in Item 1 of this
Form 10-K.
OFFICE PRODUCTS
68 distribution centers located in Arizona, California (2), Colorado,
Connecticut, Delaware, Florida (3), Georgia, Hawaii, Idaho, Illinois, Indiana,
Kentucky, Maine, Maryland, Massachusetts, Michigan (3), Minnesota, Missouri (2),
Nevada (2), New Mexico, New York (2), North Carolina, Ohio (3), Oklahoma, Oregon
(2), Pennsylvania (2), Tennessee (2), Texas (2), Utah, Vermont, Virginia,
Washington (2), Wisconsin, Australia (7), Canada (8), France (2), Spain, and the
United Kingdom (2).
Approximately 73 retail outlets located in Hawaii and Canada.
BUILDING PRODUCTS
8 sawmills located in Alabama, Idaho, Oregon (3), and Washington (3).
11 plywood and veneer plants located in Idaho, Louisiana (2), Oregon (6), and
Washington (2). Includes the Medford, Oregon plywood plant which was severely
damaged by fire in 1998. A portion of the plant is being rebuilt.
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.
16 wholesale building materials units located in Arizona, Colorado (2), Idaho
(2), Illinois, Minnesota, Montana, New Mexico, Oklahoma, Texas, Utah, and
Washington (4).
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).
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, materially affect our financial condition or operations.
In December 1998, the Maine Environmental Protection Agency issued Notices of
Violation for air and water permit exceedances at the Rumford, Maine, pulp and
paper mill for the period 1994 until the mill was sold in 1996. We are
investigating the validity of these allegations. Should the allegations prove
to be valid, we do not expect the penalties to exceed $150,000.
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 paragraphs, 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 and Chicago Stock Exchanges. In
January 1999, we voluntarily delisted our common stock and other securities from
the Pacific Exchange due to the lack of trading activity. 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 Note 11, "Quarterly Results of Operations,"
of the Notes to Financial Statements in our 1998 Annual Report. Additional
information concerning dividends on common stock is presented under the caption
"Financing Activities" of the Financial Review section of our 1998 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 1998
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 1998 Annual Report. The information under these captions is
incorporated by reference.
SHAREHOLDER RIGHTS PLAN
The company has had a shareholder rights plan since January 1986. The current
plan took effect in December 1998. At that time, the rights under the previous
plan expired and we distributed to our common stockholders one new 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 2008. 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:
1998(1) 1997 1996(2) 1995(3) 1994(4)
______ ______ ______ ______ ______
(expressed in millions, except
per-common-share amounts)
Assets
Current assets $1,368 $1,354 $1,355 $1,313 $ 918
Property and equipment, net 2,571 2,630 2,554 2,604 2,494
Other 1,028 986 802 739 882
______ ______ ______ ______ ______
$4,967 $4,970 $4,711 $4,656 $4,294
Liabilities and
Shareholders' Equity
Current liabilities $1,130 $ 894 $ 933 $ 770 $ 658
Long-term debt, less
current portion 1,578 1,726 1,330 1,365 1,625
Guarantee of ESOP debt 156 177 196 214 231
Minority interest 117 105 82 68 -
Other 558 455 490 545 415
Shareholders' equity 1,428 1,613 1,680 1,694 1,365
______ ______ ______ ______ ______
$4,967 $4,970 $4,711 $4,656 $4,294
Net sales $6,162 $5,494 $5,108 $5,074 $4,140
Net income (loss) before
cumulative effect of
accounting change $ (28) $ (30) $ 9 $ 352 $ (63)
Cumulative effect of
accounting change, net (9) - - - -
______ ______ ______ ______ ______
Net income (loss) $ (37) $ (30) $ 9 $ 352 $ (63)
Net income (loss) per
common share
Basic before cumulative
effect of accounting
change $ (.85) $(1.19) $ (.63) $ 6.62 $(3.08)
Cumulative effect of
accounting change (.15) - - - -
______ ______ ______ ______ ______
Basic (5) $(1.00) $(1.19) $ (.63) $ 6.62 $(3.08)
Net income (loss) per
common share
Diluted before cumulative
effect of accounting
change $ (.85) $(1.19) $ (.63) $ 5.39 $(3.08)
Cumulative effect of
accounting change (.15) - - - -
______ ______ ______ ______ ______
Diluted(5) $(1.00) $(1.19) $ (.63) $ 5.39 $(3.08)
Cash dividends declared
per common share $ .60 $ .60 $ .60 $ .60 $ .60
(1) 1998 includes a pretax charge of $42,382,000 for a company wide cost-
reduction initiative and the restructuring of certain operations.
1998 includes a pretax gain of $45,000,000 related to an insurance
settlement for our Medford, Oregon, plywood plant which was severely
damaged by fire.
1998 includes a pretax charge of $61,900,000 for the restructuring of our
wood products manufacturing business and a pretax charge of $19,000,000
for the revaluation of certain paper-related assets.
1998 includes a net of tax charge of $8,590,000 for the adoption of AICPA
Statement of position 98-5, "Reporting on the Costs of Start-Up
Activities."
1998 net loss per common share includes a negative seven cents related to
the redemption of our Series F preferred stock.
Excluding these items, net income for 1998 would have been $20,744,000, or
9 cents per diluted share.
(2) 1996 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.
1996 includes $9,955,000 before taxes for the write-down of certain paper
assets.
1996 includes a gain of $2,880,000 as a result of shares issued by BCOP
for stock options and to effect various acquisitions.
Excluding these items, the net loss for 1996 would have been $5,450,000,
or 93 cents per diluted share.
(3) 1995 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."
1995 includes a pretax gain of $68,900,000 as a result of the sale of our
remaining interest in Rainy River.
1995 includes a gain of $6,160,000 as a result of shares issued by BCOP to
effect various acquisitions.
1995 includes a gain of $60,000,000 from the BCOP initial public offering.
1995 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.
1995 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.
Excluding these items, net income for 1995 would have been $336,800,000,
or $5.14 per diluted share.
(4) 1994 includes a charge of $10,200,000 before taxes as a result of the sale
of securities by Rainy River. It also includes the recognition of a
noncash charge of $20,200,000 for U.S. taxes on previously undistributed
Canadian earnings.
Excluding these items, the net loss for 1994 would have been $35,600,000,
or $2.37 per diluted share.
(5) The computation of diluted net loss per common share was antidilutive in
the years 1998, 1997, 1996, and 1994; 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 1998 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 the Financial Review section of our 1998 Annual Report 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 1998 Annual
Report and are incorporated by reference.
The consolidated income statement for the three months ended December 31, 1998,
is presented in our Fact Book for the fourth quarter of 1998 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
The directors and nominees for directors are presented under the caption "Board
of Directors" in our proxy statement. This information is incorporated by
reference.
Executive Officers as of February 26, 1999
Date First
Elected as
Name Age Position or Office an Officer
________________________ ___ ____________________________ ________
George J. Harad(1) 54 Chairman of the Board and
Chief Executive Officer 5/11/82
Theodore Crumley 53 Senior Vice President and
Chief Financial Officer 5/10/90
A. Ben Groce 57 Senior Vice President 2/8/91
John W. Holleran 44 Senior Vice President and
General Counsel 7/30/91
Terry R. Lock 57 Senior Vice President 2/17/77
Christopher C. Milliken(2) 53 Senior Vice President 2/3/95
Richard B. Parrish 60 Senior Vice President 2/27/80
N. David Spence 63 Senior Vice President 12/8/87
A. James Balkins III(3) 46 Vice President 9/5/91
Stanley R. Bell 52 Vice President 9/25/90
John C. Bender 59 Vice President 2/13/90
Charles D. Blencke 55 Vice President 12/11/92
Tom E. Carlile 47 Vice President and Controller 2/4/94
Graham L. Covington 56 Vice President 9/24/98
Karen E. Gowland 40 Vice President and
Corporate Secretary 9/25/97
J. Michael Gwartney 58 Vice President 4/25/89
Vincent T. Hannity 54 Vice President 7/26/96
Guy G. Hurlbutt 56 Vice President 7/31/98
Irving Littman 58 Vice President and Treasurer 11/1/84
Jeffrey G. Lowe 57 Vice President 12/11/92
Richard W. Merson 56 Vice President 12/12/97
Carol B. Moerdyk(4) 48 Vice President 5/10/90
David A. New 48 Vice President 4/30/97
(1) Chairman of the Board, Boise Cascade Office Products Corporation
(2) Chief Executive Officer, Boise Cascade Office Products Corporation
(3) Senior Vice President, Chief Financial Officer, and Treasurer, Boise
Cascade Office Products Corporation
(4) Senior Vice President, North American and Australian 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.
Terry M. Plummer, vice president, resigned from his position with Boise Cascade
effective October 31, 1998. J. Kirk Sullivan, vice president, retired from his
position with Boise Cascade effective July 1, 1998. Gary M. Watson, vice
president, resigned from his position with Boise Cascade effective February 26,
1999. Terry R. Lock, senior vice president, and J. Michael Gwartney, vice
president, will retire from their positions with Boise Cascade on March 31,
1999.
Graham L. Covington was elected vice president in September 1998. Mr. Covington
received a bachelor's degree in English from Williams College and a MBA from the
University of California at Berkeley. Mr. Covington joined Boise Cascade in
1972 as a Paper Division sales representative and held several managerial
positions in the division's sales and marketing organization before being named
director of sales and marketing.
Guy G. Hurlbutt was elected vice president in July 1998. Mr. Hurlbutt received
a bachelor's degree in forestry from the University of Georgia, a law degree
from the University of South Carolina, and a master's degree in environmental
law from George Washington University. Mr. Hurlbutt joined Boise Cascade in
1984 as an associate general counsel. He became director of environmental
affairs in August 1997 and assumed responsibility for public policy in June
1998.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning compensation of Boise Cascade's executive officers for
the year ended December 31, 1998, 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, 1998, is set forth under the caption
"Ownership of More Than 5% of Boise Cascade Stock" in Boise Cascade's
proxy statement and is incorporated by reference.
(b) Information concerning security ownership of management as of
December 31, 1998, is set forth under the caption "Stock Ownership -
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
1998 is set forth under the caption "Business Relationships with Directors" 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, 1998, is incorporated by reference from
Boise Cascade's Fact Book for the fourth quarter of 1998.
(ii) The Financial Statements, the Notes to Financial
Statements, and the Report of Independent Public
Accountants and the Report of Management are incorporated
by reference from Boise Cascade's 1998 Annual Report.
- Balance Sheets as of December 31, 1998 and 1997.
- Statements of Income (Loss) for the years ended
December 31, 1998, 1997, and 1996.
- Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996.
- Statements of Shareholders' Equity for the years
ended December 31, 1998, 1997, and 1996.
- Notes to Financial Statements.
- Report of Independent Public Accountants.
- Report of Management.
(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
immediately precedes such exhibits, and is incorporated by
reference.
(b) Reports on Form 8-K.
On December 15, 1998, we filed a Form 8-K with the Securities and
Exchange Commission announcing a company-wide cost-reduction
initiative and the restructuring of certain operations. No other
Form 8-K's were filed during the fourth quarter of 1998.
(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
/s/
By George J. Harad
George J. Harad
Chairman of the Board and
Chief Executive Officer
Dated: March 11, 1999
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 11, 1999.
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 Gary G. Michael
______________________________ ___________________________
George J. Harad Gary G. Michael
Anne L. Armstrong Paul J. Phoenix
______________________________ ___________________________
Anne L. Armstrong Paul J. Phoenix
Philip J. Carroll A. William Reynolds
______________________________ ___________________________
Philip J. Carroll A. William Reynolds
Rakesh Gangwal Jane E. Shaw
______________________________ ___________________________
Rakesh Gangwal Jane E. Shaw
Edward E. Hagenlocker Frank A. Shrontz
______________________________ ___________________________
Edward E. Hagenlocker Frank A. Shrontz
Robert K. Jaedicke Edson W. Spencer
______________________________ ___________________________
Robert K. Jaedicke Edson W. Spencer
Francesca Ruiz de Luzuriaga Ward W. Woods, Jr.
______________________________ ___________________________
Francesca Ruiz de Luzuriaga Ward W. Woods, Jr.
Donald S. Macdonald
______________________________
Donald S. Macdonald
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we consent to the incorporation of our report
dated January 29, 1999, incorporated by reference in this Form 10-K for the year
ended December 31, 1998, 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. 33-55396); the registration statement on Form S-
8 (File No. 33-62263); the registration statement on Form S-8 (File No. 333-
59273); and the pre-effective amendment No. 1 to Form S-3 registration statement
(File No. 333-41033).
ARTHUR ANDERSEN LLP
Boise, Idaho
March 11, 1999
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed with the Annual Report
on Form 10-K for the
Year Ended December 31, 1998
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 Bylaws, as amended, December 11, 1998
4.1 (3) Trust Indenture between Boise Cascade Corporation and
Morgan Guaranty Trust Company of New York, Trustee,
dated October 1, 1985, as amended -
4.2 (4) 1997 Revolving Loan Agreement -- $600,000,000, dated
as of March 11, 1997, as amended September 25, 1997 -
4.3 (5) Shareholder Rights Plan, as amended September 25, 1990 -
4.4 (6) Renewed Rights Agreement dated as of September 25, 1997 -
9 Inapplicable -
10.1 Key Executive Performance Plan for Executive Officers,
as amended through December 10, 1998
10.2 (7) 1986 Executive Officer Deferred Compensation Plan,
as amended through December 7, 1995 -
10.3 (8) 1983 Board of Directors Deferred Compensation Plan,
as amended through July 26, 1996 -
10.4 (7) 1982 Executive Officer Deferred Compensation Plan,
as amended through December 7, 1995 -
10.5 (9) Executive Officer Severance Pay Policy -
10.6 (10) Supplemental Early Retirement Plan for Executive
Officers, as amended through July 30, 1998 -
10.7 Boise Cascade Corporation Supplemental Pension Plan,
as amended through February 11, 1999
10.8 (8) 1987 Board of Directors Deferred Compensation Plan,
as amended through July 26, 1996 -
10.9 (10) 1984 Key Executive Stock Option Plan, as amended through
July 31, 1998
10.10 (9) Executive Officer Group Life Insurance Plan description
10.11 (7) Executive Officer 1980 Split-Dollar Life Insurance Plan,
as amended through December 7, 1995 -
10.12 Forms of Agreements with Executive Officers, as amended
through February 11, 1999
10.13 (11) Supplemental Health Care Plan for Executive Officers,
as revised July 31, 1996 -
10.14 (9) Nonbusiness Use of Corporate Aircraft Policy, as amended -
10.15 (10) Executive Officer Financial Counseling Program
description, as amended through July 30, 1998 -
10.16 (9) Family Travel Program description -
10.17 (12) Form of Directors' Indemnification Agreement, as revised
June 1997 -
10.18 (11) Deferred Compensation and Benefits Trust, as amended and
restated as of December 13, 1996 -
10.19 (7) Director Stock Compensation Plan, as amended through
December 7, 1995 -
10.20 (10) Boise Cascade Corporation Director Stock Option Plan,
as amended through September 23, 1998 -
10.21 1995 Executive Officer Deferred Compensation Plan,
as amended through December 10, 1998
10.22 (7) 1995 Board of Directors Deferred Compensation Plan,
effective January 1, 1996 -
10.23 (7) Boise Cascade Corporation 1995 Split-Dollar Life
Insurance Plan, as amended through December 7, 1995 -
10.24 1998 and 1999 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
1998 Annual Report
13.2 Incorporated sections of the Boise Cascade Corporation
Fact Book for the fourth quarter of 1998
16 Inapplicable -
18 Inapplicable -
21 Significant subsidiaries of the registrant
22 Inapplicable -
23 Consent of Arthur Andersen LLP (See page __) -
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 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.
(4) 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.
(5) 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.
(6) 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.
(7) Exhibits 10.2, 10.4, 10.11, 10.19, 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.
(8) 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.
(9) Exhibits 10.5, 10.10, 10.14, 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.
(10) The supplemental Early Retirement Plan for Executive Officers, 1984
Key Executive Stock Option Plan, Executive Officer Financial
Counseling Program description, and Boise Cascade Corporation Director
Stock Option Plan were filed as Exhibits 10.1, 10.2, 10.3, and 10.4,
respectively, in Boise Cascade's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, and are incorporated by reference.
(11) 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.
(12) 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.