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 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
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
Boise Cascade Corporation 7% Convertible
Subordinated Debentures due 2016 New York Stock Exchange
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
$1.79 Depositary Shares, evidenced by
Depositary Receipts for Series E,
Conversion Preferred Stock New York Stock Exchange
$2.35 Depositary Shares, evidenced by
Depositary Receipts for Series F,
Cumulative Preferred Stock New York Stock Exchange
$1.58 Depositary Shares, evidenced by
Depositary Receipts for Series G,
Conversion Preferred Stock New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
Conversion Preferred Stock, Series E
Cumulative Preferred Stock, Series F
Conversion Preferred Stock, Series G
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 28, 1995: $2,026,251,617
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, 1995
Common Stock, $2.50 par value 47,003,394
Documents incorporated by reference
Listed hereunder are certain documents any portions of which are incorporated
by reference and the Parts of this Form 10-K into which such portions are
incorporated:
1. The registrant's annual report for the fiscal year ended December 31,
1994, portions of which are incorporated by reference into Parts I,
II, and IV of this Form 10-K, and
2. The registrant's definitive proxy statement dated March 7, 1995, for
use in connection with the annual meeting of shareholders to be held
on April 21, 1995, portions of which are incorporated by reference
into Part III of this Form 10-K.
BOISE CASCADE CORPORATION
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........................................
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 "Company" includes Boise
Cascade Corporation and its consolidated subsidiaries and predecessors.
The terms "Boise Cascade" and "Company" refer, unless the context otherwise
requires, to Boise Cascade Corporation and its consolidated subsidiaries.
Boise Cascade Corporation is an integrated paper and forest products
company headquartered in Boise, Idaho, with operations located throughout
the United States. The Company manufactures and distributes paper and
paper products, office products, and building products and owns and manages
timberland to support these operations. The Company was 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,
its name was changed to its present form.
The Company is a participant with equity affiliates in connection
with certain of its businesses. The Company's principal equity affiliate
is Rainy River Forest Products Inc. ("Rainy River"), which is managed
independently by Rainy River. The Company holds approximately a 60% equity
interest and 49% voting interest. Rainy River is accounted for on the
equity method. (See Note 8 of the Notes to Financial Statements of the
Company's 1994 Annual Report. This information is incorporated herein by
this reference.)
Financial information pertaining to each of the Company's industry
segments and to each of its geographic areas for the years 1994, 1993, and
1992 is presented in Note 9, "Segment Information," of the Notes to
Financial Statements of the Company's 1994 Annual Report and is
incorporated herein by this reference.
The Company's 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. The Company's 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 the Company's building products businesses. In addition, energy and
some operating costs may increase at facilities affected by cold weather.
However, seasonal influences are generally not significant.
The management practices followed by the Company with respect to
working capital conform to those of the paper and forest products industry
and common business practice in the United States.
The Company occasionally engages in acquisition discussions with
other companies and makes acquisitions from time to time. It is the
Company's policy to review its operations periodically and to dispose of
assets which fail to meet its criteria for return on investment or which
cease to warrant retention for other reasons. (See Notes 1 and 8 of the
Notes to Financial Statements of the Company's 1994 Annual Report. This
information is incorporated herein by this reference.)
Paper and Paper Products
The products manufactured by the Company, made both from virgin and
recycled fibers, include uncoated business, printing, forms, and converting
papers; coated white papers for magazines, catalogs, and direct-mail
advertising; newsprint; containerboard; and market pulp. These products
are available for sale to the related paper markets, and certain of these
products are sold through the Company's office products distribution
operations. In addition, containerboard is used by the Company in the
manufacture of corrugated containers.
The Company is a major North American pulp and paper producer with 7
paper mills. The total annual practical capacity of the mills was
approximately 3.2 million tons at December 31, 1994. The Company's
products are sold to distributors and industrial customers primarily by the
Company's own sales personnel.
The Company's paper mills are supplied with pulp principally from the
Company's own integrated pulp mills. Pulp mills in the Northwest manu-
facture chemical pulp primarily from wood waste produced as a byproduct of
wood products manufacturing. Pulp mills in the Midwest, Northeast, and
South manufacture chemical, thermomechanical, and groundwood pulp mainly
from pulpwood logs and, to some extent, from purchased wood waste. Wood
waste is provided by Company sawmills and plywood mills in the Northwest
and, to a lesser extent, in the South, and the remainder is purchased from
outside sources.
In October 1994, the Company's Canadian subsidiary, Rainy River, sold
a portion of its equity and certain debt securities to the public. Boise
Cascade holds approximately a 60% equity interest and 49% voting interest.
Rainy River was deconsolidated as of January 1, 1994, and is accounted for
on the equity method.
Rainy River owns and operates a newsprint mill in Kenora, Ontario,
Canada, an uncoated groundwood paper mill in Fort Frances, Ontario, Canada,
and a newsprint mill in West Tacoma, Washington, which was purchased from
the Company. Rainy River and the Company have an agreement whereby Rainy
River will purchase from the Company, at a brokerage discount for resale to
the customers of Rainy River, the newsprint produced at the Company's mill
located at DeRidder, Louisiana.
The Company currently manufactures corrugated containers at 7 plants,
which have annual practical capacity of approximately 3.9 billion square
feet. The containers produced at the Company's plants are used to package
fresh fruit and vegetables, processed food, beverages, and many other
industrial and consumer products. The Company sells its corrugated
containers primarily through its own sales personnel. The Company is
building a full-line corrugated container plant in Utah, which is scheduled
for completion in early 1996 and will replace an existing plant.
The following table sets forth sales volumes of paper and paper
products for the years indicated:
1994 1993 1992 1991 1990
Paper (thousands of short tons)
Uncoated free sheet papers 1,271 1,215 1,110 1,050 934
Containerboard 595 559 560 540 529
Coated papers 447 418 397 371 365
Newsprint(1) 415 860 831 838 873
Market pulp 212 205 260 284 307
Uncoated groundwood papers(1) - 299 319 319 314
______ ______ ______ ______ ______
2,940 3,556 3,477 3,402 3,322
Rainy River
Newsprint 450
Uncoated groundwood 318
Market pulp 115
______
883
(millions of square feet)
Corrugated containers(2) 3,237 2,961 4,715 6,478 7,087
(1) Indicated line items for 1994 exclude Rainy River, which is reported
on the equity method as of January 1, 1994.
(2) On June 30, 1992, the Company sold 11 of its corrugated container
plants.
Office Products
The Company distributes a broad line of items for the office,
including office and computer supplies, office and computer furniture, and
photocopy paper. All of the products sold by this segment are purchased
from other manufacturers or from industry wholesalers, except for copier
and similar papers, which are sourced primarily from the Company's paper
operations. The Company sells these office products directly to corporate,
government, and other offices nationwide, as well as to individuals, home
offices, and small and medium-sized business offices.
Customers with multisite locations across the country are often
serviced via national contracts that provide for consistent pricing and
product offerings and, if desired, summary billings, usage reporting, and
other special services. The Company operates 26 contract stationer
distribution centers, including a center in Colorado that was started up in
1994 and a center in Georgia that was acquired during 1994. Late in 1994
and in early 1995, the Company acquired distribution businesses in Florida
and Ohio which will be consolidated into existing locations. The Company
also acquired the direct-mail distribution business of The Reliable
Corporation in 1994, including four direct-mail distribution centers
located in Delaware, Georgia, Illinois, and Nevada. The Company's
distribution centers are located across the United States to provide next-
day delivery to substantially all domestic locations. The Company also
operates 4 retail office supply stores in Hawaii. In December 1994, the
Company announced plans to sell a minority interest in its office products
distribution business through an initial public offering of equity
securities. A registration statement on Form S-1 for Boise Cascade Office
Products Corporation was filed with the Securities and Exchange Commission
on February 22, 1995.
The following table sets forth sales dollars for the office products
distribution business for the years indicated:
1994 1993 1992 1991 1990
Sales (millions) $ 909 $ 683 $ 672(1) $1,039 $1,079
(1) Early in 1992, the Company sold essentially all of its wholesale
office products distribution operations, enabling the Company to
focus on the consumer channel on a national basis. In 1991, sales of
the 13 distribution centers and 1 minidistribution center that
comprised the wholesale operations were approximately $400 million.
Building Products
The Company is a major producer of lumber, plywood, and particle-
board, together with a variety of specialty wood products. The Company
also manufactures 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
its production is sold to independent wholesalers and dealers and through
the Company's own wholesale building materials distribution outlets. The
Company's wood products are used primarily in housing, industrial
construction, and a variety of manufactured products. Wood products
manufacturing trade sales for 1994, 1993, and 1992 were $933 million,
$879 million, and $761 million.
The following table sets forth annual practical capacities of the
Company's wood products facilities as of December 31, 1994:
Number of
Mills(1) Practical Capacity
(millions)
Plywood 12 1,940 square feet (3/8" basis)
Lumber 12 760 board feet
Particleboard 1 195 square feet (3/4" basis)
Engineered Wood Products 1 4 cubic feet
(1) The Company closed a sawmill in Oregon during 1994 and will close a
sawmill in Idaho in early 1995.
The Company operates 9 wholesale building materials distribution
facilities and 2 satellite locations. These operations market a wide range
of building materials, including lumber, plywood, particleboard, engineered
wood products, fiberboard siding, roofing, gypsum board, insulation,
ceiling tile, paneling, molding, windows, 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 38% in 1994) of the wood products
required by the Company's Building Materials Distribution Division are
provided by the Company's manufacturing facilities, and the balance are
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:
1994 1993 1992 1991 1990
(millions)
Plywood (square feet - 3/8" basis) 1,894 1,760 1,788 1,621 1,682
Lumber (board feet) 754 760 805 815 782
Particleboard (square feet - 3/4" basis) 194 182 186 182 179
Engineered wood products
(sales dollars) $ 82 $71 $38 $13 $ 1
Building materials distribution
(sales dollars) $657 $590 $447 $328 $289
Timber Resources
Boise Cascade owns or controls approximately 3 million acres of
timberland in North America. The amount of timber harvested each year by
the Company from its timber resources, compared with the amount it
purchases from outside sources, varies according to the price and supply of
timber for sale on the open market and according to what the Company deems
to be in the interest of sound management of its timberlands. During 1994,
the Company's mills processed approximately 1.2 billion board feet of
sawtimber and 1.9 million cords of pulpwood; 39% of the sawtimber and 43%
of the pulpwood were harvested from the Company's timber resources, and the
balance was acquired from various private and government sources.
Approximately 79% of the 1.1 million bone-dry tons of wood chips consumed
by the Company's Northwest pulp and paper mills in 1994 were provided from
the Company's Northwest wood products manufacturing facilities as residuals
from the processing of solid wood products and from a whole-log chipping
facility. Of the 727,000 bone-dry tons of residual chips used in the
South, 47% were provided by the Company's Southern wood products manu-
facturing facilities.
At December 31, 1994, the acreages of owned or controlled timber
resources by geographic area and the approximate percentages of total fiber
requirements available from the Company's respective timber resources in
these areas and from the residuals from processed purchased logs are shown
in the table below. Timber resources do not include approximately
3 million acres of Canadian provincial timberland under long-term lease to
Rainy River.
New
Northwest Midwest England South Total
(thousands of acres)
Fee 1,318 308 665 419 2,710
Leases and contracts 46 - - 291 337
______ ______ ______ ______ ______
Total 1,364(1) 308(2) 665(2) 710(3) 3,047(4)
Approximate percentage of total
fiber requirements available
from: (5)
Owned and controlled timber
resources 22% 23% 55% 26% 27%
Residuals from processed
purchased logs 16 - - 9 10
______ ______ ______ ______ ______
Total 38% 23% 55% 35% 37%
(1) Principally sawtimber.
(2) Principally pulpwood.
(3) Sawtimber and pulpwood.
(4) On December 31, 1994, the Company's inventory of merchantable
sawtimber was approximately 9 billion board feet, and its inventory
of pulpwood was approximately 15.8 million cords.
(5) Assumes harvesting of Company-owned and controlled timber resources
on a sustained timber yield basis and operation of the Company's
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 the Company 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, the Company has an option to purchase
approximately 203,000 acres of the timberland it currently has under leases
and contracts in the South.
The Company seeks to maximize the utilization of its 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 continually improved
through a variety of methods, including genetic research and
computerization.
The Company assumes substantially all risks of loss from fire and
other casualties on all the standing timber it owns, as do most owners of
timber tracts in the U.S.
Additional information pertaining to the Company's timber resources
is presented under the caption "Timber Supply" of the Financial Review of
the Company's 1994 Annual Report. This information is incorporated herein
by this reference.
Competition
The markets served by the Company are highly competitive, with
various substantial companies operating in each. The Company competes in
its markets principally through price, service, quality, and value-added
products and services.
Environmental Issues
The Company's discussion of environmental issues is presented under
the caption "Environmental Issues" of the Financial Review of the Company's
1994 Annual Report. This information is incorporated herein by this
reference.
Employees
As of December 31, 1994, the Company and its subsidiaries had 16,618
employees, 7,610 of whom were covered under collective bargaining
agreements. During 1994, the Company and its union employees at the
Company's four Pacific Northwest pulp and paper facilities and one
converting operation agreed to six-year labor contracts. The new contracts
expire in 1999 and replace contracts that expired in the spring of 1993.
The Company and the union representing the Company's employees at its
Northwest wood products facilities ratified new four-year contracts which
will expire in 1998. An early settlement was reached with union employees
at the Company's DeRidder, Louisiana, pulp and paper mill. The new
agreement is for a five-year term expiring in 2000. The new agreement
replaces a contract that would have expired in February 1995.
Among the negotiations scheduled for 1995 are labor contracts
covering the Company's pulp and paper facilities in Jackson, Alabama, and
Rumford, Maine.
Identification of Executive Officers
The information with respect to the executive officers of the
registrant, which is set forth in Item 10 of this annual report on
Form 10-K, is incorporated into this Part I by this reference.
Capital Investment
The Company's capital expenditures in 1994 were $272 million,
compared with $221 million in 1993 and $283 million in 1992. Details of
1994 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 $ 7 $ 43 $ - $ 89 $ 139
Office products 84 1 - 1 86
Building products 10 7 - 18 35
Timber and timberlands - - 5 - 5
Other 3 - - 4 7
_____ _____ _____ _____ _____
Total $ 104 $ 51 $ 5 $ 112 $ 272
(1) Quality and efficiency projects include quality improvements,
modernization, energy, and cost-saving projects.
The level of capital investment in 1995 is expected to be about
$400 million, excluding acquisitions. The 1995 capital budget will be
allocated to cost-saving, modernization, expansion, replacement,
maintenance, environmental, and safety projects.
Energy
The paper and paper products segment is the primary energy user of
the Company. Self-generated energy sources in this segment, such as wood
wastes, pulping liquors, and hydroelectric power, provided 66% of total
1994 energy requirements, compared with 55% in 1993 and 54% in 1992. The
energy requirements fulfilled by purchased sources in 1994 were as follows:
natural gas, 52%; electricity, 28%; residual fuel oil, 10%; and other
sources, 10%.
Item 2. Properties
The Company owns substantially all of its operating facilities.
Regular maintenance, renewal, and new construction programs have preserved
the operating suitability and adequacy of those properties.
Following is a list of the Company's facilities by segment as of
December 31, 1994. Information concerning timber resources is presented in
Item 1 of this Form 10-K.
Paper and Paper Products
7 pulp and paper mills located in Alabama, Louisiana, Maine, Minnesota,
Oregon, and Washington (2).
6 regional service centers located in California, Georgia, Illinois,
New Jersey, Oregon, and Texas.
1 converting facility located in Oregon.
7 corrugated container plants located in Idaho (2), Nevada, Oregon, Utah,
and Washington (2).
Office Products
26 contract stationer distribution centers located in Arizona,
California (2), Colorado, Connecticut, Florida, Georgia, Hawaii (4),
Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New
Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas (2), Utah, and
Washington.
4 direct-mail distribution facilities located in Delaware, Georgia,
Illinois, and Nevada.
4 retail outlets located in Hawaii.
Building Products
12 sawmills located in Alabama, Idaho (3), Louisiana, Oregon (4), and
Washington (3). The Company has announced the closure of a sawmill in
Idaho in early 1995.
12 plywood and veneer plants located in Idaho, Louisiana (2), Oregon (7),
and Washington (2).
1 particleboard plant located in Oregon.
1 engineered wood products plant located in Oregon.
1 wood beam plant located in Idaho.
9 wholesale building materials units located in Arizona, Colorado,
Idaho (2), Montana, Utah, and Washington (3).
2 satellite building materials facilities located in Colorado and
Washington.
Rainy River -- Unconsolidated Equity Affiliate
3 pulp and paper mills located in Washington and Ontario, Canada (2).
Item 3. Legal Proceedings
The Company has been notified that it is a "potentially responsible
party" under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) or similar federal and state laws with respect to a
number of sites where hazardous substances or other contaminants are
located. In 1993, the Company filed a lawsuit in State District Court in
Boise, Idaho, against its current and previous insurance carriers seeking
insurance coverage for response costs the Company has incurred or may incur
at these sites. The Company amended this complaint in January 1994 and
again in December 1994. The Company cannot predict with certainty the
total response and remedial costs, the Company's share of the total costs,
the extent to which contributions will be available from other parties, the
amount of time necessary to complete the cleanups, or the availability of
insurance coverage. However, based on the Company's investigations, the
Company's experience with respect to cleanup of hazardous substances, the
fact that expenditures will, in many cases, be incurred over extended
periods of time, and the number of solvent potentially responsible parties,
the Company does not presently believe that the known actual and potential
response costs will, in the aggregate, have a material adverse effect on
its financial condition or the results of operations.
As previously reported in the Company's report on Form 10-K for the
year ended December 31, 1993, the Company has been involved in an action
with the Maine Department of Environmental Protection to resolve alleged
violations of the state's environmental laws at the Company's facility in
Rumford, Maine. On June 3, 1994, the Company entered into a Consent
Agreement with the Maine Department of Environmental Protection, resolving
alleged violations of air emissions, water discharges, and hazardous waste
laws at the Rumford facility between 1991 and January 1, 1994. The Company
has agreed to settle the matter by, among other items, paying a $316,655
penalty.
The Company is involved in other litigation and administrative
proceedings primarily arising in the normal course of its business. In the
opinion of management, the Company's recovery, if any, or the Company's
liability, if any, under any pending litigation or administrative
proceeding, including that described in the preceding paragraphs would not
materially affect its 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
The Company's common stock is listed on the New York, the Chicago,
and the Pacific Stock Exchanges. The high and low sales prices for the
Company's common stock, as well as the frequency and amount of dividends
paid on such stock, are presented in the tables captioned "Common Stock
Prices" and "Common Stock Dividends -- Paid Per Share" in the Company's
1994 Annual Report. Additional information concerning dividends on common
stock is presented under the caption "Dividends" of the Financial Review,
and information concerning restrictions on the payments of dividends is
included in Note 4, "Debt," of the Notes to Financial Statements in the
Company's 1994 Annual Report. The approximate number of common
shareholders, based upon actual record holders at year-end, is presented
under the caption "Financial Highlights" of the Company's 1994 Annual
Report. The information under these captions is incorporated herein by
this reference.
Net Loss Per Common Share
Net loss per common share was determined by dividing net loss, as
adjusted below, by applicable shares outstanding. The computation of fully
diluted net loss per share was antidilutive in each of the periods
presented; therefore, the amounts reported for primary and fully diluted
loss are the same.
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Net loss as reported $ (62,610) $ (77,140) $(227,480)
Preferred dividends (54,586) (43,076) (27,711)
_________ _________ _________
Primary loss (117,196) (120,216) (255,191)
Assumed conversions:
Preferred dividends eliminated 43,776 33,407 27,711
Interest on 7% debentures eliminated 3,439 3,644 4,108
Supplemental ESOP contribution (12,573) (12,381) (10,285)
_________ _________ _________
Fully diluted loss $ (82,554) $ (95,546) $(233,657)
Average number of common shares
Primary 38,110 37,958 37,942
Fully diluted 61,407 55,825 53,283
Primary loss includes the aggregate amount of dividends on the
Company's preferred stock. The dividend attributable to the Company's
Series D convertible preferred stock held by the Company's ESOP (employee
stock ownership plan) is net of a tax benefit. To determine the fully
diluted loss, dividends and interest, net of any applicable taxes, have
been added back to primary loss to reflect assumed conversions. The fully
diluted loss was increased by the after-tax amount of additional
contributions that the Company would be required to make to its ESOP if the
Series D ESOP preferred shares were converted to common stock.
For the years ended December 31, 1994, 1993, and 1992, primary
average shares include only common shares outstanding. For these periods,
common stock equivalents attributable to stock options, Series E conversion
preferred stock, and Series G conversion preferred stock subsequent to
issuance in September 1993 were excluded because they were antidilutive.
Excluded common equivalent shares were 16,391,000 at December 31, 1994,
compared with 10,840,000 and 7,998,000 shares at December 31, 1993 and
1992. In addition to common and common equivalent shares, fully diluted
average shares include common shares that would be issuable upon conversion
of the Company's other convertible securities.
Series E Preferred Stock Conversion
On January 15, 1995, the depositary shares of Series E preferred
stock converted to 8,625,000 shares of the Company's common stock.
Shareholder Rights Plan
Pursuant to the shareholder rights plan adopted in December 1988 and
as 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 the Company's
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. If a
person acquires 15% or more of the Company's outstanding voting securities,
on the tenth day thereafter, unless this time period is extended by the
board of directors, each right would, subject to certain adjustments and
alternatives, entitle the rightholder to purchase common stock of the
Company or the acquiring company having a market value of twice the $175
exercise price of the right (except that the acquiring person or group and
other related holders would not be able to purchase common stock of the
Company on these terms). The rights are nonvoting, may be redeemed by the
Company at a price of 1 cent per right at any time prior to the tenth day
after an individual or group acquires 15% of the Company's voting stock,
unless extended, and expire in 1998. Additional details are set forth in
the Amended and Restated Rights Agreement filed as Exhibit 1 in the
Company's Form 8-K with the Securities and Exchange Commission on
September 25, 1990.
Item 6. Selected Financial Data
The following table sets forth selected financial data of the Company
for the years indicated and should be read in conjunction with the
disclosures in Item 7 of this Form 10-K:
1994 1993 1992 1991 1990
(expressed in millions, except
per-common-share amounts)
Assets
Current assets $ 918 $ 887 $ 866 $ 933 $ 998
Property and equipment, net 2,494 3,010 3,067 3,163 3,155
Other 882 616 627 633 632
______ ______ ______ ______ ______
$4,294 $4,513 $4,560 $4,729 $4,785
Liabilities and
Shareholders' Equity
Current liabilities $ 658 $ 688 $ 750 $ 651 $ 758
Long-term debt, less
current portion 1,625 1,593 1,680 1,916 1,649
Guarantee of ESOP debt 231 247 262 275 286
Other 415 480 510 439 516
Shareholders' equity 1,365 1,505 1,358 1,448 1,576
______ ______ ______ ______ ______
$4,294 $4,513 $4,560 $4,729 $4,785
Net sales $4,140 $3,958 $3,716 $3,950 $4,186
Income (loss) before accounting
change (63) (77) (154) (79) 75
Net income (loss) (63) (77) (227) (79) 75
Net income (loss) per common share
Primary
Income (loss) before
accounting change $(3.08) $(3.17) $(4.79) $(2.46) $ 1.62
Effect of net accounting
change (1) - - (1.94) - -
______ ______ ______ ______ ______
$(3.08) $(3.17) $(6.73) $(2.46) $ 1.62
Fully diluted (2)
Income (loss) before
accounting change $(3.08) $(3.17) $(4.79) $(2.46) $ 1.62
Effect of net accounting
change (1) - - (1.94) - -
______ ______ ______ ______ ______
$(3.08) $(3.17) $(6.73) $(2.46) $ 1.62
Cash dividends declared
per common share $ .60 $ .60 $ .60 $ 1.29 $ 1.52
(1) Consists of a one-time noncash charge of $73 million, or $1.94 per
share, for the adoption of Financial Accounting Standards Board
requirements to accrue postretirement benefits other than pensions.
(2) The computation of fully diluted net income (loss) per common share
was antidilutive in all years reported; therefore, the amounts
reported for primary and fully diluted earnings are the same.
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
the Company's 1994 Annual Report and are incorporated herein by this
reference.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements and related notes,
together with the report of the independent public accountants, are
presented in the Company's 1994 Annual Report and are incorporated herein
by this reference. Selected quarterly financial data is presented under
the caption "Quarterly Results of Operations" in the Company's 1994 Annual
Report and is incorporated herein by this reference.
The consolidated income (loss) statement for the three months ended
December 31, 1994, is presented in the Company's Fact Book for the fourth
quarter of 1994 and is incorporated herein by this reference.
The 10.125% Notes issued in December 1990, 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, as defined, and a rating
decline, as defined, the holders of these securities may require the
Company 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 of the Company are pre-
sented under the caption "Election of Directors" in the Company's
definitive proxy statement dated March 7, 1995. All of the nominees are
presently directors. This information is incorporated herein by this
reference.
Executive Officers as of February 28, 1995
Date First
Elected as
Name Age Position or Office an Officer
George J. Harad 50 President and
Chief Executive Officer,
Director 5/11/82
Peter G. Danis Jr. 63 Executive Vice President 7/26/77
Theodore Crumley 49 Senior Vice President and
Chief Financial Officer 5/10/90
A. Ben Groce 53 Senior Vice President 2/8/91
Alice E. Hennessey 58 Senior Vice President 10/28/71
Terry R. Lock 53 Senior Vice President 2/17/77
Richard B. Parrish 56 Senior Vice President 2/27/80
N. David Spence 59 Senior Vice President 12/8/87
A. James Balkins III 42 Vice President and
Corporate Secretary 9/5/91
J. Ray Barbee 47 Vice President 9/26/89
Stanley R. Bell 48 Vice President 9/25/90
John C. Bender 54 Vice President 2/13/90
Charles D. Blencke 51 Vice President 12/11/92
Tom E. Carlile 43 Vice President and
Controller 2/4/94
J. Michael Gwartney 54 Vice President 4/25/89
John W. Holleran 40 Vice President and
General Counsel 7/30/91
H. John Leusner 59 Vice President 12/11/92
Irving Littman 54 Vice President and
Treasurer 11/1/84
Jeffrey G. Lowe 53 Vice President 12/11/92
Christopher C. Milliken 49 Vice President 2/3/95
Carol B. Moerdyk 44 Vice President 5/10/90
D. Ray Ryden 61 Vice President 4/26/88
Donald F. Smith 53 Vice President 12/8/87
J. Kirk Sullivan 59 Vice President 9/30/81
Gary M. Watson 47 Vice President 2/5/93
All of the officers named above except A. Ben Groce and Gary M.
Watson (see below) have been employees of the registrant or one of its
subsidiaries for at least five years. Mr. Groce rejoined the Company in
1991 after resigning in June 1989. Prior to his resignation, he had served
as an officer of the Company since December 1987.
Christopher C. Milliken was elected a vice president in February
1995. Mr. Milliken received a B.S. degree in industrial management in 1970
from Clemson University. He joined the Company in 1977 and held a variety
of positions in the office products distribution business before becoming
Eastern Region Manager in 1991.
Gary M. Watson was elected vice president in February 1993.
Dr. Watson received a B.S. degree in chemistry from Western Washington
University in 1969. He also received an M.S. degree in 1972 and a Ph.D.
degree in chemical physics in 1974, both from Lawrence University in
connection with the Institute of Paper Science and Technology. He joined
Boise Cascade in 1992 as director of the Company's Paper Research and
Development Center in Portland, Oregon.
Item 11. Executive Compensation
Information concerning compensation of the Company's executive
officers for the year ended December 31, 1994, is presented under the
caption "Compensation Tables" in the Company's definitive proxy statement
dated March 7, 1995. This information is incorporated herein by this
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Information concerning the security ownership of certain benefi-
cial owners as of December 31, 1994, is set forth under the
caption "Beneficial Ownership" in the Company's definitive proxy
statement dated March 7, 1995, and is incorporated herein by
this reference.
(b) Information concerning security ownership of management as of
December 31, 1994, is set forth under the caption "Security
Ownership of Directors and Executive Officers" in the Company's
definitive proxy statement dated March 7, 1995, and is incorpo-
rated herein by this reference.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions during 1994 is set forth under the caption "Consulting
Services" in the Company's definitive proxy statement dated March 7, 1995,
and is incorporated herein by this 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 annual
report on Form 10-K for Boise Cascade Corporation and
subsidiaries:
(1) (i) The Income (Loss) Statement for the three months
ended December 31, 1994, is incorporated herein
by this reference from the Company's Fact Book
for the fourth quarter of 1994.
(ii) The Financial Statements, the Notes to Financial
Statements, and the Report of Independent Public
Accountants listed below are incorporated herein
by this reference from the Company's 1994 Annual
Report.
- Balance Sheets as of December 31, 1994 and
1993.
- Statements of Income (Loss) for the years
ended December 31, 1994, 1993, and 1992.
- Statements of Cash Flows for the years ended
December 31, 1994, 1993, and 1992.
- Statements of Shareholders' Equity for the
years ended December 31, 1994, 1993, and
1992.
- Notes to Financial Statements.
- Quarterly Results of Operations for the years
1994 and 1993.
- Report of Independent Public Accountants.
(2) Financial Statement Schedules.
- Consent of Independent Public Accountants.
(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
herein by this reference.
(b) Reports on Form 8-K.
On October 4, 1994, the Company filed a Form 8-K with the
Securities and Exchange Commission to report that the Company
issued a news release announcing the impact of securities sales
by Rainy River Forest Products Inc.
On October 24, 1994, the Company filed a Form 8-K with the
Securities and Exchange Commission to file the unaudited pro
forma Boise Cascade Corporation and Subsidiaries financial
information as of September 30, 1994, and to file, by reference,
the Rainy River Underwriting Agreement regarding common shares
and Convertible Debentures.
(c) Exhibits.
See Index to exhibits.
(d) The following documents are filed as a part of this annual
report on Form 10-K for Rainy River Forest Products Inc., an
unconsolidated equity affiliate of the Company:
(1) The Financial Statements, the Notes to Financial
Statements, and the Report of Independent Chartered
Accountants listed below are incorporated herein by this
reference from Rainy River Forest Products Inc.'s 1994
Annual Report:
- Consolidated Balance Sheets as of December 31, 1994
and 1993.
- Consolidated Statements of Operations for the years
ended December 31, 1994, 1993, and 1992.
- Consolidated Statements of Changes in Financial
Position for the years ended December 31, 1994, 1993,
1992.
- Consolidated Statements of Owners' Equity for the
years ended December 31, 1994, 1993, 1992.
- Auditors' Report.
- Notes to Consolidated Financial Statements.
For the purpose of complying with the rules governing Form S-8 under
the Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated by
reference into registrant's Registration Statements on Form S-8
Nos. 33-47892 (filed May 14, 1992), 33-28595 (filed May 8, 1989),
33-21964 (filed June 6, 1988), 33-31642 (filed November 7, 1989),
2-96196 (filed March 25, 1985), and 33-45675 (filed February 12,
1992):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
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
President and
Chief Executive Officer
Dated: March 14, 1995
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 14, 1995.
Signature Capacity
(i) Principal Executive Officer:
George J. Harad President and
George J. Harad Chief Executive Officer
(ii) Principal Financial Officer:
Theodore Crumley Senior Vice President and
Theodore Crumley Chief Financial Officer
(iii) Principal Accounting Officer
Tom E. Carlile Vice President
Tom E. Carlile and Controller
(iv) Directors:
John B. Fery A. William Reynolds
John B. Fery A. William Reynolds
Anne L. Armstrong Jane E. Shaw
Anne L. Armstrong Jane E. Shaw
Robert E. Coleman Frank A. Shrontz
Robert E. Coleman Frank A. Shrontz
George J. Harad Edson W. Spencer
George J. Harad Edson W. Spencer
Robert K. Jaedicke Robert H. Waterman, Jr.
Robert K. Jaedicke Robert H. Waterman, Jr.
James A. McClure Ward W. Woods, Jr.
James A. McClure Ward W. Woods, Jr.
Paul J. Phoenix
Paul J. Phoenix
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated January 30, 1995, incorporated by
reference in this Form 10-K for the year ended December 31, 1994,
into Boise Cascade Corporation's previously filed post-effective
amendment No. 1 to Form S-8 registration statement (File No. 33-28595);
the registration statement on Form S-8 (File No. 33-47892);
post-effective amendment No. 1 to Form S-8 registration statement
(File No. 2-96196); 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); and the registration statement on
Form S-3 (File No. 33-55396).
ARTHUR ANDERSEN LLP
Boise, Idaho
March 14, 1995
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS
Filed with the Annual Report
on Form 10-K for the
Year Ended December 31, 1994
Page
Number Description Number (1)
2 Inapplicable -
3.1 (2) Restated Certificate of Incorporation, as amended -
3.2 (3) Certificate of Designation of Convertible Preferred
Stock, Series D, dated July 10, 1989 -
3.3 (4) Certificate of Designation of Conversion Preferred
Stock, Series E, dated January 21, 1992 -
3.4 (5) Certificate of Designation of Cumulative Preferred
Stock, Series F, dated January 29, 1993 -
3.5 (6) Bylaws, as amended, September 29, 1994 -
3.6 (5) Certificate of Designation of Conversion Preferred
Stock, Series G, dated September 17, 1993 -
4.1 (7) Trust Indenture between Boise Cascade Corporation and
Morgan Guaranty Trust Company of New York, Trustee,
dated October 1, 1985, as amended -
4.2 (8) 1994 Revolving Loan Agreement -- $650,000,000, dated
April 15, 1994 -
4.3 (9) Shareholder Rights Plan, as amended September 25, 1990 -
9 Inapplicable -
10.1 Key Executive Performance Plan for Executive Officers,
as restated February 2, 1995, with the 1994 and 1995
Performance Criteria -
10.2 (5) 1986 Executive Officer Deferred Compensation Plan,
as amended July 29, 1993 -
10.3 (5) 1983 Board of Directors Deferred Compensation Plan,
as amended July 29, 1993 -
10.4 (5) 1982 Executive Officer Deferred Compensation Plan,
as amended July 29, 1993 -
10.5 (5) Executive Officer Severance Pay Policy -
10.6 (5) Supplemental Early Retirement Plan for Executive Officers -
10.7 Boise Cascade Corporation Supplemental Pension Plan,
effective as of January 1, 1994
10.8 (5) 1987 Board of Directors Deferred Compensation Plan,
as amended July 29, 1993 -
10.9 1984 Key Executive Stock Option Plan and Form of Agreement,
as amended through July 28, 1994
10.10 (5) Executive Officer Group Life Insurance Plan description -
10.11 (5) Executive Officer Split-Dollar Life Insurance Plan -
10.12 (5) Form of Agreement with Executive Officers, as amended -
10.13 (5) Supplemental Health Care Plan for Executive Officers -
10.14 (5) Nonbusiness Use of Corporate Aircraft Policy, as amended -
10.15 (5) Executive Officer Financial Counseling Program description -
10.16 (5) Family Travel Program description -
10.17 (5) Form of Directors' Indemnification Agreement -
10.18 (5) Deferred Compensation and Benefits Trust, as amended
through June 30, 1989 -
10.19 Director Stock Compensation Plan, as amended
December 15, 1994
10.20 Boise Cascade Corporation Director Stock Option Plan
11 Inapplicable -
12 Ratio of Earnings to Fixed Charges
13.1 Incorporated sections of the Boise Cascade Corporation
1994 Annual Report
13.2 Incorporated sections of the Boise Cascade Corporation
Fact Book for the fourth quarter of 1994
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 Incorporated sections of the Rainy River Forest Products Inc.
1994 Annual Report
(1) This information appears only in the manually signed original of the
Annual Report on Form 10-K.
(2) Exhibit 3.1 was filed under the same exhibit number in the Company's
1987 Annual Report on Form 10-K and is incorporated herein by this
reference.
(3) The Certificate of Designation of Convertible Preferred Stock, Series D,
dated July 10, 1989, was filed as Exhibit 4.4 in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1989, and is
incorporated herein by this reference.
(4) Exhibit 3.3 was filed under the same exhibit number in the Company's
1991 Annual Report on Form 10-K and is incorporated herein by this
reference.
(5) Exhibits 3.4, 3.6, 10.2, 10.3, 10.4, 10.5, 10.6, 10.8, 10.10, 10.11,
10.12, 10.13, 10.14, 10.15, 10.16, 10.17, and 10.18 were filed under the
same exhibit numbers in the Company's 1993 Annual Report on Form 10-K
and are incorporated herein by this reference.
(6) The Bylaws, as amended September 29, 1994, were filed as Exhibit 3 in
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, and are incorporated herein by this reference.
(7) 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 the
Company's Current Report on Form 8-K filed on August 10, 1990. Each of
the documents referenced in this footnote is incorporated herein by this
reference.
(8) The 1994 Revolving Loan Agreement was filed as Exhibit 4.2 in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994, and is incorporated herein by this reference.
(9) The Rights Agreement, dated as of December 13, 1988, as amended
September 25, 1990, was filed as Exhibit 1 in the Company's Form 8-K
filed with the Securities and Exchange Commission on September 25, 1990,
and is incorporated herein by this reference.
BOISE CASCADE CORPORATION
KEY EXECUTIVE PERFORMANCE PLAN
FOR EXECUTIVE OFFICERS
(As Restated February 2, 1995)
BOISE CASCADE CORPORATION
KEY EXECUTIVE PERFORMANCE PLAN FOR EXECUTIVE OFFICERS
1. Purpose of the Plan. The Boise Cascade Corporation Key
Executive Performance Plan for Executive Officers (the "Plan") is
designed to recognize the contribution made by Executive Officers
in optimizing the long-term value to the shareholders of Boise
Cascade Corporation (the "Company") and to provide Plan
participants with an opportunity to supplement their retirement
income through deferrals of awards made under the Plan. The Plan
is intended to be subject to and comply with the requirements of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and is an unfunded plan providing deferred compensation
for a select group of senior management or highly compensated
employees.
2. Definitions. For purposes of this Plan, the following
terms shall have the meanings set forth below:
2.1 "Award" or "Corporate Performance Award" shall mean
a payment made under the Plan, or a payment earned but deferred
according to the terms of a Participant's deferral election under
Section 8 of this Plan, based on the Corporate Performance Award
Criteria ("Criteria") and/or the Division or Location Performance
Measures ("Measures") applicable to the Award Period for which the
Award is made. Within 90 days of the beginning of each Award
Period, the Committee shall establish the specific Criteria and/or
Measures to be achieved by the Company in order for Participants to
earn a Corporate Performance Award. The Committee shall establish
a mathematical formula pursuant to which an Award, equal to a
specified percentage of a Participant's salary, shall be earned
upon the attainment of specific levels of the applicable Criteria
and/or Measures. This formula may take into account Criteria
and/or Measures achieved in prior Award Periods. The Criteria
and/or Measures and formula, once established, shall continue for
subsequent Award Periods unless modified by the Committee. The
Criteria and/or Measures applicable to an Award Period, and the
formula pursuant to which Award amounts shall be determined, shall
be selected and published within 90 days from the beginning of the
Award Period. No Award may be paid to a Participant in excess of
$2.5 million for any single Award Period. In the event an Award is
earned under the Criteria and/or Measures in effect for an Award
Period in excess of $2.5 million, the amount of the Award in excess
of this amount shall be deferred in accordance with Section 8 of
this Plan.
2.2 "Award Period" shall mean a period of one year,
commencing each January 1 and ending on the following December 31.
2.3 "Base Salary" shall mean a Participant's annual pay
rate at the end of the Award Period without taking into account
(i) any deferrals of income; (ii) any incentive compensation; or
(iii) any other benefits paid or provided under any of the
Company's other employee benefit plans.
2.4 "Capital" shall mean the net investment employed in
the operations of the Company, adjusted for LIFO inventory, present
value of operating leases, goodwill amortization, major capital
projects, and major nonrecurring adjustments.
2.5 "Capital Charge" shall mean the deemed opportunity
cost of employing Capital for the Company calculated as follows:
Capital Charge = average Capital x Pretax Required Rate of Return.
2.6 "Change in Control" shall mean a change in control
of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), or
any successor provisions, whether or not the Company is then
subject to such reporting requirement; provided that, without
limitation, such a Change in Control shall be deemed to have
occurred if (a) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the
Company or an employee benefit plan maintained by the Company, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities; or (b) during any period
of two consecutive years, individuals who at the beginning of such
period constitute the Board, including for this purpose any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of the period, cease for any reason to constitute a majority
thereof.
2.7 "Committee" shall mean the Executive Compensation
Committee of the board of directors of the Company.
2.8 "Corporate Performance Award Criteria" shall mean
the attainment of specified levels of Return on Equity ("ROE"),
Return on Total Capital ("ROTC"), Economic Value Added ("EVA"),
Earnings Per Share ("EPS"), and/or Net Income ("NI") selected by
the Committee.
2.9 "Deferred Compensation and Benefits Trust" shall
mean the irrevocable trust established by the Company with an
independent trustee for the benefit of persons entitled to receive
payments or benefits hereunder, the assets of which trust will be
subject to claims of the Company's creditors in the event of
bankruptcy or insolvency.
The Deferred Compensation and Benefits Trust shall
contain the following provisions:
a. If a Change in Control of the Company does not
occur within one year after the Potential Change in Control, the
Company may reclaim the assets transferred to the trustee subject
to the requirement that it be again funded upon the occurrence of
another Potential Change in Control.
b. Upon a Change in Control, the assets of the
Deferred Compensation and Benefits Trust shall be used to pay
benefits under this Plan, except to the extent such benefits are
paid by the Company, and the Company and any successor shall
continue to be liable for the ultimate payment of those benefits.
c. The Deferred Compensation and Benefits Trust
will be terminated upon the exhaustion of the trust assets or upon
payment of all the Company's obligations.
d. The Deferred Compensation and Benefits Trust
shall contain other appropriate terms and conditions consistent
with the purposes sought to be accomplished by it. Prior to a
Change in Control, the Deferred Compensation and Benefits Trust may
be amended from time to time by the Company, but no such amendment
may substantially alter any of the provisions set out in the
preceding paragraphs.
2.10 "Division or Location Performance Measures" shall
mean the attainment by division(s) and/or location(s) (at the
division and/or location level) of specified levels of Pretax
Return on Total Capital ("PROTC"), EVA, safety, quality, costs,
operating efficiency, sales, production, and/or product mix as
determined by the Committee.
2.11 "Earnings Per Share" shall mean the Company's Net
Income and excluding preferred dividends, divided by average shares
outstanding as reported in the Company's published financial
statements, and adjusted for major nonrecurring and nonoperating
expense and income items, as determined by the Committee, based on
the facts and circumstances involved. Earnings Per Share shall be
on a fully diluted basis if required to be reported on this basis
under generally accepted accounting principles; otherwise, Earnings
Per Share shall be primary Earnings Per Share.
2.12 "Economic Value Added" shall mean the excess NOPBT
that remains after subtracting the Capital Charge, expressed as
follows: EVA = NOPBT - Capital Charge.
2.13 "Executive Officers" shall mean the Company's Chief
Executive Officer, President, and any Executive Vice President,
Senior Vice President, Vice President and the Corporate Secretary,
Treasurer, or Controller of the Company.
2.14 "Net Income" shall mean the Company's income after
taxes as reported in the Company's published financial statements
for the applicable Award Period. Net Income shall be adjusted for
major nonrecurring and nonoperating income or expense items, as
determined by the Committee, based on the facts and circumstances
involved.
2.15 "Net Operating Profit Before Tax" ("NOPBT") shall
mean the before tax operating income of the Company for the Award
Period.
2.16 "Participant" shall mean a person who is an
Executive Officer of the Company at the beginning of an Award
Period or who is elected an Executive Officer by the Company's
Board of Directors (the "Board") during an Award Period who is
identified by the Company and Committee as being eligible to be a
Participant for such Award Period and who timely signs and returns
to the Company a participation letter (or similar document) in such
form as is approved by the Company.
2.17 "Potential Change in Control" shall be deemed to
have occurred if (a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control of the Company; (b) any person (including the Company) pub-
licly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control of the
Company; (c) any person becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 9.5% or more
of the combined voting power of the Company's then outstanding
securities; or (d) the board of directors of the Company adopts a
resolution to the effect that a Potential Change in Control of the
Company for purposes of this Agreement has occurred.
2.18 "Pretax Required Rate of Return" (also commonly
known as the "cost of capital") shall mean the pretax required rate
of return percentage including adjustment for business risk and for
debt to equity structure, as determined by the Committee for the
Award Period.
2.19 "Return on Equity" shall mean the Company's Net
Income, divided by average shareholders' equity.
2.20 "Return on Total Capital" shall be the Company's Net
Income divided by the average Total Capital, as reported in the
Company's published financial statements for the applicable Award
Period.
3. Determination of Awards. As soon as practical after the
conclusion of each Award Period, the Committee shall review and
evaluate the Corporate Performance Award Criteria applicable to the
Award Period in light of the Company's performance measured in
accordance with such criteria, and shall determine whether the
criteria have been satisfied. If satisfied, the Committee shall so
certify in a written statement, and shall apply the criteria to
determine the percentage amount of the Award for each Participant.
4. Payment of Awards. Payment of Awards, less withholding
taxes, shall be made to Participants as soon as practical following
the Committee's certification that the applicable Award Criteria
have been satisfied and upon determination of the amount of each
Award. Funding of Awards under this Plan shall be out of the
general assets of the Company. Payment of Awards for which a
deferral election has been made by a Participant pursuant to
Section 8 hereof shall be made in accordance with the Participant's
deferral election. Notwithstanding the foregoing, no payments
shall be made under this Plan unless the material terms of the Plan
have been approved by a majority vote of the Company's shareholders
voting with respect to such matters.
5. Administration and Interpretation of the Plan. The
Committee shall have the sole discretion, responsibility, and
authority to carry out all actions with respect to administration
and interpretation of the Plan. Any interpretation by the
Committee shall be final and binding on the Participants. The
Committee shall have sole discretion to determine any and all
questions of fact relating to or arising in connection with the
Plan, including but not limited to questions of eligibility and
benefits under the Plan. The Committee shall have sole discretion
to construe any and all terms or conditions of the Plan and to make
determinations and administrative decisions regarding the intent,
meaning, application, and effect of any and all aspects of the
Plan. The Committee may adopt such rules and regulations relating
to the Plan as it may deem necessary for the administration of the
Plan. The Committee may delegate its responsibilities hereunder to
Company employees, advisors, or other persons who are not members
of the Committee, and may rely upon information or opinions of
legal counsel or experts selected to render advice with respect to
the Plan. Any delegate of the Committee hereunder shall have the
absolute discretionary authority vested in the Committee with
respect to such delegated responsibilities unless limited in
writing by the Committee.
6. Participation in the Plan. Executive Officers of the
Company may become Participants in accordance with the terms of the
Plan at any time during the Award Period, as provided in
Section 2.16. If an Executive Officer becomes a Participant at any
time other than at the commencement of an Award Period, the amount
of his or her Award under the Corporate Performance Award Criteria
of the Plan shall be prorated on the basis of the number of days
during the Award Period that he or she is a Participant compared to
the total number of calendar days in the Award Period.
At such time as an Executive Officer becomes a
Participant in this Plan, he or she shall be eligible to be a
Participant in all subsequent Award Periods under the Plan until he
or she ceases to be an Executive Officer of the Company, his or her
employment with the Company terminates, he or she is excluded from
participation by the Committee, or he or she fails to sign a
participation letter as provided in Section 2.16.
If a person becomes a Participant under this Plan and is
also a Participant under the Company's Key Executive Performance
Plan for Key Executives or any similar incentive plan for the same
Award Period, such Participant will also be eligible to receive a
pro rata Award under the Key Executive Performance Plan for Key
Executives or such other plan, in accordance with the terms of such
plan, at the end of the Award Period.
7. Treatment of Awards Upon Retirement, Disability, Death,
Reassignment or Termination. A Participant who (a) retires
(including early retirement as defined under the Company's
qualified pension plan for salaried employees and retirement under
the Company's Supplemental Early Retirement Plan for Executive
Officers), (b) becomes totally disabled, (c) dies, or
(d) terminates employment as a direct result of the sale or
permanent closure of a division or facility of the Company, or as
a direct result of a merger, reorganization, sale, or restructuring
of all or part of the Company, will cease to be a Participant in
the Plan as of the day of the occurrence of such event. In this
event, the Participant (or his or her designated beneficiary or
estate in the case of death) shall receive a pro rata Award under
the Plan (if one is paid), based on the number of days during the
Award Period the person was a Participant in the Plan compared to
the total number of days in the Award Period. This prorated Award
shall be paid to the Participant (or his or her designated benefi-
ciary or estate in the case of death) as soon as practical after
the conclusion of the Award Period. Any award to be paid pursuant
to clause (d) above shall be calculated based on the Corporate
Performance Award Criteria applicable to the Award Period through
the date of the occurrence of such event, and shall be calculated
as though such event had not occurred.
If a Participant is excluded from participation by
decision of the Committee during an Award Period, the Participant
shall cease participation as of the date of such decision and shall
receive a prorated Award for the Award Period (if one is paid).
The calculation and payment of this prorated award will be made in
the same manner as that of a Participant who has retired, become
permanently disabled, or died.
Participants who otherwise terminate their employment
with the Company during an Award Period, whether voluntarily or
involuntarily, with or without cause, shall not be eligible to
receive any Award for the Award Period, unless payment of an Award
to such Participant is approved by the Committee.
8. Deferral of Awards. A Participant may elect to defer
receipt of all or any portion of any Corporate Performance Award
made under the Plan to a future date, provided the amount to be so
deferred exceeds $2,000, as described in this Section 8. A
Participant who has earned an Award in excess of $2.5 million for
an Award Period shall be required to defer the amount of the Award
in excess of $2.5 million, in accordance with this Section 8.
Deferred Bonus Accounts shall not be funded, and all
Awards deferred by Participants shall be unfunded obligations of
the Company. Participants shall be unsecured general creditors of
the Company with respect to such Deferred Bonus Accounts.
8.1 Eligible executives may elect (if done so on or
before September 30 of the Plan year) to defer receipt of their
Award (if any), subject to the following:
a. Before September 30 of the Plan year for which
a deferral election is to be effective, executives must sign and
return to the Company a completed Deferral Election Form, which
shall specify (1) the percentage or amount of the Award to be
deferred, (2) the form (lump sum or installment) of payment, and
(3) the date on which payment of the deferred Award is to commence.
Elections hereunder shall be irrevocable except as otherwise
provided in the Plan.
b. A Deferred Award will be credited to a Deferred
Bonus Account for the executive, an account established for Key
Executive Performance Plan deferral purposes for the Plan year.
Thereafter, the executive's Deferred Bonus Account will be credited
with nominal interest at a rate determined by the Company. This
rate, which will be set annually, will not be less than the prime
rate offered by the Bank of America NT&SA each January 1.
c. If any payment is made from an executive's
Deferred Bonus Account during a year, interest will be credited to
the account on the portion so paid up to the end of the month
preceding the month in which payment occurs.
d. An executive's Deferred Bonus Account for a
given Plan year will be paid to the executive in a lump sum on one
of the following dates:
(1) The date selected by the executive in the
applicable Deferral Agreement, or
(2) January 1 of the year following the
executive's normal or early retirement if no earlier date has been
selected previously by the executive.
In lieu of lump-sum payment, an executive
may elect to receive payment in consecutive equal annual
installments over a period not exceeding ten years commencing with
the date the executive selects in the applicable Deferral
Agreement.
e. Earlier payment of Deferred Bonus Account
balances will be made only in accordance with Plan provisions
permitting hardship or other early withdrawals, waiting periods,
and account limitations, and penalties will apply as set forth in
the Plan.
f. Any amounts deferred shall not be considered as
compensation for pension purposes or for purposes of the Company's
Savings and Supplemental Retirement Plan. However, any resulting
reduction in a participant's pension benefit will be provided from
the Company's unfunded supplemental pension plan.
8.2 Except as otherwise provided herein, election to
defer payment of an award is irrevocable.
8.3 If an executive terminates for any reason other than
retirement or death, the Company will pay to such terminated
employee his or her Deferred Bonus Account in full in the month
following the month of termination. The amount of such Deferred
Bonus Account to be distributed will be determined in accordance
with paragraph 8.1.b.
8.4 If an executive terminates because of death or if an
executive dies after his or her normal or early retirement and
there is an unpaid balance in his or her Deferred Bonus Account,
the executive's Deferred Bonus Account or unpaid balance thereof
will be paid by the Company to the executive's designated
beneficiary or beneficiaries in the month following the month in
which the executive's death occurs. The amount of such Deferred
Bonus Account or unpaid balance thereof to be distributed will be
determined in accordance with paragraph 8.1.c.
8.5 An executive must designate the beneficiary or
beneficiaries who are to receive his or her Deferred Bonus Account
in the event of the executive's death. The beneficiary designation
shall be made on the Beneficiary Designation form and may be
changed at any time upon written notice to the Company. If an
executive has not designated a beneficiary or beneficiaries or if
all the designated beneficiaries are deceased, the Deferred Bonus
Account will be paid to the executive's estate.
8.6 Distributions of Deferred Bonus Accounts may be made
in accordance with the provisions of this Section 8,
notwithstanding a Participant's Deferral Election Form.
8.6.1 Hardship Termination and Distribution. In
the event of serious and unanticipated financial hardship, a
participant may request a lump-sum distribution of all or a portion
of his or her Deferred Bonus Account balance. The participant
making a hardship distribution request under this section shall
document, to the Company's satisfaction, that distribution of his
or her Deferred Bonus Account is necessary to satisfy an
unanticipated, immediate, and serious financial need and that the
participant does not have access to other funds, including proceeds
of any loans sufficient to satisfy the need. Upon receipt of a
request under this section, the Company may, in its sole
discretion, distribute all or a portion of the participant's
account balance in a lump sum, to the extent such distribution is
necessary to satisfy the financial need. The participant shall
sign all documentation requested by the Company relating to any
such distribution, and any participant whose participation in the
Plan terminates under this paragraph may not make deferrals of
Awards for a minimum of 12 months following the date of any
distribution.
8.6.2 Early Distribution with Penalty.
Notwithstanding any provision in this Plan to the contrary, a
participant or beneficiary may, at any time, request a single
lump-sum payment of the amount credited to a Deferred Bonus Account
or accounts of the Participant under the Plan. The amount of the
payment shall be equal to (i) the participant's accumulated
Deferred Bonus Account balance under the Plan as of the payment
date, reduced by (ii) an amount equal to 10% of such accumulated
account balance. This lump-sum payment shall be subject to
withholding of federal, state, and other taxes to the extent
applicable. This request must be made in writing to the Company.
The lump-sum payment shall be made within 30 days of the date on
which the Company receives the request for the distribution. If a
request is made under this provision, the participant shall not be
eligible to participate in any nonqualified deferred compensation
plan maintained by the Company, including the deferral option under
this Plan, for a period of 12 months after such request is made.
In addition, in this event, any deferred compensation agreement
under any nonqualified deferred compensation plan of the Company
shall not be effective with respect to compensation payable to the
participant during this 12-month period.
8.6.3 Distribution Upon Extraordinary Events.
In the event any participant terminates employment with the Company
as a direct result of the sale or divestiture of a facility,
operating division, or reduction in force in connection with any
reorganization of the Company's operations or staff, such
participant may request distribution of his or her entire Deferred
Bonus Account balance. Upon receipt of such a request for
distribution under this section, the Company may, in its sole
discretion, elect whether to approve or deny the request. If the
Company approves a request under this section, distribution of the
participant's account shall occur no later than the January 1 of
the year following the year during which such termination of
employment occurs.
8.6.4 Small Account Distributions. In the event
a participant terminates employment with the Company for any reason
and the participant's benefit under this Plan is less than either
(i) $5,000 in lump sum present value, calculated in accordance with
reasonable assumptions, or (ii) the monthly payment under the
benefit payment option selected by the participant is less than $75
per month, such participant may request distribution of his or her
entire account balance. Upon receipt of a request for distribution
under this section, the Company may, in its sole discretion, elect
whether to approve or deny the request. If the request is
approved, the Company shall close the participant's account and
distribute the participant's entire account balance in a single
lump sum. Any distribution under this paragraph shall be made no
later than January 1 of the year following the year in which such
termination of employment occurs.
8.7 A participant who has previously submitted an
election regarding payment of a Deferred Bonus Account and who
subsequently wishes to change that election may submit a written
request to change the election to Boise Cascade. Such request must
specify, subject to the limits of the Plan, (i) either a lump-sum
payment or annual installments and (ii) a date at least one year
later than the date originally elected for such payments to
commence and terminate. Such requests must be received by the
Company at least 30 days prior to January 1 of the year in which
the executive previously elected to have the payments commence.
Boise Cascade, in its sole and absolute discretion, may accept or
reject such application. No change will be permitted that would
allow payment of a deferral Award earlier than originally elected.
8.8 Once an award is made to an executive, it cannot be
revoked or modified by the Company and will be paid in accordance
with the election made and in accordance with the terms of this
Plan.
8.9 The Deferred Bonus Account of an executive, or any
part thereof, shall not be assignable or transferable by an
executive, either before or after normal or early retirement, other
than to a properly designated beneficiary or beneficiaries or by
will or the laws of descent and distribution. During the lifetime
of an executive, payments of a Deferred Bonus Account will be made
only to the executive.
8.10 An executive who takes early retirement at the
request of the Company may, on that account, change any outstanding
deferral election under this Plan at any time between the date on
which he or she is so requested to take retirement and the
effective date of such early retirement.
8.11 The Company believes, but does not represent or
guarantee, that a deferral election made in accordance with the
terms of the Plan is effective to defer the receipt of taxable
income. Each executive should consider his or her own financial
situation and tax implications prior to electing to defer an Award.
Deferral elections are at the sole discretion of each executive and
the Company makes no representation regarding the tax or legal
consequences of such deferral elections. Executives should consult
an attorney or an accountant familiar with the federal income and
estate tax laws, as well as their local laws, regarding the tax
implications of a deferred Award in their individual cases.
8.12 This deferral option applies only to participants in
those countries where tax statutes recognize voluntary compensation
deferral programs that are consistent with the terms of this Plan.
8.13 Participants and their beneficiaries, heirs,
successors and assigns shall have no legal or equitable right,
interest, or claim in any property or assets of the Company. Such
assets of the Company shall not be held under any trust for the
benefit of participants, their beneficiaries, heirs, successors or
assigns or held in any way as collateral security for the
fulfilling of obligations of the Company under this Plan. Any and
all Company assets shall be and remain the general, unpledged,
unrestricted assets of the Company. The Company's obligation under
this Plan shall be an unfunded and unsecured promise of the Company
to pay money in the future.
9. Deferred Compensation and Benefits Trust. Upon the
occurrence of any Potential Change in Control of the Company, the
Company shall transfer to the Deferred Compensation and Benefits
Trust an amount of cash, marketable securities, or other property
acceptable to the trustee(s) equal in value to 105 percent of the
amount necessary to pay the Company's obligations under this Agree-
ment, calculated on an actuarial basis and in accordance with the
terms of the Trust (the "Funding Amount"). The cash, marketable
securities, and other property so transferred shall be held,
managed, and disbursed by the trustee(s) subject to and in
accordance with the terms of the Trust. In addition, from time to
time the Company shall make any and all additional transfers of
cash, marketable securities, or other property acceptable to the
trustee(s) as may be necessary in order to maintain the Funding
Amount with respect to this Plan.
10. Miscellaneous.
10.1 Assignability. A Participant's right and interest
under the Plan may not be assigned or transferred, except in the
event of the Participant's death, in which event such right and
interest shall be transferred to his or her designated beneficiary,
or in the absence of a designation of beneficiary, by will or in
accordance with the laws of descent and distribution of the state
of the Participant's principal residence at the time of death.
10.2 Employment Not Guaranteed. Neither this Plan nor
any description of benefits, company policy or practice, or any
action taken hereunder creates a contract of employment, and shall
under no circumstances be construed as giving a Participant a right
to be or remain as an Executive Officer or an employee of the
Company for any period. Any Executive Officer or Participant is
employed solely at the will of the Company, and his or her
employment may be terminated at any time by the Company, with or
without cause or reason, notwithstanding any provision in this
Plan, any description of benefits, or any company policy or
practice which may be construed to the contrary.
10.3 Taxes. The Company shall deduct from all Corporate
Performance Awards or Individual Performance Awards all applicable
federal and state taxes required by law to be withheld from such
Corporate Financial Performance Awards or Discretionary Individual
Performance Awards. Participants may, upon written request to the
Company, request additional amounts to be withheld from any Award.
10.4 Construction and Jurisdiction. The Plan shall be
construed according to the laws of the state of Idaho. In the
event any lawsuit or legal action is brought, by any party, person,
or entity regarding this Plan, benefits hereunder, or any related
issue, such action or suit may be brought only in Federal District
Court in the District of Idaho.
10.5 Form of Communication. Any election, application,
claim, notice or other communication required or permitted to be
made by a Participant to the Committee or Company shall be made in
writing and in such form as the Company shall prescribe. Such
communication shall be effective upon its receipt by the Company,
if sent by first-class mail, postage prepaid and addressed to
Manager of Executive Compensation, Boise Cascade Corporation,
1111 West Jefferson (83702), P.O. Box 50, Boise, Idaho, 83728-0001.
11. Amendment and Termination. The Committee may amend or
terminate the Plan, at any time, provided that the Committee may
not amend or terminate the Plan so as to adversely affect any
benefits earned or accrued by Participants prior to the date of the
amendment or termination. All actions of the Committee in this
regard shall be evidenced by a duly adopted resolution or consent
action of the Committee.
12. Claims Procedure. Claims for benefits under the Plan
shall be filed in writing, within 90 days after the event giving
rise to a claim, with the Company's Manager of Executive
Compensation, who shall have absolute discretion to interpret and
apply the Plan, evaluate the facts and circumstances, and make a
determination with respect to such claim in the name and on behalf
of the Committee. Such written notice of a claim shall include a
statement of all facts believed by the Participant to be relevant
to the claim and shall include copies of all documents, materials,
or other evidence that the Participant believes relevant to such
claim. Written notice of the disposition of a claim shall be
furnished the claimant within 90 days after the application is
filed. This 90-day period may be extended an additional 90 days by
the Committee, in its sole discretion, by providing written notice
of such extension to the claimant prior to the expiration of the
original 90-day period. In the event the claim is denied, the
specific reasons for such denial shall be set forth in writing,
pertinent provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the claimant may perfect the
claim or submit such claim for review will be provided.
13. Claims Review Procedure. Any Participant, former
Participant or Beneficiary of either, who has been denied a benefit
claim under Section 12 hereof shall be entitled, upon written
request, to a review of his or her denied claim. Such request,
together with a written statement of the claimant's position, shall
be filed no later than 60 days after receipt of the written
notification provided for in Section 12, and shall be filed with
the Company's Manager of Executive Compensation, who shall promptly
inform the Committee and forward all such material to the Committee
for its review. The Committee may meet in person or by telephone
to review any such denied claim. The Committee shall make its
decision, in writing, within 60 days after receipt of the
claimant's request for review. The Committee's written decision
shall state the facts and plan provisions upon which its decision
is based. The Committee's decision shall be final and binding on
all parties. This 60-day period may be extended an additional
60 days by the Committee, in its discretion, by providing written
notice of such extension to the claimant prior to the expiration of
the original 60-day period.
14. Effective Date. The Plan shall become effective on
January 1, 1995, provided it is approved by the Company's
shareholders at the 1995 annual meeting of shareholders.
1994 PERFORMANCE CRITERIA
For 1994, the Plan provides for payment of a Corporate
Performance Award when company Net Income equals $77 million.
The maximum award payout would occur when Net Income equals
or exceeds $329 million (or 20.2% return on equity). The
executive officer awards as a percent of base salary would
be as illustrated by the following table. Net earnings
levels between the amounts indicated would result in
proportional reward amounts:
NET INCOME ($000,000)
$ 77 $178 $329
CEO/COO 14% 44% 90%
EVP/SVP 12 37 75
Vice President 10 30 60
BOISE CASCADE CORPORATION
KEY EXECUTIVE PERFORMANCE PLAN
1995 Payout Criteria Based on Economic Value Added (EVA)
Economic Value Added (EVA(R)) is a registered trademark of Stern
Stewart & Co. and they have assisted Boise Cascade in developing
this incentive plan.
PAYOUT AS A PERCENT OF SALARY
Improvement
in EVA CEO EVP/SVP VP
______________ ______ ______ _____
Less than
($175,000,000) 0.0% 0.0% 0.0%
$0 44.0% 37.0% 30.0%
$87,500,000 66.0% 55.5% 45.0%
$262,500,000 80.5% 67.7% 54.9%
$437,500,000 95.5% 80.3% 65.1%
$563,000,000 106.0% 89.2% 72.3%
$563,000,001 113.1% 95.1% 77.1%
$738,000,000 127.6% 107.3% 87.0%
o For Improvement in EVA in excess of $738 Million the payout
increases proportionally to the increase from $563,000,001
to $738 Million.
o The payout is interpolated on a straight line for
Improvement in EVA not shown in the table.
EVA = Net Operating Profit Before Tax -
Capital Charge
Net Operating Profit
Before Tax (NOPBT)* = Income from operating assets
+ Imputed interest of capitalized
lease obligations
+ Increase (decrease) in LIFO reserve
+ Annual amortization of goodwill
- Amortization of restructuring
losses
* Unusual nonrecurring and nonoperating income or expense
items do not affect NOPBT
Capital Charge = EVA Capital x 16%
EVA Capital** = Operating Capital
+ Cumulative amortization of goodwill
+ Imputed capital value of lease
obligations
+ Total LIFO reserve account
- Gain from the sale of assets
+ Unamortized restructuring losses
** Nonrecurring and nonoperating losses do not affect Operating
Capital. There may be adjustments to Operating Capital for
strategic investments while they are under construction and
up to two additional years subject to approval by the
Executive Compensation Committee of the Board.
BOISE CASCADE CORPORATION
SUPPLEMENTAL PENSION PLAN
EFFECTIVE DATE JANUARY 1, 1994
BOISE CASCADE CORPORATION
SUPPLEMENTAL PENSION PLAN
EFFECTIVE DATE JANUARY 1, 1994
ARTICLE I
1. Purpose of the Plan. It is the policy of Boise Cascade
Corporation (the "Company") to provide retirement benefits to
eligible employees in accordance with the terms and conditions of
the Company's retirement plans. Under certain circumstances the
effect of federal and state tax laws may preclude payment of full
benefits to which an employee is otherwise entitled out of the
assets of the Company's retirement plans qualified under
Section 401 of the Internal Revenue Code of 1986 (the "Code").
In addition, the election of certain employees to voluntarily
defer receipt of otherwise taxable and pensionable compensation
may have the effect of reducing the amount of retirement benefits
which such employees would otherwise be entitled to receive out
of the Company's tax-qualified retirement plans. In order to
ensure that employees of the Company receive the full retirement
benefits earned during the course of their employment with the
Company, the Company will provide benefits as described in this
Plan.
ARTICLE II
2. Definitions.
2.1 "Act" shall mean the Employee Retirement Income
Security Act of 1974 ("ERISA") as amended from time to time.
2.2 "Pension Plan" shall mean the Boise Cascade
Corporation Pension Plan for Salaried Employees as amended from
time to time.
2.3 "Code" shall mean the Internal Revenue Code of
1986 as amended from time to time.
2.4 "Company" shall mean Boise Cascade Corporation and
any of its subsidiaries or affiliated business entities
participating in the Pension Plan.
2.5 "Compensation" shall mean a Participant's
compensation as defined in the Pension Plan, but without regard
to any limitations required by Section 401(a)(17) of the Code,
and including amounts voluntarily deferred at the Participant's
election under any of the nonqualified deferred compensation
plans of the Company.
2.6 "Effective Date" shall mean January 1, 1994.
2.7 "Maximum Benefit" shall mean the monthly
equivalent of the maximum benefit permitted by the Code to be
paid to a participant in the Company's Pension Plan, taking into
account all limitations required by the Code in order for the
Pension Plan to retain its qualified status under Section 401 of
the Code.
2.8 "Participant" shall mean any employee of the
Company who is an active Participant in the Pension Plan on or
after the Effective Date and whose pension benefits determined on
the basis of the provisions of the Pension Plan, without regard
to the limitations of the Code, would exceed the Maximum Benefits
permitted under the Code.
2.9 "Plan" shall mean the Boise Cascade Corporation
Supplemental Pension Plan, as amended from time to time, which
shall be an unfunded plan providing benefits for a select group
of senior management or highly compensated employees of the
Company.
2.10 "Unrestricted Benefit" shall mean the maximum
monthly normal, early, or deferred vested (or disability)
retirement benefit, whichever is applicable, which a Participant
has earned, calculated in accordance with the benefit formula
under the Pension Plan and determined without regard to any
limitations imposed by the Code, including but not limited to
limitations under Code Sections 401(a)(17) and 415. The amount
of the Unrestricted Benefit shall be based on a Participant's
Compensation as defined in this Plan.
2.11 All capitalized terms used herein not otherwise
defined shall have the meaning ascribed to such terms under the
Pension Plan.
ARTICLE III
3. Benefits.
3.1 Normal Retirement Benefit. Upon the Normal
Retirement of a Participant, as defined in the Pension Plan, a
Participant shall be entitled to a monthly benefit under this
Plan equal in amount to his or her Unrestricted Benefit minus the
Maximum Benefit.
3.2 Early Retirement Benefit. Upon the early
retirement of a Participant as provided under the Pension Plan,
such Participant shall be entitled to a monthly benefit under
this Plan equal to his or her Unrestricted Benefit minus the
Maximum Benefit.
3.3 Deferred Vested Retirement Benefit. If a
Participant terminates employment with the Company and is
entitled to a deferred vested retirement benefit provided under
the Pension Plan, such Participant shall be entitled to a monthly
benefit under this Plan equal to his or her Unrestricted Benefit
minus the Maximum Benefit.
3.4 Spousal Pension Benefit. Subject to Section 3.5
below, on the death of a Participant whose spouse is eligible for
a pre- or post-retirement surviving spouse benefit under the
Pension Plan, the Participant's surviving spouse shall be
entitled to a monthly benefit equal to the surviving spouse
benefit determined in accordance with the provisions of the
Pension Plan without regard to the limitations under the Code,
minus the Maximum Benefit.
3.5 Optional Forms of Benefit Payment. Retirement
benefits payable under this Article III shall be paid in such
form and at such time as benefits are payable to the Participant
under the Pension Plan, except as provided in Section 4.8 hereof.
ARTICLE IV
4. Plan Administration.
4.1 Administrator. The Plan shall be administered by
the Company, acting through its Retirement Committee, which shall
have complete and unrestricted authority to interpret the Plan
and issue such administrative rules and procedures and it deems
appropriate in its sole discretion. The administrator shall have
the duty and responsibility of maintaining records, making the
requisite calculations and disbursing the payments hereunder.
The Plan administrator's interpretations, determinations,
procedures, and calculations shall be final and binding on all
persons and parties concerned.
4.2 Amendment and Termination. The Company may amend
or terminate the Plan at any time, acting through the Executive
Compensation Committee of the Company's board of directors,
provided, however, that no such amendment or termination shall
adversely affect a benefit to which a Participant or his or her
beneficiary is entitled under Article III prior to the effective
date of such amendment or termination unless such Participant or
beneficiary becomes entitled to an amount equal to such benefit
under another plan or policy adopted by the Company.
4.3 Payments. The Company will pay all benefits
arising under this Plan and all costs, charges, and expenses
relating hereto.
4.4 Nonassignability of Benefits. The benefits
payable hereunder or the right to receive future benefits under
the Plan may not be anticipated, alienated, pledged, encumbered,
or subjected to any charge or legal process, and if any attempt
is made to do so, or a person eligible for any benefit becomes
bankrupt, the interest under the Plan of the person affected may
be terminated by the administrator which, in its sole discretion,
may cause the same to be held or applied for the benefit of one
or more of the dependents of such person or make any other
disposition of such benefits that it deems appropriate in its
sole discretion.
4.5 Status of Plan. The benefits under this Plan
shall not be funded but shall constitute liabilities by the
Company payable when due.
4.6 Nonguarantee of Employment. Nothing contained in
this Plan shall be construed as a contract of employment between
the Company and any Participant, or as a right of any Participant
to be continued in employment of the Company, or as a limitation
on the right of the Company to terminate the employment of any of
its employees, with or without cause.
4.7 Applicable Law. All questions pertaining to the
construction, validity, and effect of this Plan shall be
determined in accordance with the laws of the United States and,
to the extent not preempted by such laws, by the laws of the
state of Idaho.
4.8 Deferred Compensation and Benefits Trust. Upon a
potential change in control of the Company (as defined in the
Company's deferred compensation and benefits trust) the Company
shall calculate using reasonable assumptions, the present value
of all amounts payable under this Plan (the "Funding Amount")
and, thereupon, shall transfer to the trustee of the Deferred
Compensation and Benefits Trust, an amount equal to 105% of the
funding amount in cash or marketable securities, to be held by
the trustee subject to and in accordance with the terms of the
Deferred Compensation and Benefits Trust. For purposes of
calculating the funding amount, any employee whose employment has
not previously been terminated and who is entitled to benefits
hereunder shall be deemed for this purpose to have terminated his
or her employment with the Company upon the later of the second
anniversary of the potential change in control or the date as of
which that calculation is being made.
4.9 Appeals Procedure. Claims for benefits under this
Plan shall be subject to determination and review by the Company.
If any Participant disagrees with the Company's determination of
benefits hereunder, the Participant shall have the right to
appeal the Company's determination in accordance with procedures
adopted by the Company applicable to appeals under the Pension
Plan.
BOISE CASCADE CORPORATION
1984 KEY EXECUTIVE STOCK OPTION PLAN
As Amended Through July 28, 1994
BOISE CASCADE CORPORATION
1984 KEY EXECUTIVE STOCK OPTION PLAN
1. Establishment and Purpose
1.1 Establishment. Boise Cascade Corporation, a Delaware
corporation, hereby establishes a Stock Option Plan for key
employees, which shall be known as the Boise Cascade
Corporation 1984 KEY EXECUTIVE STOCK OPTION PLAN (the "Plan").
It is intended that some of the options issued pursuant to the
Plan may constitute incentive stock options within the meaning
of Section 422A of the Internal Revenue Code, and the
remainder of the options issued pursuant to the Plan shall
constitute nonstatutory options. The Committee referred to in
Section 2.1(c) of this Plan shall determine which options are
to be incentive stock options and which are to be nonstatutory
options and shall enter into option agreements with Optionees
accordingly.
1.2 Purpose. The purpose of this Plan is to attract,
retain and motivate key employees of the Company and to
encourage stock ownership by these employees by providing them
with a means to acquire a proprietary interest or to increase
their proprietary interest in the Company's success.
2. Definitions
2.1 Definitions. Whenever used in this Plan, the
following terms shall have the meanings set forth below:
(a) "Board" means the board of directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1954, as
amended.
(c) "Committee" means the Executive Compensation
Subcommittee of the Human Resources Committee of the Board of
Directors of the Company or any successor to the subcommittee.
(d) "Company" means Boise Cascade Corporation, a
Delaware corporation, as well as any subsidiary of which 50%
or more of the outstanding stock is owned by Boise Cascade
Corporation.
(e) "Date of Exercise" means the date the Company
receives written notice, by an Optionee, of the exercise of an
Option or Option and Stock Appreciation Right, pursuant to
subsection 8.1 of this Plan.
(f) "Employee" means a key employee (including an
officer of the Company), who is employed by the Company on a
full-time basis, who is compensated for such employment by a
regular salary and who, in the opinion of the Committee, is in
a position to contribute materially to its continued growth
and development and to its future financial success. The term
"Employee" does not include persons who are retained by the
Company only as consultants.
(g) "Fair Market Value" means the closing price of the
Stock as reported by the consolidated tape of the New York
Stock Exchange on a particular date, or if the Stock is not
listed or traded on the New York Stock Exchange, then the
closing sales price of the Stock on a national securities
exchange on a particular date, or if the Stock is not listed
on a national securities exchange, then the average of the
closing bid and asking prices for the Stock in the over-the-
counter market for a particular date, or if the Stock is not
traded in the over-the-counter market, such value as the
Company in its discretion may determine, but in no event
greater than the then fair market value of the Stock for
federal income tax purposes. In the event that there are no
Stock transactions on such date, the Fair Market Value shall
be determined as of the immediately preceding date on which
there were Stock transactions.
(h) "Grant Price" means an amount not less than 100%
of the Fair Market Value of the Company's Stock on the date of
an Option's grant.
(i) "Option" means the right to purchase Stock of the
Company at the Grant Price for a specified duration. For pur-
poses of this Plan, an Option may be either (i) an "Incentive
Stock Option" within the meaning of Section 422A of the Code
or (ii) a "Nonstatutory Option."
(j) "Optionee" means an Employee who has been granted
an Option under this Plan.
(k) "Stock" means the common stock, $2.50 par value,
of the Company.
(l) "Stock Appreciation Right" means the right,
exercisable by the Optionee, to receive a cash payment from
the Company upon the exercise of an Option. The amount of
this cash payment and the conditions upon the exercise of the
Stock Appreciation Right shall be determined by the Committee
pursuant to subsection 6.2 and Section 7.
(m) "Tax Offset Bonus" means a cash payment which the
Company makes automatically upon the exercise of an Option
equal to a percentage (as determined by the Committee pursuant
to subsection 6.2 and Section 7) of the excess of the Fair
Market Value of the Stock on a date determined by the
Committee over the Grant Price of the Option, the purpose of
which is to offset partially the federal income tax incurred
incident to exercising a Nonstatutory Option.
(n) "Window Period" means the period described in
Rule 16b-3(e)(3)(iii) under the Securities Exchange Act of
1934.
2.2 Number. Except when otherwise indicated by the
context, the definition of any term in the Plan in the
singular shall also include the plural.
3. Participation
Participation in the Plan shall be determined by the
Committee. Any Employee at any one time and from time to time
may hold more than one Option or Stock Appreciation Right
granted under this Plan or under any other plan of the
Company. No member of the Committee may participate in the
Plan.
4. Stock Subject to the Plan
4.1 Number. The total number of shares of Stock as to
which Options and Stock Appreciation Rights may be granted
under the Plan shall not exceed 7,500,000. These shares may
consist, in whole or in part, of authorized but unissued Stock
or treasury Stock not reserved for any other purpose.
4.2 Unused Stock. If any shares of Stock are subject to
an Option or Stock Appreciation Right which, for any reason,
expires or is terminated unexercised as to such shares, such
Stock may again be subjected to an Option or Stock
Appreciation Right pursuant to this Plan.
4.3 Adjustment in Capitalization. In the event of any
change in the outstanding shares of Stock occurring after
ratification by shareholders of this Plan, by reason of a
Stock dividend or split, recapitalization, reclassification,
merger, consolidation, combination or exchange of shares or
other similar corporate change, the aggregate number of shares
of Stock under this Plan and the number of shares of Stock
subject to each outstanding Option and the related Grant Price
shall be appropriately adjusted by the Committee, whose
determination shall be conclusive, provided, however, that
fractional shares shall be rounded to the nearest whole share.
No adjustments shall be made in connection with the issuance
by the Company of any warrants, rights or Options to acquire
additional shares of Stock or of securities convertible into
Stock.
5. Duration of the Plan
The Plan shall remain in effect until all Stock subject to
it has been purchased pursuant to the exercise of the Options
or Stock Appreciation Rights granted under the Plan. Notwith-
standing the foregoing, no Options or Stock Appreciation
Rights may be granted pursuant to this Plan on or after the
twentieth anniversary of the Plan's effective date.
6. Options
6.1 Grant of Options. Subject to the provisions of
subsection 4.1 and Section 5, Options may be granted to
Employees at any time and from time to time as shall be deter-
mined by the Committee. The Committee may request recommenda-
tions from the chief executive officer of the Company. The
Committee shall determine whether an Option is to be an
Incentive Stock Option within the meaning of Section 422A of
the Code or a Nonstatutory Option. However, in no event shall
any grant of an Incentive Stock Option provide for the option
to be or become exercisable in amounts in excess of $100,000
per calendar year. Furthermore, the aggregate number of
shares of Stock with respect to which Options or Stock
Appreciation Rights may be granted to any one Employee
throughout the duration of the Plan may not exceed 15 percent
of the total number of shares of Stock available for issuance
pursuant to subsection 4.1 of the Plan.
6.2 Option Agreement. As determined by the Committee on
the date of grant, each Option shall be evidenced by a Stock
Option agreement that specifies:
(i) Grant Price;
(ii) duration of the Option;
(iii) number of shares of Stock to which the Option
pertains;
(iv) vesting requirements, if any;
(v) whether the Option is an Incentive Stock Option or
a Nonstatutory Option;
(vi) amount and time of payment of Tax Offset Bonuses,
if any;
(vii) The amount of Stock Appreciation Rights, if any,
and any conditions upon their exercise;
(viii) duration of the Stock Appreciation Rights, if any;
(ix) Options to which the Stock Appreciation Rights, if
any, relate;
(x) rights of the Optionees upon termination of
employment with the Company, provided that the
termination rights for Optionees receiving
Incentive Stock Options shall conform with
Section 422A of the Code;
(xi) the terms of the loan, if any, that will be made
available in connection with the exercise of an
Option; and
(xii) such other information as the Committee deems
desirable.
No Option shall have an expiration date later than the
first day following the tenth anniversary of the date of its
grant. The Stock Option agreement may be supplemented by
adding Stock Appreciation Rights with or Tax Offset Bonuses to
previously granted Options as provided in Section 7.
6.3 Exercise. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions
and conditions as the Committee directs, which need not be the
same for all Optionees.
6.4 Payment. The Grant Price upon exercise of any Option
shall be payable to the Company in full either:
(i) in cash;
(ii) by tendering shares of Stock having a Fair Market
Value at the time of exercise equal to the total
Grant Price (in the exercise of a Nonstatutory
Option, an Optionee may surrender one or more
shares of Stock in the exercise of an Option with
instructions to resurrender any shares acquired
upon exercise in one or more successive,
simultaneous exercises until Options covering the
number of shares, which he specifies, have been
exercised);
(iii) with the proceeds of a loan on such terms and
conditions as may be authorized by the Committee
(however, the rate of interest on any such loan
shall not be less than the applicable federal rate
under Section 1274(d) of the Code on the date an
Option is exercised, compounded semiannually); or
(iv) by any combination of (i), (ii) and (iii).
6.5. Cancellation of Previously Granted Options. In
the event the Fair Market Value of Stock is ever less than the
Option Price of any outstanding Nonstatutory Option, the
Committee may cancel the Nonstatutory Option and issue in its
place, a new substitute Nonstatutory Option for up to the same
number of shares at the then current Fair Market Value of the
Stock as of that new date of grant.
7. Stock Appreciation Rights and Tax Offset Bonuses
The Committee may grant Stock Appreciation Rights and/or
grant Options which pay Tax Offset Bonuses on such bases as
the Committee shall determine, including but not limited to
Stock Appreciation Rights which become exercisable or Tax
Offset Bonuses which become payable only upon an Optionee
being subject to the restrictions of Section 16 of the
Securities Exchange Act of 1934 at the time of exercise. A
Stock Appreciation Right or Tax Offset Bonus may be granted
only with respect to an Option and may be granted concurrently
with or after the grant of the Option. If Options granted on
a particular date include Stock Appreciation Rights for only
Optionees who are subject to the requirements of Section 16 of
the Securities Exchange Act of 1934, an Optionee receiving an
Option on that date and who thereafter becomes subject to
those restrictions shall thereupon be deemed to have received
Stock Appreciation Rights with respect to any unexercised
options granted on the particular date in the same weighted
average proportion as the Stock Appreciation Rights granted on
the same grant date to the Optionees who were subject to the
requirements of Section 16 of the Securities Exchange Act of
1934; provided, however, if 50% or more of the Board of
Directors are employees of the Company and may receive Options
under this plan, then the provisions of this sentence will
apply only if, in each instance, approved by the Committee.
The Committee may cancel or place a limit on the term of, or
the amount payable for, any Stock Appreciation Right or Tax
Offset Bonus at any time and may disapprove the election by
the Optionee to exercise a Stock Appreciation Right rather
than the related Option. The Committee shall determine all
other terms and provisions of any Stock Appreciation Right or
Tax Offset Bonus. Each Stock Appreciation Right or Tax Offset
Bonus granted by the Committee shall expire no later than the
expiration of the Option to which it relates. In addition,
any Stock Appreciation Right granted with respect to an
Incentive Stock Option may be exercised only if:
(i) such Incentive Stock Option is exercisable; and
(ii) the Grant Price of the Incentive Stock Option is
less than the Fair Market Value of the Stock on
the Date of Exercise.
8. Written Notice, Issuance of Stock Certificates, Payment of
Stock Appreciation Rights or Stockholder Privileges
8.1 Written Notice. An Optionee electing to exercise an
Option and any applicable Stock Appreciation Right shall give
written notice to the Company, in the form and manner
prescribed by the Committee, indicating the number of Options
to be exercised. Full payment for the Options exercised shall
be received by the Company prior to issuance of any stock
certificates.
8.2 Issuance of Stock Certificates. As soon as reasonably
practicable after the receipt of written notice and payment,
the Company shall issue and deliver to the Optionee or any
other person entitled to exercise an Option pursuant to this
Plan a certificate or certificates for the requisite number of
shares of Stock.
8.3 Payment of Stock Appreciation Rights and Tax Offset
Bonuses. As soon as practicable after receipt of written notice,
the Company shall pay to the Optionee, in cash, the amount
payable under the Stock Appreciation Rights and the amount of any
Tax Offset Bonuses.
8.4 Privileges of a Stockholder. An Optionee or any other
person entitled to exercise an Option under this Plan shall
not have stockholder privileges with respect to any Stock
covered by the Option until the Date of Exercise.
8.5 Partial Exercise. An Option may be exercised for less
than the total number of shares granted by the Option. An
exercise of a portion of the shares granted under the Option
shall not affect the right to exercise the Option from time to
time for any unexercised shares subject to the Option.
9. Rights of Employees
9.1 Employment. Nothing in this Plan shall interfere
with or limit in any way the right of the Company to terminate
any Employee's employment at any time, nor confer upon any
Employee any right to continue in the employ of the Company.
9.2 Nontransferability. All Options and Stock
Appreciation Rights granted under this Plan shall be nontrans-
ferable by the Optionee, other than by will or the laws of
descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee or the Optionee's
guardian or legal representative.
10. Optionee Transfer or Leave of Absence
For Plan purposes:
(a) A transfer of an Optionee from the Company to a
subsidiary or vice versa, or from one subsidiary to another;
or
(b) A leave of absence duly authorized by the Company,
shall not be deemed a termination of employment. However, an
Optionee may not exercise an Option or any applicable Stock
Appreciation Right during any leave of absence, unless
authorized by the Committee.
11. Administration
11.1 Administration. The Committee shall be responsible
for the administration of the Plan. The Committee, by
majority action thereof, is authorized to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating
to the Plan, to determine the form and content of Options to
be issued (which need not be identical) under the Plan, to
provide for conditions and assurances deemed necessary or
advisable to protect the interests of the Company and to make
all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not con-
trary to the express provisions of the Plan. The Committee
shall determine, within the limits of the express provisions
of the Plan, the Employees to whom and the time or times at
which Options and Stock Appreciation Rights shall be granted,
the number of shares to be subject to each Option and Stock
Appreciation Right and the duration of each Option. In making
such determinations, the Committee may take into account the
nature of the services rendered by such Employees or classes
of Employees, their present and potential contributions to the
Company's success and such other factors as the Committee, in
its discretion, shall deem relevant. The determination of the
Committee, its interpretation or other action made or taken
pursuant to the provisions of the Plan shall be final and
shall be binding and conclusive for all purposes and upon all
persons.
11.2 Incentive Stock Options. Notwithstanding any
contrary provision in this Plan, the Committee shall not take
any action or impose any terms or conditions with respect to
an Option intended by the Committee to be an Incentive Stock
Option which would cause such Option to not qualify as such
under the Code and applicable regulations and rulings in
effect from time to time.
12. Amendment, Modification and Termination of the Plan
The Board may at any time terminate, and at any time and
from time to time and in any respect, amend or modify the
Plan, provided, however, that no such action of the Board,
without approval of the stockholders, may:
(a) Increase the total amount of Stock which may be
purchased through Options granted under the Plan, except as
provided in subsection 4.3 of the Plan.
(b) Change the requirements for determining which
Employees are eligible to receive Options or Stock
Appreciation Rights.
(c) Change the provisions of the Plan regarding the
Grant Price except as permitted by subsection 4.3.
(d) Permit any person, while a member of the
Committee, to be eligible to receive or hold an Option under
the Plan.
(e) Change the manner of computing the amount to be
paid through a Stock Appreciation Right.
(f) Materially increase the cost of the Plan.
(g) Extend the period during which Options and Stock
Appreciation Rights may be granted.
No amendment, modification or termination of the Plan
shall in any manner adversely affect the rights of an Optionee
under the Plan without the consent of the Optionee.
13. Acceleration of Stock Options
13.1 Merger or Consolidation. In the event of a
dissolution or a liquidation of the Company or a merger and
consolidation in which the Company is not the surviving
corporation, the Options shall, immediately prior thereto, be
exercisable, whether or not otherwise exercisable, subject to
the provisions of this Plan.
13.2 Change of Control. If, while unexercised Options
remain outstanding hereunder (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended), other than the Company or an
employee benefit plan maintained by the Company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under such
Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any
period of two consecutive years, individuals who at the
beginning of such period constitute the Board, including for
this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office
who were directors at the beginning of the period, cease for
any reason to constitute a majority thereof, then from or
after the date on which public announcement of the acquisition
of such percentage shall have been made or the date on which
the change in the composition of the Board set forth above
shall have occurred, all Options shall be exercisable in full,
whether or not then exercisable under the terms of their
grant.
14. Withholding Taxes
Whenever shares of Stock are issued on the exercise of an
Option under this Plan, the Company shall (a) require the
recipient of the Stock to remit to the Company an amount
sufficient to satisfy all withholding taxes, (b) deduct from a
cash payment pursuant to any Stock Appreciation Right or Tax
Offset Bonus an amount sufficient to satisfy any withholding
tax requirements, or (c) withhold from, or require surrender
by, the recipient, as appropriate, shares of Stock otherwise
issuable or issued upon exercise of the Option the number of
shares sufficient to satisfy, to the extent permitted under
applicable law, federal and state withholding tax requirements
resulting from the exercise, provided, however, that the
Company shall not withhold or accept surrender of Stock under
this paragraph unless the recipient of the Stock has made an
irrevocable election to have Stock withheld or surrendered for
this purpose at least six months after the date of grant of
the Option and either (i) six months, or (ii) within a Window
Period, prior to the date the amount of withholding tax is
determined. The Committee may, at any time subsequent to an
election under this paragraph, disapprove the election and
require satisfaction of withholding taxes by other means
permitted under the Plan. Stock withheld or surrendered under
this paragraph shall be valued at its Fair Market Value on the
date the amount of withholding tax is determined.
15. Shareholder Approval and Registration Statement
Initially, the Plan is approved by the Board and will be
submitted to the Company's shareholders for approval at their
next annual meeting following the effective date of the Plan.
Options may be granted under the Plan prior to shareholder
approval and prior to filing with the Securities and Exchange
Commission and having an effective registration statement
covering the Stock to be issued upon the exercise of Options.
Any Options granted under this Plan prior to shareholder
approval and having an effective registration statement shall
not be exercisable until and are expressly conditional upon
shareholder approval of the Plan and having an effective
registration statement covering the Stock.
16. Requirements of Law
16.1 Requirements of Law. The granting of Options and
the issuance of shares of Stock upon the exercise of an Option
shall be subject to all applicable laws, rules and regula-
tions, and shares shall not be issued nor cash payments made
except upon approval of proper government agencies or stock
exchanges, as may be required.
16.2 Governing Law. The Plan, and all agreements
hereunder, shall be construed in accordance with and governed
by the laws of the state of Idaho.
17. Effective Date of Plan
The Plan shall become effective as of July 24, 1984,
subject to ratification by shareholders.
BOISE CASCADE CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option (the "Option") is granted
July 28, 1994, by BOISE CASCADE CORPORATION (the "Company") to
_______________, _______________ ("Optionee") pursuant to the
1984 Key Executive Stock Option Plan (the "Plan"), a copy of
which is attached as Exhibit A, subject to the following terms
and conditions.
1. This Agreement is subject to all the terms and
conditions of the Plan, and all capitalized terms not other-
wise defined in this Agreement shall have the meaning given
them in the Plan.
2. The Company hereby grants the Optionee a
nonstatutory stock option to purchase up to _______ shares of
Stock at a price of $24.875 per share.
3. The Option shall expire on the first to occur of
(a) ten years and one day from the date of this Agreement,
(b) three years after Optionee's retirement, death, or total
and permanent disability, or (c) three years following
termination of Optionee's employment with the Company provided
(i) the termination is the direct result of the sale or
permanent closure of any facility or operating unit of the
Company, and (ii) Optionee has not, as of the date of the
exercise of the Option, commenced employment with any
competitor of the Company; or (d) three months after termina-
tion of Optionee's employment with the Company for any other
reason, except that the Option shall be canceled in the event
of termination for disciplinary reasons.
4. Except as provided in Section 13 of the Plan, this
Option shall not be exercisable until after the first anniver-
sary of the date of this Agreement, and thereafter it shall be
exercisable in full.
5. This Option may be exercised from time to time by
delivery of written notice to the Company specifying the
number of shares of Stock to be purchased. Payment of the
Grant Price shall be made as provided in Section 6.4 of the
Plan.
BOISE CASCADE CORPORATION
By _______________________________
Alice E. Hennessey, Senior Vice President
Human Resources and Corporate Relations
Accepted:
By ___________________________
Optionee
BOISE CASCADE CORPORATION
DIRECTOR STOCK COMPENSATION PLAN
As Amended December 15, 1994
BOISE CASCADE CORPORATION
DIRECTOR STOCK COMPENSATION PLAN
1. PLAN ADMINISTRATION AND ELIGIBILITY
1.1 Purpose. The purpose of the Director Stock
Compensation Plan (the "Plan") of Boise Cascade Corporation
(the "Company") is to encourage ownership of the Company's
common stock by its nonemployee directors.
1.2 Administration. This Plan shall be administered by
the Executive Compensation Committee (the "Committee") of the
Board of Directors of the Company. The Committee shall have
full authority to administer this Plan, including authority to
interpret and construe any provision of this Plan and to adopt
such rules for administrating this Plan as it may deem neces-
sary or appropriate. Decisions of the Committee shall be
final and binding on all persons who have an interest in this
Plan.
1.3 Participation in the Plan. Directors of the Company
who are not employees of the Company or any of its
subsidiaries are eligible to participate in this Plan.
2. STOCK SUBJECT TO THE PLAN
2.1 Number of Shares. The maximum number of shares of
the Company's $2.50 par value Common Stock ("Common Stock" or
"Shares") which may be issued pursuant to options granted
under this Plan shall be one hundred thousand (100,000)
Shares, subject to adjustment as provided in Section 4.4.
2.2 Nonexercised Shares. If any outstanding option
under this Plan for any reason expires or is terminated with-
out having been exercised in full, the Shares allocable to the
unexercised portion of the option shall again become available
for issuance under options granted pursuant to this Plan.
2.3 Share Issuance. Upon the exercise of an option, the
Company may issue new Shares or reissue Shares previously
repurchased by or on behalf of the Company.
3. OPTIONS
3.1 Option Grant Dates. Options shall be granted
automatically to each participating director on December 31 of
each year (or, if December 31 is not a business day, on the
immediately preceding business day) (the "Grant Date").
3.2 Option Price. The purchase price per share for the
Shares covered by each option shall be $2.50 (the "Option
Price").
3.3 Number of Option Shares. The number of Shares
subject to options granted to each participating director on
each Grant Date will be the aggregate number of Shares
determined by the following formulas:
3.3.1 Elected Portion of Annual Retainer and
Meeting Fee Shares. The number of option Shares equal to the
nearest whole number determined by the following formula:
Elected Portion of Annual Retainer Number
and Meeting Fees = of
(Fair Market Value - $2.50) Option Shares
3.3.2 Dividend Equivalent Shares. The number of
option Shares equal to the nearest whole number determined by the
following formula:
Dividend Equivalent = Number of
(Fair Market Value - $2.50) Option Shares
3.3.3 Definitions. For purposes of determining the
number of Shares granted under this Section 3.3, the following
definitions will apply:
3.3.3.1 "Annual Retainer." The dollar
amount of compensation paid to eligible directors each year
which is identified by the Company as an annual retainer.
3.3.3.2 "Meeting Fees." The amount of
compensation, in excess of the Annual Retainer, paid to
eligible directors for their services as directors of the
Company, including but not limited to fees earned for service
as committee chairpersons and for meeting participation, but
excluding amounts paid as reimbursement for actual expenses.
3.3.3.3 "Dividend Equivalent." The
aggregate dollar value, determined each year, equal to the
product of (i) the number of Shares subject to options held by
a director pursuant to this Plan on each respective Record
Date during the year plus one-half the number of Shares to be
granted under Sections 3.3.1 and 3.3.2 for the year in which
this calculation is being made, multiplied by (ii) the value
of the dividend per Share paid by the Company for each
respective Record Date.
3.3.3.4 "Elected Portion of Annual Retainer
and Meeting Fees." A dollar amount determined each year for
each director equal to the dollar amount of both the percent-
age of the Annual Retainer, if any, and the percentage of
Meeting Fees, if any, which the director has irrevocably
elected, in writing, to have paid in the form of options
granted under this Plan. This written election must be
received by the secretary of the Company on or before
December 31 of each year and shall specify a percentage, up to
100%, of the director's Annual Retainer and a percentage, up
to 100%, of the director's Meeting Fees for the following year
to be paid in the form of options under this Plan; provided,
however, that in the initial year of the Plan's operation a
director's written election must be received by the secretary
of the Company on or before February 28, 1992, and shall be
effective only for Annual Retainer and Meeting Fee amounts
earned during the period April 1, 1992, through December 31,
1992. Eligible directors initially elected or appointed to
office as directors of the Company after adoption of this plan
may make a written election under this paragraph within
30 days following their initial election or appointment to
office, which election shall be effective for Annual Retainer
and Meeting Fee amounts earned during the calendar year of
their initial election or appointment to office.
3.3.3.5 "Fair Market Value." The closing
price for Shares on July 31 as reported on The New York Stock
Exchange Composite Tape or, if the New York Stock Exchange is
not open for trading on July 31, on the immediately preceding
trading day (the "Valuation Date").
3.3.3.6 "Record Date." Each date declared
as a record date by the Board of Directors for the purpose of
determining shareholders eligible to receive a dividend to be
paid on Shares.
3.4 Director Terminations. If a director participating
in this Plan retires, resigns, dies, or otherwise terminates
his or her position on the Company's Board of Directors, on
December 31 of the year in which the termination occurs the
director shall be granted an option for Shares under this Plan
equal in value to (i) the Elected Portion of Annual Retainer
and Meeting Fees and (ii) the Dividend Equivalent. For
purposes of this Section 3.4, the amount of the Annual
Retainer shall be prorated through the date of termination.
3.5 Written Agreements. Each grant of an option under
this Plan shall be evidenced by a written agreement, which
shall comply with and be subject to the terms and conditions
contained in this Plan.
3.6 Nonstatutory Stock Options. Options granted under
this Plan shall not be entitled to special tax treatment under
Section 422A of the Internal Revenue Code of 1986.
3.7 Period of Option. No option may be exercised within
six months of its Grant Date, provided, however, that options
held by a director shall be immediately exercisable upon
(i) that director's retirement because of age, disability, or
death, or (ii) the occurrence of any of the events described
in Section 3.11, [recognizing that Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Act"), may
limit a director's ability to resell the Shares acquired upon
the exercise until six months after the Grant Date]. No
option shall be exercisable after expiration of three years
from the date upon which the option holder terminates his or
her position as a director of the Company.
3.8 Exercise of Options. Options may be exercised only
by written notice to the secretary of the Company and payment
of the exercise price in (i) cash, (ii) Shares (a director may
surrender one or more Shares in the exercise of an Option with
instructions to resurrender any Shares acquired upon exercise
in one or more successive, simultaneous exercises until
Options covering the number of specified Shares have been
exercised), (iii) a loan from the Company, or (iv) delivery of
an irrevocable written notice instructing the Company to
deliver the Shares being purchased to a broker, subject to the
broker's written guarantee to deliver cash to the Company, in
each case equal to the full consideration of the Option Price
for the Shares which are being exercised. Options may be
exercised in whole or in part.
3.9 Options Nontransferable. Each option granted under
this Plan shall not be transferable by the optionee otherwise
than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or Title I of
the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder. No option
granted under this Plan, or any interest therein, may be
otherwise transferred, assigned, pledged, or hypothecated by
the director to which the option was granted during his or her
lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment, or similar process.
3.10 Exercise by Representative Following Death of
Director. A director, by written notice to the Company, may
designate one or more persons (and from time to time change
such designation), including his or her legal representative,
who, by reason of the director's death, shall acquire the
right to exercise all or a portion of an option granted under
this Plan. Any exercise by a representative shall be subject
to the provisions of this Plan.
3.11 Acceleration of Stock Options.
3.11.1 Merger or Consolidation. Notwithstanding
Section 3.7, in the event of a dissolution or a liquidation of
the Company or a merger and consolidation in which the Company
is not the surviving corporation, any unexercised options
granted prior to the date of the merger or consolidation shall
become exercisable immediately prior to the date of the merger
or consolidation. In addition, upon the occurrence of any of
these events, any pro rata amounts of the Elected Portion of
Annual Retainer, Meeting Fees earned, and Dividend Equivalent
for the year in which such event occurs, which would otherwise
have been paid in the form of options granted under this Plan
shall be promptly paid to each participating director in cash.
3.11.2 Change of Control. If, while unexercised
options remain outstanding hereunder, (i) any "person" (as
this term is used in Sections 13(d) and 14(d) of the Act)
other than the Company or an employee benefit plan maintained
by the Company is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities or (ii) during any period of two consecutive years,
individuals who at the beginning of the period constitute the
company's board of directors, including for this purpose any
new director whose election or nomination for election by the
Company's shareholders was approved by a vote of at least two-
thirds of the directors then still in office who were direc-
tors at the beginning of the period, cease for any reason to
constitute a majority of the members of the board, then from
and after the date on which public announcement of the
acquisition of such percentage is made or the date on which
the change in the composition of the Board set forth above
occurs, all options previously granted under this Plan shall
be immediately exercisable in full.
4. GENERAL PROVISIONS
4.1 Effective Date of This Plan. This Plan shall be
effective January 1, 1992, subject to approval by the share-
holders of the Company. Options may be granted under this
Plan only after shareholder approval of this Plan. Directors
may give written notice pursuant to Section 3.3.4.4 any time
after December 1, 1991.
4.2 Duration of This Plan. This Plan shall remain in
effect until all Shares subject to option grants have been
purchased or all unexercised options have expired. Notwith-
standing the foregoing, no options may be granted pursuant to
this Plan on or after the tenth anniversary of this Plan's
effective date.
4.3 Amendment of This Plan. The Committee may suspend
or discontinue this Plan or revise or amend it in any respect,
provided, however, that without approval of a majority of the
Company's shareholders no revision or amendment shall
(i) change the number of Shares subject to this Plan (except
as provided in Section 4.4), (ii) change the designation of
the class of directors eligible to participate in the Plan,
(iii) change the formulas to determine the amount, price, or
timing for the grants, or (iv) materially increase the bene-
fits accruing to participants under this Plan. Moreover, in
no event may these Plan provisions be amended more than once
every six months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules and regulations thereunder. No amendment,
modification, or termination of this Plan shall in any manner
adversely affect the rights of directors holding options
granted under this Plan without their consent.
4.4 Changes in Shares. In the event of any merger, con-
solidation, reorganization, recapitalization, stock dividend,
stock split, or other change in the corporate structure or
capitalization affecting the Shares, appropriate adjustment
shall be made in the number (including the aggregate numbers
specified in Section 2.1) and kind of Shares or other
securities which are or may become subject to options granted
under this Plan prior to and subsequent to the date of the
change.
4.5 Limitation of Rights.
4.5.1 No Right to Continue as a Director. Neither
this Plan, nor the granting of an option under this Plan, nor
any other action taken pursuant to this Plan shall constitute
or be evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any
period of time, or at any particular rate of compensation.
4.5.2 No Shareholders' Rights for Options. An
optionee shall have no rights as a shareholder with respect to
the Shares covered by his or her options until the date of the
issuance to him or her of a stock certificate therefor.
4.6 Assignments. The rights and benefits under this
Plan may not be assigned except as provided in Sections 3.9
and 3.10.
4.7 Notice. Any written notice to the Company required
by any of the provisions of this Plan shall be addressed to
the secretary of the Company and shall become effective when
it is received.
4.8 Shareholder Approval and Registration Statement.
This Plan shall be approved by the Board of Directors and
submitted to the Company's shareholders for approval. Direc-
tors may elect to participate in this Plan prior to share-
holder approval and prior to filing (and effectiveness of) a
registration statement with the Securities and Exchange
Commission covering the Shares to be issued upon the exercise
of options. Any options granted under this Plan prior to
effectiveness of the registration statement shall not be
exercisable until, and are expressly conditional upon, the
effectiveness of a registration statement covering the Shares.
4.9 Governing Law. This Plan and all determinations
made and actions taken pursuant hereto shall be governed by
and construed in accordance with the laws of the state of
Delaware.
BOISE CASCADE CORPORATION
DIRECTOR STOCK OPTION PLAN
Adopted December 15, 1994
BOISE CASCADE CORPORATION
DIRECTOR STOCK OPTION PLAN
1. PLAN ADMINISTRATION AND ELIGIBILITY
1.1 Purpose. The purpose of the Boise Cascade Corporation
Director Stock Option Plan (the "Plan") is to encourage ownership
of the Company's common stock by its nonemployee directors.
1.2 Administration. This Plan shall be administered by the
Executive Compensation Committee (the "Committee") of the Board
of Directors of the Company. The Committee shall have full
authority to administer this Plan, including authority to
interpret and construe any provision of this Plan and to adopt
such rules for administration of this Plan as it may deem neces-
sary or appropriate. Decisions of the Committee shall be final
and binding on all persons who have an interest in this Plan.
1.3 Participation in the Plan. Individuals who are
directors of the Company as of each January 1, and who are not
employees of the Company or any of its subsidiaries, are eligible
to receive grants of options in that calendar year in accordance
with Section 3.1 of this Plan ("Eligible Directors").
2. STOCK SUBJECT TO THE PLAN
2.1 Number of Shares. The maximum number of shares of the
Company's $2.50 par value Common Stock ("Common Stock" or
"Shares") which may be issued pursuant to options granted under
this Plan shall be one hundred thousand Shares, subject to
adjustment as provided in Section 4.4.
2.2 Nonexercised Shares. If any outstanding option under
this Plan for any reason expires or is terminated without having
been exercised in full, the Shares allocable to the unexercised
portion of the option shall again become available for issuance
under options granted pursuant to this Plan.
2.3 Share Issuance. Upon the exercise of an option, the
Company may issue new Shares or reissue Shares previously
repurchased by or on behalf of the Company.
3. OPTIONS
3.1 Option Grant Dates. Options shall be granted
automatically to each Eligible Director on July 31 of each year
(or, if July 31 is not a business day, on the immediately
preceding trading day) (the "Grant Date"). Any Eligible Director
first elected as a director after July 31 but prior to
December 31 in any year shall be granted an option covering the
same number of shares as options granted to other Eligible
Directors on the Grant Date for that calendar year. The Grant
Date for an option granted to a newly-elected director hereunder
shall be the date of such director's election to the board, and
the Option Price of such option shall be determined as of such
Grant Date.
3.2 Option Price. The purchase price per share for the
Shares covered by each option shall be the closing price for a
share of Common Stock as reported on the composite tape by the
New York Stock Exchange on the Grant Date (the "Option Price").
3.3 Number of Option Shares. The number of Shares subject
to options granted to each participating director on each Grant
Date will be 1,000. The board of directors may increase or
decrease this number, not more frequently than once each year, by
action taken at least six months prior to the Grant Date for
which such increase or decrease is effective.
3.4 Director Terminations. If a director participating in
this Plan retires, resigns, dies, or otherwise terminates his or
her position on the Company's Board of Directors prior to January
1 of any year, he or she shall not be eligible to receive a grant
of an option in the year immediately following the year in which
he or she so terminates.
3.5 Written Documentation. Each grant of an option under
this Plan shall be evidenced in writing, which shall comply with
and be subject to the terms and conditions contained in this
Plan.
3.6 Nonstatutory Stock Options. Options granted under this
Plan shall not be entitled to special tax treatment under
Section 422A of the Internal Revenue Code of 1986.
3.7 Period of Option. Options may be exercised 12 months
after their Grant Date, provided, however, that options held by a
director shall be immediately exercisable upon the occurrence of
any of the events described in Section 3.11, recognizing that
Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Act"), may limit a director's ability to resell the Shares
acquired upon the exercise until six months after the Grant Date.
No option shall be exercisable after the earlier to occur of
(a) three years from the date upon which the option holder
terminates his or her position as a director of the Company or
(b) ten years from the option's Grant Date.
3.8 Exercise of Options. Options may be exercised only by
written notice to the secretary of the Company and payment of the
exercise price in (i) cash, (ii) Shares, (iii) a loan from the
Company, or (iv) delivery of an irrevocable written notice
instructing the Company to deliver the Shares being purchased to
a broker selected by the Company, subject to the broker's written
guarantee to deliver cash to the Company, in each case equal to
the full consideration of the Option Price for the Shares which
are being exercised. Options may be exercised in whole or in
part.
3.9 Options Nontransferable. Each option granted under
this Plan shall not be transferable by the optionee other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and the rules
and regulations thereunder. No option granted under this Plan,
or any interest therein, may be otherwise transferred, assigned,
pledged, or hypothecated by the director to which the option was
granted during his or her lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment, or
similar process.
3.10 Exercise by Representative Following Death of Director.
A director, by written notice to the Company, may designate one
or more persons (and from time to time change such designation),
including his or her legal representative, who, by reason of the
director's death, shall acquire the right to exercise all or a
portion of an option granted under this Plan. Any exercise by a
representative shall be subject to the provisions of this Plan.
3.11 Acceleration of Stock Options.
3.11.1 Merger or Consolidation. Notwithstanding
Section 3.7, in the event of a dissolution or a liquidation of
the Company or a merger and consolidation in which the Company is
not the surviving corporation, any unexercised options granted
prior to the date of the merger or consolidation shall become
exercisable immediately prior to the date of the merger or con-
solidation.
3.11.2 Change of Control. If, while unexercised
options remain outstanding hereunder, (i) any "person" (as this
term is used in Sections 13(d) and 14(d) of the Act) other than
the Company or an employee benefit plan maintained by the Company
is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities or (ii) during any
period of two consecutive years, individuals who at the beginning
of the period constitute the Company's board of directors,
including for this purpose any new director whose election or
nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the
period, cease for any reason to constitute a majority of the
members of the board, then from and after the date on which
public announcement of the acquisition of such percentage is made
or the date on which the change in the composition of the Board
set forth above occurs, all options previously granted under this
Plan shall be immediately exercisable in full.
4. GENERAL PROVISIONS
4.1 Effective Date of This Plan. This Plan shall be
effective December 16, 1994, subject to approval by the share-
holders of the Company. Options may be granted under this Plan
only after shareholder approval of this Plan.
4.2 Duration of This Plan. This Plan shall remain in
effect until all Shares subject to option grants have been pur-
chased or all unexercised options have expired. Notwithstanding
the foregoing, no options may be granted pursuant to this Plan on
or after the tenth anniversary of this Plan's effective date.
4.3 Amendment of This Plan. The board of directors may
suspend or discontinue this Plan or revise or amend it in any
respect, provided, however, that without approval of a majority
of the Company's shareholders no revision or amendment shall
(i) change the number of Shares subject to this Plan (except as
provided in Section 4.4), (ii) change the designation of the
class of directors eligible to participate in the Plan,
(iii) change the exercise price of the options, or
(iv) materially increase the benefits accruing to participants
under or the cost of this Plan to the Company. Moreover, in no
event may Plan provisions be amended more than once every six
months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the
rules and regulations thereunder. No amendment, modification, or
termination of this Plan shall in any manner adversely affect the
rights of any director holding options granted under this Plan
without his or her consent.
4.4 Changes in Shares. In the event of any merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, or other change in the corporate structure or
capitalization affecting the Shares, appropriate adjustment shall
be made in the number (including the aggregate numbers specified
in Section 2.1) and kind of Shares or other securities which are
or may become subject to options granted under this Plan prior to
and subsequent to the date of the change.
4.5 Limitation of Rights.
4.5.1 No Right to Continue as a Director. Neither
this Plan, nor the granting of an option under this Plan, nor any
other action taken pursuant to this Plan shall constitute or be
evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time,
or at any particular rate of compensation.
4.5.2 No Shareholders' Rights for Options. An
optionee shall have no rights as a shareholder with respect to
the Shares covered by his or her options until the date of the
issuance to him or her of a stock certificate therefor.
4.6 Assignments. The rights and benefits under this Plan
may not be assigned except as provided in Sections 3.9 and 3.10.
4.7 Notice. Any written notice to the Company required by
any of the provisions of this Plan shall be addressed to the
secretary of the Company and shall become effective when it is
received.
4.8 Shareholder Approval and Registration Statement. This
Plan shall be approved by the Board of Directors and submitted to
the Company's shareholders for approval. Any options granted
under this Plan prior to effectiveness of a registration state-
ment filed with the Securities and Exchange Commission covering
the Shares to be issued hereunder shall not be exercisable until,
and are expressly conditional upon, the effectiveness of a
registration statement covering the Shares.
4.9 Governing Law. This Plan and all determinations made
and actions taken pursuant hereto shall be governed by and
construed in accordance with the laws of the state of Delaware.
EXHIBIT 12
BOISE CASCADE CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
Year Ended December 31
1990 1991 1992 1993 1994
(dollar amounts expressed in thousands)
Interest costs $ 142,980 $ 201,006 $ 191,026 $ 172,170 $ 169,170
Interest capitalized during the period 35,533 6,498 3,972 2,036 1,630
Interest factor related to
noncapitalized leases(1) 3,803 5,019 7,150 7,485 9,161
_________ _________ _________ _________ _________
Total fixed charges $ 182,316 $ 212,523 $ 202,148 $ 181,691 $ 179,961
Income (loss) before income taxes $ 121,400 $(128,140) $(252,510) $(125,590) $ (64,750)
Undistributed (earnings) losses of
less than 50% owned persons, net
of distributions received 2,966 (1,865) (2,119) (922) (1,110)
Total fixed charges 182,316 212,523 202,148 181,691 179,961
Less: Interest capitalized (35,533) (6,498) (3,972) (2,036) (1,630)
Guarantee of interest on
ESOP debt (24,869) (24,283) (23,380) (22,208) (20,717)
_________ _________ _________ _________ _________
Total earnings (losses) before fixed charges $ 246,280 $ 51,737 $ (79,833) $ 30,935 $ 91,754
Ratio of earnings to fixed charges(2) 1.35 - - - -
(1) Interest expense for operating leases with terms of one year or longer is based on an imputed interest
rate for each lease.
(2) Earnings before fixed charges were inadequate to cover total fixed charges by $160,786,000,
$281,981,000, $150,756,000, and $88,207,000 at December 31, 1991, 1992, 1993, and 1994.
Financial Highlights
1994 (1) 1993 1992
_____________________________________________________________________________________________________
Sales $4,140,390,000 $3,958,300,000 $3,715,590,000
Net loss $ (62,610,000) $ (77,140,000) $ (227,480,000) (2)
Net loss per common share
Primary $(3.08) $(3.17) $(6.73)
Fully diluted (3) $(3.08) $(3.17) $(6.73)
Shareholders' equity per common share $21.77 $25.92 $29.95
Capital expenditures $ 271,864,000 $ 221,481,000 $ 282,951,000
Number of employees 16,618 17,362 17,222
Number of common shareholders 24,808 25,930 31,006
Number of shares of common stock
outstanding 38,284,186 (4) 37,987,529 37,940,312
_____________________________________________________________________________________________________
(1) In October 1994, the Company's Canadian subsidiary, Rainy River Forest Products Inc. ("Rainy
River"), completed the sale of securities in a public offering. The net loss includes a
nonrecurring noncash charge of $27,000,000 after tax, or 71 cents per share, related to this
transaction. Rainy River has been accounted for on the equity method retroactive to January 1,
1994.
(2) Includes a one-time noncash charge of $73,450,000 after tax, or $1.94 per fully diluted common
share, for the adoption of Financial Accounting Standards Board requirements to accrue
postretirement benefits other than pensions.
(3) The computation of fully diluted net loss per common share for the periods shown was
antidilutive; therefore, the amounts reported for primary and fully diluted net loss are the
same.
(4) On January 15, 1995, the Company's Series E preferred stock converted to 8,625,000 shares of
common stock.
FINANCIAL REVIEW
Results of Operations
1994 Compared With 1993. Boise Cascade reported a net loss of
$62.6 million, or $3.08 per fully diluted common share, in 1994.
This compares with a net loss of $77.1 million, or $3.17 per
fully diluted common share, in 1993.
The 1994 loss includes a net noncash charge of $27 million, or
71 cents per fully diluted share, related to the sale by Rainy
River Forest Products Inc., the Company's Canadian subsidiary, of
a portion of its equity in an initial public offering. The 1993
loss includes pretax gains on the sales of assets totaling
$13.9 million, or 23 cents per share, and a net charge of
$2.1 million, or 6 cents per share, resulting from changes in
statutory tax rates in the U.S. and Canada.
Excluding nonrecurring gains and charges, the Company lost
$35.6 million, or $2.37 per share, in 1994, compared with a loss
of $83.6 million, or $3.34 per share, in 1993.
Sales in 1994, which exclude sales by Rainy River, were
$4.14 billion. This compares with $3.96 billion in 1993,
including sales of $309 million by Rainy River operations. The
increase was due primarily to additional sales in office products
distribution and improving paper prices.
The 1994 loss was due principally to continued weak pricing in
our paper business. In recent years, pricing has been poor for
all of the Company's grades of paper, but particularly for our
highest-volume grades.
In the second half of 1994, the cycle in the paper business
turned sharply positive. As European economies improved, supply
and demand came into better balance, which slowed exports of
European paper. Domestic demand continued to grow. Industry
operating rates strengthened, and product prices began to rise.
The Company's paper segment became profitable in the third
quarter, and the Company overall became profitable in the fourth
quarter.
The paper segment, which excludes Rainy River results, reported
an operating loss of $38 million in 1994. This compares with a
loss of $138 million in 1993, including a loss of approximately
$40 million from operations making up Rainy River. The improved
results were due to rising paper prices, increased unit sales
volume, and an improved product mix. Segment sales on a
comparable-facility basis rose 11%, compared with those of a year
ago, to $1.8 billion.
Average prices for uncoated business and printing papers
(uncoated free sheet), newsprint, containerboard, and market pulp
rose from 1993 levels. Prices for coated papers rose in the
second half of the year, but average prices for the full year
were flat, compared with 1993 levels. The average price per ton
for all of our pulp and paper sold in 1994 was up 6% over the
average price in 1993 but was still 26% below the peak reached in
1989.
The Company's cost-reduction efforts have helped offset weak
product prices over the last several years, positioning the paper
business for a sharp recovery. From 1990 to 1993, capital
investment and internal process improvements have reduced unit
manufacturing cash costs in paper about 11%, or nearly
$200 million below what they otherwise would have been. On a
comparable-facility basis, unit manufacturing costs in 1994 were
roughly the same as in 1993.
Unit sales volume on a comparable-facility basis rose 5% to
2.9 million tons in 1994, as improved machine efficiency
increased production from existing equipment and as
market-related downtime declined.
In October 1994, Rainy River Forest Products sold a portion of
its equity and certain debt securities to the public. Rainy
River owns Boise Cascade's former West Tacoma, Washington, and
Kenora, Ontario, newsprint mills and its former Fort Frances,
Ontario, uncoated groundwood paper mill. Rainy River also has
a contract to sell the newsprint produced by our DeRidder,
Louisiana, mill.
Rainy River's equity securities were sold at a premium to its
net book value. However, after translation to U.S. dollars, the
recognition of certain transaction costs, and a noncash charge
for U.S. taxes on undistributed Canadian earnings, Boise Cascade
recorded a net charge of $27 million.
Boise Cascade now owns a 60% equity interest and 49% voting
interest in Rainy River. The Rainy River transactions allowed
Boise Cascade to reduce its debt by approximately $330 million.
In addition, Rainy River is now able to independently fund its
own capital requirements.
Operating income for the office products segment was $42 million
in 1994, compared with $36 million in 1993. Dollar sales volume
increased 33% to $909 million. Sales were added from new and
recently acquired operations and increased business at existing
facilities. Sales volume rose 15% on a same-store basis.
In the second quarter of 1994, the Company completed the
acquisition of the direct-mail business of The Reliable
Corporation. During 1994 and early 1995, Boise Cascade Office
Products acquired office products distribution businesses in
Atlanta, Georgia; Jacksonville, Florida; and Columbus, Ohio. If
we had owned these facilities for the entire year, they would
have added approximately $196 million of annual sales to the
business. The Company also opened a new facility in Denver,
Colorado, in 1994.
In December 1994, the Company announced plans to sell a minority
interest in our office products distribution business through an
initial public offering of equity securities. The sale should
help achieve two objectives. It should facilitate our acceler-
ated growth of this business, and part of the net proceeds
of the offering will be used initially to reduce Boise Cascade's
debt, thus strengthening our balance sheet.
Operating income for the building products segment was
$151 million in 1994, compared with a record $159 million in
1993. Sales increased 8% to $1.7 billion. Average prices for
plywood rose 4% from year-earlier levels, while lumber prices
remained flat. Prices remained at high levels by historical
standards because of continued constraints on the supply of
timber available for commercial harvest in the Pacific Northwest.
The cost of logs delivered to the Company's wood products
operations increased for the same reason and was up 5% in 1994
over 1993 costs. The 1994 increase was more moderate than in
recent years, as logs from private, nonindustrial lands mitigated
near-term timber supply issues.
In early 1995, the Company completed an expansion of its White
City, Oregon, engineered wood products facility that increased
annual capacity by 50% to 6 million cubic feet. We have also
announced construction of a new facility near Alexandria,
Louisiana, which will add 4.4 million cubic feet of annual
capacity by mid-1996 and can be expanded further to 8 million
cubic feet at minimal incremental cost.
1993 Compared With 1992. Boise Cascade reported a net loss of
$77.1 million, or $3.17 per fully diluted common share, in 1993.
This compares with a net loss of $227.5 million, or $6.73 per
fully diluted share, in 1992.
The 1993 loss includes pretax gains on the sales of assets
totaling $13.9 million, or 23 cents per share, and a net charge
of $2.1 million, or 6 cents per share, resulting from changes in
statutory tax rates in the U.S. and Canada. The 1992 loss
includes a charge of $73.5 million after tax, or $1.94 per fully
diluted share, for the adoption of Financial Accounting Standards
Board requirements to accrue the cost of postretirement benefits
other than pensions.
Excluding gains and charges, the Company lost $83.6 million, or
$3.34 per share, in 1993, compared with a loss of $154.0 million,
or $4.79 per share, in 1992.
Sales in 1993 were $4.0 billion, compared with $3.7 billion in
1992. The increase was due primarily to higher lumber and
plywood prices in the building products segment.
The 1993 loss was due principally to weak prices in all of the
Company's grades of paper. Domestic and overseas economies
weakened, and paper consumption flattened or declined, as new
industry capacity was starting up.
The paper segment reported an operating loss of $138 million in
1993, compared with a loss of $187 million in 1992. The improved
results were due to significantly reduced manufacturing costs, an
upgraded product mix, and modestly stronger unit sales volume.
Segment sales were about flat, compared with those of the year
earlier.
Average prices for uncoated free sheet, newsprint, and coated
papers rose modestly from 1992 levels, while average container-
board and market pulp prices declined. The average price per ton
for all of Boise Cascade's pulp and paper sold in 1993 was about
the same as in 1992. Prices declined 10% that year.
The Company's cost-reduction efforts helped offset the continued
weak prices. Unit manufacturing cash costs in paper declined 4%
in 1993 from 1992 levels.
Additionally, unit sales volume grew 2% to 3.6 million tons in
1993, despite 68,000 tons of market-related machine downtime
taken throughout 1993.
Operating income for the office products segment was $36 million
in 1993, nearly twice the $19 million earned in 1992, as we added
sales volume and reduced operating costs to improve margins. In
early 1992, we sold our wholesale operations in order to expand
in the commercial channel.
Excluding the sales volume of our former wholesale operations,
dollar sales volume increased 10% to $683 million due to sales
from new and acquired facilities and additional sales from
existing facilities. Sales volume rose 5% on a same-store basis.
Operating income for the building products segment was a record
$159 million in 1993, compared with $115 million in 1992. Sales
increased 21% to $1.5 billion. The improvement was due to rising
lumber and plywood prices, which, on average, were 22% and 18%
higher, respectively, than in 1992. Higher product prices
resulted from a constrained supply of timber available for
commercial harvest in the Pacific Northwest. The cost of logs
delivered to our wood products operations was up 22% in 1993 over
1992 costs.
Financial Condition
In 1994, operations provided $216 million in cash, compared with
$131 million in 1993. The working capital ratio was 1.4:1 at the
end of 1994, compared with 1.3:1 at the end of 1993.
The Company's effective tax benefit rate for 1994, exclusive of
the impact of a charge for U.S. taxes on undistributed earnings,
declined to 34.5% from 40.3% in 1993. The decrease in the
benefit rate was due primarily to reporting the 1994 results of
Rainy River's operations, including the tax effect, in "Equity in
net income (loss) of affiliates." Net interest expense in 1994
and 1993 was $148 million.
On December 31, 1994, the Company's total debt declined slightly
to $1.97 billion, compared with $2.02 billion at the end of 1993.
On December 31, 1994, our long-term debt-to-equity ratio was
1.4:1, compared with 1.2:1 at the end of 1993. Our debt and
debt-to-equity ratio include the guarantee by the Company of the
remaining $231 million of debt incurred by the trustee of our
leveraged Employee Stock Ownership Plan (ESOP). While that
guarantee has a negative impact on our debt-to-equity ratio, it
has virtually no effect on our cash-coverage ratios or on other
measures of our financial strength.
In 1994, the Company arranged a new committed revolving credit
agreement of $650 million with a group of banks, replacing a
previous agreement. As of December 31, 1994, borrowings under
the existing agreement totaled $240 million. At the time of its
expiration in June 1997, any amount outstanding will be due and
payable.
The agreement requires the Company to maintain a minimum amount
of net worth and a minimum interest coverage ratio and not to
exceed a maximum ratio of debt to net worth. Under this agree-
ment, the payment of dividends is dependent on the existence
and amount of net worth in excess of the defined minimum. The
Company's net worth at December 31, 1994, exceeded the defined
minimum amount by $63 million.
At December 31, 1994, the Company had $400.4 million of shelf
capacity registered with the Securities and Exchange Commission
for additional debt securities.
The estimated current market value of the Company's debt, based
on current interest rates for similar obligations with like
maturities, is approximately $41 million less than the amount of
debt reported.
Additional information about our credit agreement and debt is in
Note 4 accompanying the financial statements.
On January 15, 1995, depositary shares of the Company's
conversion preferred stock, Series E, were converted into
8.6 million shares of Boise Cascade common stock.
Capital Investment
Capital investment in 1994 was $272 million, including
acquisitions, compared with $221 million in 1993. Capital
investment in 1995 is expected to be approximately $400 million,
excluding acquisitions, and will be allocated to cost-saving,
modernization, expansion, replacement, maintenance,
environmental, and safety projects.
Dividends
In 1994, Boise Cascade's quarterly cash dividend was 15 cents per
common share, the same as in 1993. The quarterly dividend was
44.75 cents on each depositary share of the Series E conversion
preferred stock, 58.75 cents on each depositary share of the
Series F cumulative preferred stock, and 39.5 cents on each
depositary share of the Series G conversion preferred stock.
Timber Supply
In recent years, heightened attention has been paid to developing
and implementing recovery plans for U.S. species that are listed
as threatened or endangered under the Endangered Species Act of
1973. Some of these plans and related litigation, as well as
other challenges to federal forest management activities, have
sharply curtailed the amount of federal government timber
available for commercial harvest. As a result, approximately
8.4 billion board feet of timber on national forests were under
contract and awaiting harvest in 1994, down from 17.9 billion
board feet five years earlier.
Over the last few years, increased harvests from private,
nonindustrial lands have partially offset the loss of timber
available from federal forests in the Pacific Northwest.
However, in the Company's judgment, the current rate of harvest
on private, nonindustrial timberlands cannot be sustained and, at
some point, will decline markedly.
In this environment, Boise Cascade has relative advantages. An
important share of our raw material needs is met by our own
timberland -- some 1.4 million acres in Washington, Oregon, and
Idaho. And our wood products facilities are among the most
efficient in the region, allowing us to bid competitively for
available timber.
Our Northwest pulp and paper mills already receive approximately
79% of their wood chip supply either directly from or through
trades with our wood products and whole-log chipping operations.
The Company has also taken additional steps to reduce our need
for outside chip purchases. Our cottonwood tree farm near our
Wallula, Washington, pulp and paper mill will be ready for
harvest in 1997, increasing our internal supply of wood chips to
over 90%. In addition, our three Northwest paper mills are now
using recycled fiber -- and will use more over time -- to produce
recycled-content paper products.
We believe we are better positioned than most Northwest producers
to compete in an era of reduced log supply. However, because of
further potential litigation, legislation, and regulation related
to this issue, we cannot accurately predict what log supply will
be over the next several years. In 1994 and early 1995, the
Company closed small sawmills in Joseph, Oregon, and Council,
Idaho, due in part to limited log supply. Additional curtailment
or closures of wood products manufacturing facilities are
possible.
It is also difficult to predict the impact of timber constraints
on the cost structure of the Northwest paper and forest products
industry. The cost of logs delivered to our Northwest wood
products facilities climbed 74% from 1989 to 1994, while wood
chip costs for our Northwest pulp mills rose 75% from 1987 to
1991, before leveling off. Despite rapidly increasing log costs,
our Northwest wood products operations have maintained stable
profit margins due to use of timber from our own lands, increased
production of value-added products, gains in log recovery and
manufacturing efficiency, and rising prices. Because of excess
industry supply, paper prices have not increased to offset higher
wood chip costs in the Northwest.
It is unclear what impact existing and proposed endangered
species listings will have on pricing and cost trends in future
years in the Northwest or across the nation.
Environmental Issues
The Company invests substantial capital to comply with federal,
state, and local environmental laws and regulations. During
1994, expenditures for an ongoing pollution abatement program
amounted to $39 million. The Company expects to spend
approximately $24 million in 1995 for this purpose. Failure to
comply with applicable pollution control standards could result
in interruption or suspension of operations at the affected
facilities or could require additional expenditures. Anticipated
expenditures for ongoing pollution abatement are expected to
enable the Company to continue to meet applicable environmental
standards.
The Environmental Protection Agency (EPA) has proposed rules to
regulate air and water emissions from pulp and paper mills.
These rules would, among other things, set extremely stringent
standards for color, chemical oxygen demand, and the discharge of
all chlorinated organics. The term chlorinated organics refers
to a family of thousands of compounds that occur naturally and
are also produced as byproducts of pulp-bleaching processes that
use chlorine compounds. Research is ongoing to determine the
true impact of these chemicals on human health and the
environment.
Unfortunately, the proposed EPA rules do not discriminate between
chlorinated organics, such as dioxin, that are known to be toxic
and all other chlorinated organics. Rather, they seek to
regulate the levels of all such compounds. If implemented, the
rules would require the elimination of elemental chlorine and
could require the elimination of all chlorine compounds from the
pulp-bleaching process, despite a lack of evidence that totally
chlorine-free (TCF) bleaching would result in any significant
improvement in human health or the environment.
Boise Cascade has already made changes in our pulp-bleaching
processes to reduce our use of elemental chlorine. Our printing
and writing paper mills have substituted chlorine dioxide for at
least 50% of the elemental chlorine previously used to bleach
pulp, virtually eliminating dioxin in our paper mill effluent.
Chlorine dioxide is a chemical with a name similar to elemental
chlorine but with very different chemical and physical
properties. Over time, Boise Cascade will continue to move
toward elemental chlorine-free bleaching of pulp.
Boise Cascade's additional cost for complying with the proposed
rules and implementation schedule, utilizing current technology,
could be $200 million to $300 million over the next four years.
We are working with industry associations and the EPA to achieve
revisions to the proposed regulations that would better reflect
scientific understanding of the effects, risks, and costs of
alternative pulp-bleaching processes.
As of December 31, 1994, the Company had been notified that it is
a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
or similar federal and state laws with respect to 59 sites where
hazardous substances or other contaminants are located. The
Company has resolved issues related to several of these sites at
minimal cost. We believe we have minimal or no responsibility
with regard to several other sites. In most cases, the Company
is one of many potentially responsible parties, and our alleged
contribution to these sites has been minor. For those sites
where a range of potential liability has been determined, the
Company has established appropriate reserves.
With respect to all currently outstanding sites, the Company
cannot predict with certainty the total response and remedial
costs, our share of the total costs, what contributions will be
available from other parties, the time necessary to complete the
cleanups, or the availability of reimbursement from insurance
coverage. However, based on our investigations, our experience
in cleaning up hazardous substances, the fact that expenditures
will, in many cases, be incurred over extended periods of time,
and the number of solvent potentially responsible parties, the
Company does not 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.
Common Stock Prices
1994 1993 1992
Quarter High Low High Low High Low
First $27 3/4 $22 3/8 $26 3/8 $19 1/2 $25 3/8 $20 7/8
Second 24 1/4 19 27 1/2 22 1/2 22 7/8 17 3/4
Third 30 1/2 22 24 19 5/8 20 1/2 16 3/8
Fourth 30 1/2 22 5/8 24 7/8 20 3/8 22 17 1/4
The Company's common stock is traded principally on the New York Stock Exchange.
Common Stock Dividends
1994 1993 1992
Paid Per Share
$.15 $.15 $.15
.15 .15 .15
.15 .15 .15
.15 .15 .15
1994 Capital Investment by Business
Replacement,
Quality/ Timber and Environmental,
Expansion Efficiency(1) Timberlands and Other Total
(expressed in millions)
Paper and paper products $ 7 $ 43 $ - $ 89 $ 139
Office products 84 1 - 1 86
Building products 10 7 - 18 35
Timber and
timberlands - - 5 - 5
Other 3 - - 4 7
________ ________ ________ ________ ________
Total $ 104 $ 51 $ 5 $ 112 $ 272
(1) Quality and efficiency projects include quality improvements, modernization, energy, and
cost-saving projects.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
December 31
Assets 1994 1993
(expressed in thousands)
Current
Cash and cash items (Note 1) $ 22,447 $ 14,860
Short-term investments at cost, which
approximates market (Note 1) 7,007 7,569
__________ __________
29,454 22,429
Receivables, less allowances of $1,987,000
and $1,264,000 405,661 366,187
Inventories (Note 1) 423,589 446,609
Deferred income tax benefits 42,487 38,831
Other 17,073 13,397
__________ __________
918,264 887,453
__________ __________
Property (Note 1)
Property and equipment
Land and land improvements 37,775 56,871
Buildings and improvements 439,936 571,712
Machinery and equipment 4,078,302 4,642,434
__________ __________
4,556,013 5,271,017
Accumulated depreciation (2,062,106) (2,261,360)
__________ __________
2,493,907 3,009,657
Timber, timberlands, and timber deposits 397,721 366,054
__________ __________
2,891,628 3,375,711
__________ __________
Investments in equity affiliates (Note 8) 204,498 22,700
Other assets (Note 1) 279,687 227,109
__________ __________
Total assets $4,294,077 $4,512,973
BOISE CASCADE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
December 31
Liabilities and Shareholders' Equity 1994 1993
(expressed in thousands)
Current
Notes payable $ 56,000 $ 31,000
Current portion of long-term debt (Note 4) 58,534 145,185
Accounts payable 306,848 288,300
Accrued liabilities
Compensation and benefits 107,866 103,188
Interest payable 36,043 32,194
Other 92,552 88,568
__________ __________
657,843 688,435
__________ __________
Debt (Note 4)
Long-term debt, less current portion 1,625,148 1,593,348
Guarantee of ESOP debt 230,956 246,856
__________ __________
1,856,104 1,840,204
__________ __________
Other
Deferred income taxes (Note 2) 137,260 222,464
Other long-term liabilities 278,012 257,346
__________ __________
415,272 479,810
__________ __________
Commitments and contingent liabilities
(Notes 1, 2, 5, and 7)
Shareholders' equity (Note 6)
Preferred stock - no par value; 10,000,000
shares authorized;
Series D ESOP: $.01 stated value;
6,294,891 and 6,395,047 shares outstanding 283,270 287,777
Deferred ESOP benefit (230,956) (246,856)
Series E: $.01 stated value; 862,500 shares
outstanding in each period 191,466 191,466
Series F: $.01 stated value; 115,000 shares
outstanding in each period 111,043 111,043
Series G: $.01 stated value; 862,500 shares
outstanding in each period 176,404 176,404
Common stock - $2.50 par value; 200,000,000
shares authorized; 38,284,186 and 37,987,529
shares outstanding 95,710 94,969
Retained earnings (Notes 1 and 4) 737,921 889,721
__________ __________
Total shareholders' equity 1,364,858 1,504,524
__________ __________
Total liabilities and shareholders' equity $4,294,077 $4,512,973
Shareholders' equity per common share $21.77 $25.92
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Revenues
Sales $4,140,390 $3,958,300 $3,715,590
Other income, net (Note 1) 1,360 10,570 11,040
__________ __________ __________
4,141,750 3,968,870 3,726,630
__________ __________ __________
Costs and expenses
Materials, labor, and other
operating expenses 3,453,730 3,411,500 3,264,190
Depreciation and cost of
company timber harvested 236,430 267,710 265,790
Selling and administrative
expenses 336,970 283,450 294,890
__________ __________ __________
4,027,130 3,962,660 3,824,870
__________ __________ __________
Equity in net income (loss)
of affiliates (Note 8) (22,930) 13,570 3,760
Income (loss) from operations 91,690 19,780 (94,480)
__________ __________ __________
Interest expense (147,800) (148,310) (166,450)
Interest income 1,690 1,330 1,830
Foreign exchange gain (loss) (130) 1,610 6,590
Loss on subsidiary's sale of
stock (Note 8) (10,200) - -
__________ __________ __________
(156,440) (145,370) (158,030)
__________ __________ __________
Loss before income taxes (64,750) (125,590) (252,510)
Income tax benefit (Note 2) (2,140) (48,450) (98,480)
__________ __________ __________
Loss before cumulative
effect of accounting change (62,610) (77,140) (154,030)
Cumulative effect of accounting
change, net of tax (Note 5) - - (73,450)
__________ __________ __________
Net loss $ (62,610) $ (77,140) $ (227,480)
Net loss per common
share (Note 1)
Primary
Loss before cumulative
effect of accounting change $(3.08) $(3.17) $(4.79)
Cumulative effect of accounting
change, net of tax (Note 5) - - (1.94)
______ ______ ______
Net loss per share $(3.08) $(3.17) $(6.73)
Fully diluted
Loss before cumulative
effect of accounting change $(3.08) $(3.17) $(4.79)
Cumulative effect of accounting
change, net of tax (Note 5) - - (1.94)
______ ______ ______
Net loss per share $(3.08) $(3.17) $(6.73)
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Cash provided by (used for) operations
Net loss $ (62,610) $ (77,140) $ (227,480)
Items in loss not using
(providing) cash
Equity in net (income) loss of affiliates 15,040 (5,270) (3,760)
Loss on subsidiary's sale of stock 10,200 - -
Depreciation and cost of company timber
harvested 236,430 267,710 265,790
Deferred income tax benefit (2,174) (46,243) (59,815)
Amortization and other 17,836 16,817 32,309
Cumulative effect of accounting
change, net of tax - - 73,450
Gain on sales of operating assets (Note 1) - (8,300) (25,020)
Receivables (69,567) (116) (46,322)
Inventories 6,139 (30,679) (3,319)
Accounts payable and accrued liabilities 55,329 15,696 9,216
Current and deferred income taxes 9,036 13,137 53,572
Other 94 (14,391) (1,947)
__________ __________ __________
Cash provided by operations 215,753 131,221 66,674
__________ __________ __________
Cash provided by (used for) investment
Expenditures for property and equipment (187,040) (216,818) (275,414)
Expenditures for timber and timberlands (5,174) (4,663) (7,537)
Investments in equity affiliates (25,347) 896 (1,413)
Purchases of facilities (78,454) - -
Sales of operating assets (Note 1) 171,383 23,992 202,156
Other (50,428) 7,971 (29,974)
__________ __________ __________
Cash used for investment (175,060) (188,622) (112,182)
__________ __________ __________
Cash provided by (used for) financing
Cash dividends paid
Common stock (22,844) (22,772) (22,765)
Preferred stock (60,871) (44,731) (32,712)
__________ __________ __________
(83,715) (67,503) (55,477)
Notes payable 25,000 27,000 (54,000)
Additions to long-term debt 138,842 83,807 130,937
Payments of long-term debt (Note 4) (115,569) (269,180) (164,380)
Issuance of preferred stock (Note 6) - 287,442 191,471
Other 1,774 (2,068) (4,722)
__________ __________ __________
Cash provided by (used for) financing (33,668) 59,498 43,829
__________ __________ __________
Increase (decrease) in cash and short-term
investments 7,025 2,097 (1,679)
Balance at beginning of the year 22,429 20,332 22,011
__________ __________ __________
Balance at end of the year $ 29,454 $ 22,429 $ 20,332
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1992, 1993, and 1994
________________________________________________________________________________________________________________
Total
Common Share- Deferred
Shares holders' Preferred ESOP Common Retained
Outstanding Notes 1, 4, 5, and 6 Equity Stock Benefit Stock Earnings
________________________________________________________________________________________________________________
(expressed in thousands)
37,944,725 Balance at December 31, 1991 $1,447,613 $ 300,262 $ (275,058) $ 94,862 $1,327,547
________________________________________________________________________________________________________________
Net loss (227,480) (227,480)
Cash dividends declared
Common stock (22,765) (22,765)
Preferred stock (36,571) (36,571)
Issuance of preferred stock 191,471 191,471
(4,413) Other 5,328 (8,878) 13,363 (11) 854
________________________________________________________________________________________________________________
37,940,312 Balance at December 31, 1992 1,357,596 482,855 (261,695) 94,851 1,041,585
________________________________________________________________________________________________________________
Net loss (77,140) (77,140)
Cash dividends declared
Common stock (22,813) (22,813)
Preferred stock (50,841) (50,841)
Issuance of preferred stock 287,442 287,442
47,217 Other 10,280 (3,607) 14,839 118 (1,070)
________________________________________________________________________________________________________________
37,987,529 Balance at December 31, 1993 1,504,524 766,690 (246,856) 94,969 889,721
________________________________________________________________________________________________________________
Net loss (62,610) (62,610)
Cash dividends declared
Common stock (22,885) (22,885)
Preferred stock (60,872) (60,872)
296,657 Other 6,701 (4,507) 15,900 741 (5,433)
________________________________________________________________________________________________________________
38,284,186 Balance at December 31, 1994 $1,364,858 $ 762,183 $ (230,956) $ 95,710 $ 737,921
The accompanying notes are an integral part of these Financial Statements.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The financial statements include the accounts of the
Company and all subsidiaries after elimination of intercompany
balances and transactions.
OTHER INCOME. "Other income, net" on the Statements of Income (Loss)
includes gains and losses on the sale and disposition of property and
other miscellaneous income and expense items. Results for 1993
include a net pretax gain of $13,944,000, which was primarily
attributable to sales of assets. A 1993 adoption of Financial
Accounting Standards Board requirements to accrue certain severance,
disability, and other benefits provided to former or inactive
employees did not have a material impact on reported results. In
1992, strategic sales made by the Company included the sale of
essentially all of its wholesale office products distribution
operations at their approximate book value. Additionally, the
Company sold 11 corrugated container plants at a gain of $25,020,000
and wrote off certain pulp and paper mill start-up costs (see "Start-
Up Costs" in this note).
FOREIGN CURRENCY TRANSLATION. The 1994 foreign exchange loss
reported on the Statement of Income (Loss) is due primarily to
forward contracts to purchase Canadian dollars. Gains or losses in
the market value of the forward contracts were recorded as they were
incurred during the year. The forward contracts were terminated in
September 1994. Foreign exchange gains and losses in 1994, arising
primarily from translation of the Company's Canadian subsidiaries'
net liabilities prior to the Rainy River Forest Products Inc. ("Rainy
River") transactions (see Note 8), are included in "Equity in net
income (loss) of affiliates." Subsequent to the transactions, the
functional currency was changed from the U.S. dollar to the Canadian
dollar, and the cumulative foreign currency translation adjustment at
December 31, 1994, of $14,704,000, net of deferred income taxes, is
included as a reduction to "Retained earnings" on the Balance Sheet
due to its relative insignificance. The 1993 and 1992 foreign
exchange gains on the Statements of Income (Loss) arose primarily
from translation of the Company's Canadian subsidiaries' net
liabilities, partially offset by gains or losses in the market value
of the forward contracts.
NET LOSS PER COMMON SHARE. The computation of fully diluted net loss
per share was antidilutive in each of the periods presented;
therefore, the amounts reported for primary and fully diluted loss
are the same.
Net loss per common share was determined by dividing net loss, as
adjusted, by applicable shares outstanding. The loss was adjusted by
the aggregate amount of dividends on the Company's preferred stock.
The dividend attributable to the Company's Series D convertible
preferred stock held by the Company's ESOP (employee stock ownership
plan) is net of a tax benefit. Preferred dividends for the year
ended December 31, 1994, were $54,586,000, compared with $43,076,000
and $27,711,000 for the years ended December 31, 1993 and 1992. The
average common shares outstanding at December 31, 1994, were
38,110,000. For the same period in 1993 and 1992, the average shares
outstanding were 37,958,000 and 37,942,000. Primary average shares
include only common shares outstanding.
On January 15, 1995, the Company's Series E preferred stock converted
to 8,625,000 shares of common stock (see Note 6). Had the conversion
occurred on January 1, 1994, the reported net loss per common share
for the year ended December 31, 1994, would have decreased 90 cents
to $2.18.
CASH AND SHORT-TERM INVESTMENTS. Short-term investments consist of
investments that had a maturity of three months or less at the date
of purchase. At December 31, 1994, $10,034,000 of cash, short-term
investments, and certain receivables of a wholly owned insurance
subsidiary was committed for use in maintaining statutory liquidity
requirements of that subsidiary.
INVENTORY VALUATION. The Company uses the last-in, first-out (LIFO)
method of inventory valuation for raw materials and finished goods
inventories at substantially all of its domestic wood products and
paper manufacturing facilities. All other inventories are valued at
the lower of cost or market, with cost based on the average or first-
in, first-out (FIFO) valuation method. Manufactured inventories
include costs for materials, labor, and factory overhead.
Inventories include the following:
December 31
1994 1993
(expressed in thousands)
Finished goods and work in process $ 256,732 $ 255,395
Logs 107,095 106,649
Other raw materials and supplies 147,211 167,192
LIFO reserve (87,449) (82,627)
__________ __________
$ 423,589 $ 446,609
PROPERTY. Property and equipment are recorded at cost. Cost
includes expenditures for major improvements and replacements and the
net amount of interest cost associated with significant capital
additions. Capitalized interest was $1,630,000 in 1994, $1,118,000
in 1993, and $3,492,000 in 1992. Substantially all of the Company's
paper and wood products manufacturing facilities determine
depreciation by the units-of-production method, and other operations
use the straight-line method. Gains and losses from sales and
retirements are included in income as they occur except at certain
pulp and paper mills that use composite depreciation methods. At
those facilities, gains and losses are included in accumulated
depreciation. Estimated service lives of principal items of property
and equipment range from 3 to 40 years.
Cost of company timber harvested and amortization of logging roads
are determined on the basis of the annual amount of timber cut in
relation to the total amount of recoverable timber. Timber and
timberlands are stated at cost, less the accumulated total of timber
previously harvested.
A portion of the Company's wood requirements are acquired from public
and private sources. Except for deposits required pursuant to wood
supply contracts, no amounts are recorded until such time as the
Company becomes liable for the timber. At December 31, 1994, based
on average prices at the time, the unrecorded amount of those
contracts was estimated to be approximately $240,000,000.
START-UP COSTS. Preoperating costs incurred during the construction
and start-up of major expansions or new manufacturing facilities are
capitalized. In mid-1992, the Company elected to write off certain
pulp and paper mill costs totaling $18,968,000 that had been
capitalized prior to 1987 and were being amortized over 15 years.
The write-off reflected a change in the estimated period benefited by
such expenditures. The remaining unamortized balance is being
amortized over a five-year period. The unamortized balance of start-
up costs, included in "Other assets" on the Balance Sheets, was
$16,237,000 at December 31, 1994, and $24,356,000 at December 31,
1993.
GOODWILL. Goodwill represents the excess of purchase price and
related costs over the value assigned to the net tangible assets of
businesses acquired. Goodwill is amortized on a straight-line basis
generally over 40 years. Annually, the Company reviews the
recoverability of goodwill. The measurement of possible impairment
is based primarily on the ability to recover the balance of the
goodwill from expected future operating cash flows on an undiscounted
basis. In managements' opinion, no such impairment exists at
December 31, 1994. The unamortized balance of goodwill included in
"Other assets" on the Balance Sheets at December 31, 1994 and 1993
was $55,041,000 and $3,698,000.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE. Generally, environmental
expenditures resulting in additions to property, plant, and equipment
that increase useful lives are capitalized, while other environmental
expenditures are charged to expense. Liabilities are recorded when
assessments and/or remedial efforts are probable and the cost can be
reasonably estimated.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs are
expensed as incurred. During 1994, research and development expenses
were $11,461,000, compared with $11,496,000 in 1993 and $11,785,000
in 1992.
RECLASSIFICATIONS. To provide a more meaningful comparison with the
1994 financial statements, certain classifications, none of which
affected net loss, have been made to the 1993 and 1992 financial
statements.
2. INCOME TAXES
Effective as of January 1, 1993, the Company adopted Financial
Accounting Standards Board requirements that govern the way deferred
taxes are calculated and reported. The one-time adjustment made to
record the initial adoption of the standard had no effect on the
Company's 1993 net loss. The impact of changes in statutory tax
rates on deferred taxes subsequent to the initial adoption is
discussed below. Financial statements for prior periods were not
restated.
The income tax benefit shown on the Statements of Income (Loss)
includes the following:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Current income tax payment (refund) $ 34 $ (2,207) $ (38,665)
Deferred income tax benefit (2,174) (46,243) (59,815)
__________ __________ __________
Total income tax benefit
before cumulative effect
of accounting change $ (2,140) $ (48,450) $ (98,480)
Deferred tax attributable
to cumulative effect
of accounting change $ - $ - $ (44,950)
During 1994, the Company received income tax refunds, net of cash
payments, of $7,269,000, compared with net refunds of $48,025,000 in
1993 and $60,081,000 in 1992.
A reconciliation of the statutory U.S. federal tax benefit and the
Company's reported tax benefit is as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Statutory tax benefit $ (22,661) $ (43,957) $ (85,852)
(Increases) decreases in
benefit resulting from:
State taxes (1,702) (4,158) (4,865)
Foreign loss tax benefit
at less (more) than theoretical
rate 4,108 (1,109) (7,254)
Provision for undistributed
earnings 20,200 - -
Other (2,085) (1,326) (509)
__________ __________ __________
Effective tax benefit (2,140) (50,550) (98,480)
Tax rate adjustments to net
deferred tax liabilities - 2,100 -
__________ __________ __________
Reported tax benefit $ (2,140) $ (48,450) $ (98,480)
During 1993, the U.S. federal government increased its statutory rate
from 34% to 35%. The increase in net deferred tax liabilities due to
that increase was partially offset by decreases due to reductions in
Canadian tax rates. The Canadian federal rate was decreased from
23.8% to 22.8%.
The components of the net deferred tax liability on the Balance
Sheets are as follows:
December
1994 1993
Assets Liabilities Assets Liabilities
(expressed in thousands)
Operating loss carryover $ 200,535 $ - $ 169,758 $ -
Employee benefits 106,146 17,781 98,262 17,359
Property and equipment and
timber and timberlands 81,623 531,384 89,025 589,380
Alternative minimum tax 79,615 - 79,775 -
Tax credit carryovers 35,663 - 47,268 -
Reserves 14,644 2,031 11,578 1,498
Inventories 10,069 215 9,767 412
State income taxes - 33,398 3,892 29,026
Deferred charges 174 7,931 313 14,591
Differences in basis of
nonconsolidated entities 11,541 28,524 - 17,909
Other 10,337 23,856 9,790 32,886
__________ __________ __________ __________
$ 550,347 $ 645,120 $ 519,428 $ 703,061
The deferred tax benefit portion of the total income tax benefit on
the Statement of Income (Loss) for the year ended December 31, 1992,
was determined in accordance with accounting requirements used prior
to January 1, 1993. The components of the deferred benefit related
to differences in recognition of revenue and expense for tax and
financial reporting purposes were as follows: a reduction of deferred
tax liabilities due to losses incurred and differences in expenses
deferred for financial reporting purposes that were less than for tax
purposes created benefits of $109,682,000 and $12,560,000. These
benefits were offset by the effect of the difference between
financial reporting and tax depreciation and other miscellaneous
differences, which reduced the benefit by $59,745,000 and $2,682,000.
The net effect of these differences resulted in a deferred income tax
benefit of $59,815,000 for the year ended December 31, 1992.
At December 31, 1994, the Company had loss carryforwards for tax
purposes of $513,427,000 expiring in 2007 through 2009.
Additionally, the Company had income tax credits of $35,663,000
expiring in 1997 through 2008. The Company also had $79,615,000 of
minimum tax credits, which may be carried forward indefinitely. The
loss carryforwards and the minimum tax credits are realizable through
future reversals of existing taxable temporary differences.
Management believes that the income tax credits will be fully
realized based on future reversals of existing taxable temporary
differences, future earnings, or available tax planning strategies.
During 1994, the Company recognized a noncash charge of $20,200,000
for taxes on undistributed Canadian earnings (see Note 8).
Pretax loss from domestic and foreign sources is as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Domestic $ (37,783) $(100,319) $(214,696)
Foreign (26,967) (25,271) (37,814)
_________ _________ _________
Pretax loss $ (64,750) $(125,590) $(252,510)
The Company's federal income tax returns have been examined through
1991. Certain deficiencies have been proposed, but the amount of the
deficiencies, if any, that may result upon settlement of these years
cannot be determined at this time. The Company believes that it has
adequately provided for any such deficiencies and that settlements
will not have a material adverse effect on the Company's financial
condition or results of operations.
3. LEASES
Lease obligations for which the Company assumes substantially all
property rights and risks of ownership are capitalized. All other
leases are treated as operating leases. Rental expenses for
operating leases, net of sublease rentals, were $31,714,000 in 1994,
$30,877,000 in 1993, and $28,821,000 in 1992.
The Company has various operating leases with remaining terms of more
than one year. These leases have minimum lease payment requirements,
net of sublease rentals, of $22,881,000 for 1995, $21,185,000 for
1996, $17,383,000 for 1997, $16,439,000 for 1998, and $15,964,000 for
1999, with total payments thereafter of $182,615,000.
Substantially all lease agreements have fixed payment terms based
upon the passage of time. Some lease agreements provide the Company
with the option to purchase the leased property. Additionally,
certain agreements contain renewal options averaging eight years,
with fixed payment terms similar to those in the original lease
agreements.
4. DEBT
In 1994, the Company arranged a new committed revolving credit
agreement of $650,000,000 with a group of banks, replacing a previous
agreement. As of December 31, 1994, borrowings under the existing
agreement totaled $240,000,000. At the time of its expiration in
June 1997, any amount outstanding will be due and payable.
The revolving credit agreement provides a choice of several pricing
formulas. At December 31, 1994, the interest rates under these
formulas would have ranged from 6.7% to 8.5%. Commitment fees are
required on the unused portion of the credit.
The agreement requires the Company to maintain a minimum amount of
net worth and a minimum interest coverage ratio, and not to exceed a
maximum ratio of debt to net worth. Under this agreement, the
payment of dividends is dependent upon the existence and amount of
net worth in excess of the defined minimum. The Company's net worth
at December 31, 1994, exceeded the defined minimum amount by
$63,000,000.
At December 31, 1994, the Company had $400,400,000 of shelf capacity
registered with the Securities and Exchange Commission for additional
securities.
Long-term debt, almost all of which is unsecured, consists of the
following:
December 31
1994(1) 1993
(expressed in thousands)
7.375% notes, due in 1997, net of
unamortized discount of $223,000 $ 99,777 $ 99,690
10.125% notes, due in 1997, net of
unamortized discount of $156,000 119,844 119,791
9.625% notes, due in 1998, callable in
1995, including unamortized premium of
$2,822,000 102,822 99,912
9.9% notes, due in 2000, net of
unamortized discount of $286,000 99,714 99,659
9.875% notes, due in 2001, callable in
1999 100,000 100,000
9.85% notes, due in 2002 125,000 125,000
9.45% debentures, due in 2009, net of
unamortized discount of $334,000 149,666 149,644
7% convertible subordinated debentures,
due in 2016, net of unamortized
discount of $361,000 75,552 76,308
Medium-term notes, Series A, with
interest rates averaging 8.8% and
9.3%, due in varying amounts through 2013 327,300 239,100
Revenue bonds and other indebtedness,
with interest rates averaging 7.3% and
7.6%, due in varying amounts annually
through 2024, net of unamortized
discount of $1,359,000(2) 220,591 219,870
American & Foreign Power Company Inc.
5% debentures, due in 2030, net of
unamortized discount of $1,301,000 23,416 24,559
Revolving credit borrowings, with
interest rates averaging 6.8% and 4%(2) 240,000 385,000
__________ __________
1,683,682 1,738,533
Less current portion 58,534 145,185
__________ __________
1,625,148 1,593,348
Guarantee of ESOP debt, due in
installments through 2004 230,956 246,856
__________ __________
$1,856,104 $1,840,204
(1) The amount of net unamortized discount disclosed applies to long-
term debt outstanding at December 31, 1994.
(2) The 1993 amounts include $130,000,000 of indebtedness of the
Company's Canadian subsidiary, guaranteed by Boise Cascade. As a
result of the Rainy River transaction, the debt was retired, and
subsequent financings of Rainy River are no longer included in the
Company's Balance Sheets (see Note 8).
The scheduled payments of long-term debt are $58,534,000 in 1995,
$18,806,000 in 1996, $490,879,000 in 1997, $137,784,000 in 1998, and
$43,820,000 in 1999. Of the total amount shown in 1997, $240,000,000
is related to the 1994 revolving credit agreement.
Cash payments for interest, net of interest capitalized, were
$143,693,000 in 1994, $158,963,000 in 1993, and $168,090,000 in 1992.
The estimated current market value of the Company's debt, based on
current interest rates for similar obligations with like maturities,
is approximately $41,000,000 less than the amount of debt reported.
The Company has guaranteed debt used to fund an employee stock
ownership plan that is part of the Savings and Supplemental
Retirement Plan for the Company's U.S. salaried employees (see
Note 5). The Company has recorded the debt on its Balance Sheets,
along with an offset in the shareholders' equity section that is
titled "Deferred ESOP benefit." The Company has guaranteed certain
tax indemnities on the ESOP debt, and the interest rate on the
guaranteed debt is subject to adjustment for events described in the
loan agreement.
The Company may redeem all or part of the 7% unsecured convertible
subordinated debentures at specified amounts that decline to $50 par
value per debenture on May 1, 1996. Sinking fund payments are
required after May 1, 1996. At December 31, 1994, $21,992,000 of
these debentures had been purchased by the Company for application to
the sinking fund requirements. Each debenture is convertible into
1.1415 shares of the Company's common stock.
5. RETIREMENT AND BENEFIT PLANS
Substantially all of the Company's employees are covered by pension
plans. The plans are primarily noncontributory defined benefit
plans. The pension benefit for salaried employees is based primarily
on years of service and the highest five-year average compensation,
and the benefit for hourly employees is generally based on a fixed
amount per year of service. The Company's contributions to its
pension plans vary from year to year, but the Company has made at
least the minimum contribution required by law in each year. The
assets of the pension plans are invested primarily in common stocks,
fixed-income securities, and cash and cash equivalents.
The assumptions used by the Company's actuaries in the calculations
of pension income and plan obligations for the U.S. plans are
estimates of factors that will determine, among other things, the
amount and timing of future benefit payments. The return on assets
assumption used during each period was 10%. The discount rate
assumption was increased from 1993's 7.5% to 8.25% effective as of
year-end 1994. The 1992 rate was also 8.25%. The salary escalation
assumption used during 1994 and 1993 was 5%. A salary escalation of
6% was adopted for salaried employees at December 31, 1992. Pension
income was primarily attributable to earnings from plan assets in
recent years.
The Company's Canadian plans and assets and liabilities related to
U.S. employees that became employees of Rainy River were transferred
to Rainy River effective in 1994 (see Note 8).
The assumptions used by the Company's actuaries in the calculations
of pension expense and plan obligations for the Canadian plans in
1993 and 1992 are estimates of factors that will determine, among
other things, the amount and timing of future benefit payments. A
discount rate of 8.25% was used for the plans at December 31, 1993
and 1992. The return on assets assumption used during 1993 and 1992
was 10%. The salary escalation assumption was decreased to 5.5% at
year-end 1993, down from the 6.5% used previously.
The components of pension income are as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Benefits earned by employees $ 19,989 $ 20,253 $ 19,446
Interest cost on projected
benefit obligation 67,710 76,076 73,210
(Earnings) losses from plan assets 9,985 (134,679) (64,607)
Assumed earnings from plan
assets (more) less than actual
earnings (97,681) 44,338 (21,042)
Amortization of unrecognized
net initial asset (9,985) (12,145) (12,233)
Amortization of net experience
gains and losses from prior
periods 237 1,149 888
Amortization of unrecognized
prior service costs 2,931 3,547 3,462
__________ __________ __________
Company-sponsored plans (6,814) (1,461) (876)
Multiemployer pension plans 570 546 625
__________ __________ __________
Total pension (income) $ (6,244)$ (915) $ (251)
The following table, which includes only Company-sponsored plans, compares
the pension obligation with assets available to meet that obligation:
Plans With Assets in Excess of the Plans With an Accumulated Benefit
Accumulated Benefit Obligation Obligation in Excess of Assets
December 31 December 31
1994 1993 1994 1993
(expressed in millions)
Accumulated benefit obligation
Vested $(496.1) $(674.5) $(327.1) $(255.2)
Nonvested (16.7) (29.3) (16.6) (14.7)
Provision for salary escalation (45.8) (72.6) (2.6) (3.0)
_______ _______ _______ _______
Projected benefit obligation (558.6) (776.4) (346.3) (272.9)
Plan assets at fair market value 586.1 842.9 259.5 207.1
_______ _______ _______ _______
Net plan assets (obligation) $ 27.5 $ 66.5 $ (86.8) $ (65.8)
The following table reconciles the net plan assets (obligation) to the
prepayment (obligation) recorded on the Company's Balance Sheets:
Plans With Assets in Excess of the Plans With an Accumulated Benefit
Accumulated Benefit Obligation Obligation in Excess of Assets
December 31 December 31
1994 1993 1994 1993
(expressed in millions)
Net plan assets (obligation) $ 27.5 $ 66.5 $ (86.8) $ (65.8)
Remainder of unrecognized
initial asset (1) (9.8) (28.9) (5.4) (2.3)
Other unrecognized items (2) 32.1 17.0 51.3 30.6
Adjustment to record minimum
liability - - (44.7) (25.7)
_______ _______ _______ _______
Net recorded prepayment
(obligation) $ 49.8 $ 54.6 $ (85.6) $ (63.2)
(1) The unrecognized initial (asset) obligation calculated at January 1, 1986, is being amortized over
a weighted average of 11 years.
(2) "Other unrecognized items" reflects changes in actuarial assumptions, net changes in prior service
costs, and net experience gains and losses since January 1, 1986.
The Company and its retired employees currently share in the cost of
retiree health care costs. The type of benefit provided and the extent
of coverage vary based on employee classification, date of retirement,
location, and other factors. The portion of the cost of coverage paid
by the Company for salaried employees retiring in each year since 1986
has decreased, and the Company will eventually cease to share in the
cost of health care benefits for retired salaried employees. All of the
Company's postretirement health care plans are unfunded. The Company
explicitly reserves the right to amend or terminate its retiree medical
plans at any time, subject only to constraints, if any, imposed by the
terms of collective bargaining agreements. Accrual of costs pursuant to
accounting standards does not affect, or reflect, the Company's ability
to amend or terminate these plans. Amendment or termination may
significantly impact the amount of expense incurred.
Effective as of January 1, 1992, the Company adopted Financial
Accounting Standards Board requirements to accrue postretirement benefit
costs, including retiree health care costs. The cumulative cost of
these benefits attributable to employee service prior to January 1,
1992, was $118,400,000 before taxes, or $73,450,000 after taxes. As a
result, the 1992 net loss per fully diluted common share was increased
by $1.94.
A discount rate of 8.25% was adopted effective as of December 31, 1994,
up from a 7.5% rate that had been adopted at the end of the previous
year. A discount rate of 8.25% was used at the end of 1992, and at the
time the accounting standard was adopted, a rate of 8.5% was used. The
initial 1992 trend rate for medical care costs was 8.5%, which is
assumed to decrease ratably over the next ten years to 6%. A 1%
increase in the trend rate for medical care costs would have increased
the December 31, 1994, benefit obligation by $6,700,000 and
postretirement health care expense for the year ended December 31, 1994,
by $870,000.
The components of postretirement health care expense are as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Benefits earned by employees $ 1,850 $ 2,300 $ 2,080
Interest cost on accumulated postretirement
health care benefit obligation 8,430 11,700 10,920
Amortization of unrecognized actuarial
loss 410 - -
Amortization of unrecognized items (3,020) - -
__________ __________ __________
Total postretirement health care expense $ 7,670 $ 14,000 $ 13,000
The accrued postretirement health care benefit obligation is included
primarily in "Other long-term liabilities" on the Balance Sheets.
The components of the obligation are as follows:
December 31
1994 1993
(expressed in thousands)
Retirees $ 70,090 $ 79,800
Fully eligible active employees 15,380 18,700
Other active employees 26,340 33,200
__________ __________
Accumulated postretirement health care
benefit obligation 111,810 131,700
Unrecognized items 30,180 17,600
Unrecognized actuarial loss (5,220) (6,500)
__________ __________
Accrued postretirement health care
benefit obligation $ 136,770 $ 142,800
The Company sponsors savings and supplemental retirement programs for
its salaried and some hourly employees. The program for salaried
employees includes an employee stock ownership plan. Under that
plan, the Company's Series D ESOP convertible preferred stock (see
Note 6) is being allocated to eligible participants through 2004, as
principal and interest payments are made on the ESOP debt guaranteed
by the Company. Total expense for these plans was $20,150,000 in
1994, compared with $13,598,000 in 1993, and $12,038,000 in 1992.
6. SHAREHOLDERS' EQUITY
PREFERRED STOCK. At December 31, 1994, 6,294,891 shares of 7.375%
Series D ESOP convertible preferred stock were outstanding. The
stock is shown on the Balance Sheets at its liquidation preference of
$45 per share. The stock was sold to the trustee of the Company's
Savings and Supplemental Retirement Plan for salaried employees (see
Note 5). Each ESOP preferred share is entitled to one vote, bears an
annual cumulative dividend of $3.31875, and is convertible at any
time by the trustee to .80357 share of common stock. The ESOP
preferred shares may not be redeemed for less than the liquidation
preference.
At December 31, 1994, there were three series of preferred stock
outstanding that were represented by depositary shares. These
preferred issues are shown on the Balance Sheets at their respective
liquidation preference, net of the costs of issuance. The details of
the issues are as follows:
Series E Series F Series G
Date of issuance First quarter First quarter Third quarter
1992 1993 1993
Preferred shares outstanding 862,500 115,000 862,500
Depositary shares
outstanding 8,625,000 4,600,000 8,625,000
Cumulative annual dividend:
Per preferred share $17.90 $94.00 $15.80
Per depositary share $1.79 $2.35 $1.58
Liquidation preference:
Per preferred share $228.75 $1,000.00 $211.25
Per depositary share $22.875 $25.00 $21.125
Votes:
Per preferred share 1 (Limited 1
Per depositary share 1/10 voting rights) 1/10
Automatic conversion
(unless previously
redeemed or converted):
Date Jan. 1995 (Not convertible) Oct. 1997
Common shares issued
per depositary share 1 - 1
(see below) (see below)
On January 15, 1995, the depositary shares of Series E preferred
stock converted to 8,625,000 shares of the Company's common stock.
The Series F preferred stock and related depositary shares may be
redeemed on or after February 15, 1998, at a price of $1,000 per
preferred share ($25 per depositary share) plus accrued but unpaid
dividends.
On October 15, 1997, each depositary share of Series G preferred
stock will automatically convert to one share of the Company's common
stock unless the Series G preferred stock and related depositary
shares have been previously redeemed by the Company or converted by
the shareholders. The Company may elect to redeem the Series G
preferred stock and related depositary shares for common stock on or
after July 15, 1997, until October 15, 1997. The total number of
common shares issuable upon redemption between July 15, 1997, and
September 15, 1997, is determined by dividing $21.225 by a defined
then-current average market price for the Company's common stock and
multiplying the result by the 8,625,000 depositary shares. For the
period on or after September 15, 1997, through October 14, 1997, the
numerator in the preceding calculation is reduced from $21.225 to
$21.125. In the event the market price of the Company's common stock
exceeds $26.375 upon an announced redemption, it is anticipated that
the holders of the Series G depositary shares would elect to convert
their depositary shares to common stock. Upon conversion, which is
permitted at any time prior to redemption, .801 share of common stock
(subject to adjustment in certain events) would be issuable for each
Series G depositary share so converted.
Examples of common stock issuances upon redemption of the Series G
preferred stock are as follows (subsequent to September 15, 1997):
Common Stock Market Common Shares Expected
Price at Time to be Issued
of Redemption Upon Redemption
$0-$21.125 (1) 8,625,000
$22.50 8,097,916
$25.00 7,288,125
$26.375 (2) 6,908,175
(1) Call price.
(2) The total number of common shares issuable at this market price
are equal to shares issuable upon exercise of the Series G
preferred stock conversion rights.
The remaining authorized but unissued preferred shares may be issued
with such voting rights, dividend rates, conversion privileges,
sinking fund requirements, and redemption prices as the board of
directors may determine, without action by the shareholders.
COMMON STOCK. The Company is authorized to issue 200,000,000 shares
of common stock, of which 38,284,186 shares were issued and
outstanding at December 31, 1994. Of the unissued shares, a total of
30,172,111 shares were reserved for the following:
Conversion of Series D ESOP preferred stock 5,058,385
Conversion of Series E preferred stock (1) 8,625,000
Conversion of Series G preferred stock 8,625,000
Conversion of 7% convertible subordinated debentures 1,733,087
Issuance under Key Executive Stock Option Plan 6,034,920
Issuance under Director Stock Compensation Plan 95,719
(1) On January 15, 1995, the Company's Series E preferred stock
converted to 8,625,000 shares of common stock.
The Company has a shareholder rights plan which was adopted in
December 1988 and amended in September 1990. Details are set forth
in the Amended and Restated Rights Agreement filed with the
Securities and Exchange Commission on September 26, 1990.
The Key Executive Stock Option Plan provides for the granting of
options to purchase shares of the Company's common stock. The
exercise price is equal to the fair market value of the Company's
common stock on the date the options were granted.
Additional information relating to the Key Executive Stock Option
Plan is as follows:
Year Ended December 31
1994 1993 1992
Balance at beginning
of the year 4,708,382 4,131,952 3,692,357
Options granted 1,039,600 919,200 622,600
Options exercised (347,671) (50,067) -
Options canceled (405,259) (292,703) (183,005)
_________ _________ _________
Balance at end of the year 4,995,052(1) 4,708,382 4,131,952
Price range of:
Options granted $25 $21 $18-$21
Options exercised $18-$25 $18-$25 -
Options outstanding $18-$47 $18-$47 $18-$47
(1) At December 31, 1994, options for 3,959,452 shares were
exercisable.
The Director Stock Compensation Plan, which is only available to
nonemployee directors, provides for granting options to purchase
shares of the Company's common stock. The difference between the
$2.50 per share exercise price and the market value of the common
stock subject to option is intended to offset certain compensation
that participating directors have elected not to receive in cash. A
total of 7,716 options were granted with respect to cash compensation
not taken and dividends accrued during 1994, compared with 10,194
options in 1993. A total of 6,322 options were granted for cash
compensation not taken in 1992. A total of 4,281 options were
exercised during 1994.
During 1994, the Company purchased 1,818 shares of its common stock
under a program approved by the board of directors and, at
December 31, 1994, was authorized to purchase up to 5,423,027
additional shares.
7. LITIGATION AND LEGAL MATTERS
The Company is involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the
opinion of management, the Company's recovery, if any, or the
Company's liability, if any, under any pending litigation or
administrative proceeding would not materially affect its financial
condition or operations.
8. INVESTMENTS IN EQUITY AFFILIATES.
As of December 31, 1994, the Company's principal investments in
affiliates accounted for using the equity method included investments
in Rainy River Forest Products Inc., Rumford Cogeneration Company
Limited Partnership, and Pine City Fiber Company.
On October 13, 1994, the Company's Canadian subsidiary, Rainy River
Forest Products Inc., completed an initial public offering of units
(the "Units") of its equity and debt securities. The sale of
C$420,000,000 of Units consisted of 14,000,000 newly issued common
shares of Rainy River sold to the public at C$15 per share for an
aggregate offering price of C$210,000,000 and C$210,000,000 principal
amount 8.0% Convertible Unsecured Subordinated Debentures due
October 15, 2004. Concurrently with the sale of the Units, Rainy
River also sold to the public US$110,000,000 aggregate principal
amount of 10 3/4% Senior Secured Notes due 2001 (the "Senior Notes").
Rainy River owns and operates a newsprint mill in Kenora, Ontario,
Canada, an uncoated groundwood paper mill in Fort Frances, Ontario,
Canada, and a newsprint mill in West Tacoma, Washington, which was
purchased from the Company for approximately US$148,000,000 cash in
conjunction with the public offerings.
The common shares sold represent approximately 51% of the total
outstanding voting common shares and 40.34% of the total outstanding
equity of Rainy River. As a result, the Company now owns 49% of the
outstanding voting common shares and 59.66% of the total equity of
Rainy River. Rainy River has been accounted for on the equity method
retroactive to January 1, 1994, in the Company's consolidated
financial statements.
The equity securities were sold at a premium to the net book value of
the Canadian company, but the translation into U.S. dollars and other
costs of the transaction resulted in a charge to the Company of
$6,800,000 after tax, or 18 cents per fully diluted common share, in
the third quarter 1994. In addition, recognition by the Company of a
noncash charge for U.S. taxes on undistributed Canadian earnings
amounted to $20,200,000, or 53 cents per fully diluted common share.
The Company and Rainy River entered into a Contingent Subordinated
Credit Agreement under which the Company will make available to Rainy
River a line of credit of up to US$50,000,000. Borrowings by Rainy
River may be made, subject to certain conditions, until the third
anniversary of the closing of the Public Offerings discussed above.
There were no borrowings under this agreement as of December 31,
1994.
Rainy River and the Company entered into an agreement whereby Rainy
River will purchase from the Company, at a brokerage discount for
resale to customers of Rainy River, the newsprint produced at the
Company's mill located at DeRidder, Louisiana. During 1994, these
sales totaled $37,204,000.
The Company has a 30% interest in Rumford Cogeneration Company
Limited Partnership, which is engaged in the operation of a
cogeneration facility, located at the Company's mill in Rumford,
Maine, that produces electricity and low-pressure steam. The Company
has a 50% interest in the general partnership of Pine City Fiber
Company. Pine City is engaged in the financing, construction, and
eventual operation of a waste paper deink pulp production facility to
be located adjacent to the Jackson, Alabama, pulp and paper complex
owned by the Company. The Company has management/operating
agreements with these two equity affiliates and rights, subject to
certain conditions, to purchase all of the equity affiliates.
The debt of each affiliate has been issued without recourse to the
Company.
A summary of transactions between the Company and its equity
affiliates is as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Fees charged by and expenses
reimbursable to the Company $ 36,430 $ 18,150 $ 16,930
Purchases from equity
affiliates 98,180 50,170 47,990
Sales to equity affiliates 83,490 28,900 27,340
Amounts payable to equity
affiliates 11,711 6,046 3,669
Amounts receivable from equity
affiliates 29,170 7,328 5,230
Summarized financial information of the equity affiliates is as follows:
Year Ended December 31
1994 1993 1992
(expressed in thousands)
Condensed income statement
information:
Sales $499,520 $105,810 $ 99,510
Gross profit 6,790 31,930 28,220
Net income (loss) (15,300) 16,270 12,340
December 31
1994 1993
Condensed balance sheet
information:
Current assets $222,293 $ 63,694
Noncurrent assets 760,431 264,335
Current liabilities 111,064 23,751
Noncurrent liabilities 488,884 228,372
9. SEGMENT INFORMATION
Boise Cascade Corporation is an integrated paper and forest products
company headquartered in Boise, Idaho, with operations located
throughout the United States and, prior to the Rainy River transaction,
in Canada (see Note 8). The Company manufactures and distributes paper
and paper products, office products, and building products and owns and
manages timberland to support these operations. In December 1994, the
Company announced plans to sell a minority interest in its office
products business through an initial public offering of equity
securities.
No single customer accounts for 10% of consolidated trade sales. Export
sales to foreign unaffiliated customers are immaterial. During 1993,
the Company's Canadian paper operations made sales of $37,292,000 to
Company paper operations in the U.S. Similar sales in 1992 were
$40,643,000.
SUMMARY OF SIGNIFICANT SEGMENT ACCOUNTING POLICIES. Intersegment sales
are recorded primarily at market prices. Corporate assets are primarily
cash and short-term investments, deferred income tax benefits, prepaid
expenses, certain receivables, and property and equipment.
The Company's segments exclude timber-related assets and capital expen-
ditures, because any allocation of these assets would be arbitrary.
Company timber harvested is included in segment results at cost.
An analysis of the Company's operations by segment and by geographic area is as follows:
Depreciation
and Cost of
Sales Operating Company Capital
Inter- Income Timber Expendi-
Trade segment Total (Loss)(1) Harvested tures Assets
(expressed in thousands)
Year Ended December 31, 1994
Paper and paper products $1,630,379 $ 164,519 $1,794,898 $ (38,473) $ 181,729 $ 138,892 $2,607,716
Office products 907,276 1,244 908,520 42,008 10,377 86,137 348,122
Building products 1,589,693 63,732 1,653,425 150,978 36,159 35,324 443,075
Other operations 13,042 62,055 75,097 5,280 5,332 5,612 67,102
__________ __________ __________ __________ __________ __________ __________
Total 4,140,390 291,550 4,431,940 159,793 233,597 265,965 3,466,015
__________ __________ __________ __________ __________ __________ __________
Intersegment eliminations - (291,550) (291,550) (398) - - (30,241)
Timber, timberlands, and timber deposits - - - - - 5,174 397,721
Equity in affiliates - - - (22,930) - - 204,498
Corporate and other - - - (43,324) 2,833 725 256,084
__________ __________ __________ __________ __________ __________ __________
Consolidated totals $4,140,390 $ - $4,140,390 $ 93,141 $ 236,430 $ 271,864 $4,294,077
Year Ended December 31, 1993
Paper and paper products
United States $1,548,788 $ 125,007 $1,673,795 $ (124,865) $ 181,060 $ 144,062 $2,700,246
Canada 246,855 3 246,858 (12,905) 29,095 34,962 452,739
__________ __________ __________ __________ __________ __________ __________
1,795,643 125,010 1,920,653 (137,770) 210,155 179,024 3,152,985
Office products 681,654 1,165 682,819 35,631 10,100 2,907 234,751
Building products 1,468,724 62,100 1,530,824 158,773 38,477 28,534 447,831
Other operations 12,279 57,524 69,803 3,136 5,618 5,301 71,994
__________ __________ __________ __________ __________ __________ __________
Total 3,958,300 245,799 4,204,099 59,770 264,350 215,766 3,907,561
__________ __________ __________ __________ __________ __________ __________
Intersegment eliminations - (245,799) (245,799) (935) - - (24,144)
Timber, timberlands, and timber deposits - - - - - 4,663 366,054
Equity in affiliates - - - 13,570 - - 22,700
Corporate and other - - - (51,763) 3,360 1,052 240,802
__________ __________ __________ __________ __________ __________ __________
Consolidated totals $3,958,300 $ - $3,958,300 $ 20,642 $ 267,710 $ 221,481 $4,512,973
Year Ended December 31, 1992
Paper and paper products
United States $1,575,837 $ 105,394 $1,681,231 $ (157,651) $ 178,569 $ 210,262 $2,733,037
Canada 249,009 3 249,012 (28,886) 27,832 28,420 451,835
__________ __________ __________ __________ __________ __________ __________
1,824,846 105,397 1,930,243 (186,537) 206,401 238,682 3,184,872
Office products 671,164 1,056 672,220 18,847 11,989 5,537 245,483
Building products 1,207,799 61,666 1,269,465 114,891 37,462 27,239 415,287
Other operations 11,781 54,278 66,059 1,989 6,385 3,079 68,535
__________ __________ __________ __________ __________ __________ __________
Total 3,715,590 222,397 3,937,987 (50,810) 262,237 274,537 3,914,177
__________ __________ __________ __________ __________ __________ __________
Intersegment eliminations - (222,397) (222,397) (742) - - (22,350)
Timber, timberlands, and timber deposits - - - - - 7,537 385,955
Equity in affiliates - - - 3,760 - - 24,350
Corporate and other - - - (45,429) 3,553 877 257,574
__________ __________ __________ __________ __________ __________ __________
Consolidated totals $3,715,590 $ - $3,715,590 $ (93,221) $ 265,790 $ 282,951 $4,559,706
(1) Operating income (loss) includes gains from sales and dispositions (see Note 1). In addition, interest income has been
allocated to the Company's segments in the amounts of $1,451,000 for 1994, $862,000 for 1993, and $1,259,000 for 1992.
Quarterly Results of Operations (unaudited)
1994 1993
4th Qtr. 3rd Qtr.(1) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.(2) 2nd Qtr.(3) 1st Qtr.(4)
(expressed in millions, except per-common-share amounts)
Net sales $1,109 $1,090 $1,000 $ 941 $ 997 $1,003 $ 974 $ 984
Gross profit 171 122 100 57 66 67 67 79
Income (loss) before
income taxes $ 40 $ (19) $ (30) $ (56) $ (40) $ (30) $ (36) $ (19)
Income tax provision (benefit) 14 13 (11) (18) (16) (6) (19) (7)
______ ______ ______ ______ ______ ______ ______ ______
Net income (loss) $ 26 $ (32) $ (19) $ (38) $ (24) $ (24) $ (17) $ (12)
Net income (loss) per share
Primary and fully diluted(5) $ .32 $(1.19) $ (.86) $(1.35) $ (.98) $ (.91) $ (.72) $ (.56)
(1) On September 29, 1994, the Company's Canadian subsidiary, Rainy River Forest Products Inc. ("Rainy River"), agreed to the
sale of C$420,000,000 units of common stock and convertible debentures in an initial public offering, primarily in Canada,
and US$110,000,000 of senior secured notes in a public offering in the United States. The sale was completed October 13,
1994. The equity securities were sold at a premium to the net book value of the Canadian company, but the translation into
U.S. dollars and other costs of the transaction resulted in a charge to the Company of $6,800,000 after tax, or 18 cents per
fully diluted common share, in the third quarter 1994. In addition, recognition by the Company of a noncash charge for U.S.
taxes on undistributed Canadian earnings amounted to $20,200,000, or 53 cents per fully diluted common share.
Boise Cascade holds approximately 60% of Rainy River's economic equity and 49% of its voting equity. Rainy River has been
accounted for on the equity method retroactive to January 1, 1994, in the Company's consolidated financial statements.
(2) 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 for the quarter have been decreased by $7,120,000, or 19 cents per fully
diluted common share, as a result of adjusting net deferred tax liabilities for the change in rates. Also included in the
third quarter of 1993 was a net pretax gain of $5,300,000, or 9 cents per fully diluted common share after tax, which was
primarily attributable to an asset sale.
(3) In the second quarter of 1993, the Canadian federal government reduced the statutory tax rate applicable to the Company.
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 for the quarter have been increased by $5,020,000, or 13 cents per
fully diluted common share, as a result of adjusting net Canadian deferred tax liabilities for the changes in rates.
(4) During the first quarter of 1993, the Company sold its interest in a specialty paper producer at a pretax gain of $8,644,000,
or 14 cents per fully diluted common share after taxes.
(5) The computation of fully diluted net loss per common share was antidilutive in each of the periods shown; therefore, primary
and fully diluted net loss per share are the same.
See the Notes to Financial Statements for additional information.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Boise Cascade Corporation:
We have audited the accompanying balance sheets of Boise Cascade Corporation
(a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993,
and the related statements of income (loss), cash flows, and shareholders'
equity for the years ended December 31, 1994, 1993, and 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Boise Cascade Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 5 to the financial statements, effective January 1, 1992,
the Company changed its method of accounting for postretirement benefits other
than pensions in accordance with Standard No. 106 of the Financial Accounting
Standards Board.
Boise, Idaho
January 30, 1995
Arthur Andersen LLP
REPORT OF MANAGEMENT
The management of Boise Cascade Corporation is primarily responsible for the
information and representations contained in this annual report. The finan-
cial statements and related notes were prepared in conformity with generally
accepted accounting principles appropriate in the circumstances. In preparing
the financial statements, management has, when necessary, made judgments and
estimates based on currently available information.
Management maintains a comprehensive system of internal controls based on
written policies and procedures and the careful selection and training of
employees. The system is designed to provide reasonable assurance that assets
are safeguarded against loss or unauthorized use and that transactions are
executed in accordance with management's authorization. The concept of
reasonable assurance is based on recognition that the cost of a particular
accounting control should not exceed the benefit expected to be derived.
The Company's Internal Audit staff monitors the Company's financial reporting
system and the related internal accounting controls, which are also
selectively tested by Arthur Andersen LLP, Boise Cascade's independent public
accountants, for purposes of planning and performing their audit of the
Company's financial statements.
The Audit Committee of the board of directors, which is composed solely of
nonemployee directors, meets periodically with management, representatives of
the Company's Internal Audit Department, and Arthur Andersen LLP represen-
tatives to assure that each group is carrying out its responsibilities. The
Internal Audit staff and the independent public accountants have access to the
Audit Committee, without the presence of management, to discuss the results of
their audits, recommendations concerning the system of internal accounting
controls, and the quality of financial reporting.
Statements of Loss (Unaudited) Boise Cascade Corporation and Subsidiaries
Three Months Ended December 31 Year Ended December 31
1994 1993 1994 1993
(expressed in thousands)
Revenues
Sales $ 1,108,880 $ 996,900 $ 4,140,390 $ 3,958,300
Other income (expense), net (5,570) (2,000) 1,360 10,570
___________ _________ ___________ ___________
1,103,310 994,900 4,141,750 3,968,870
___________ _________ ___________ ___________
Costs and Expenses
Materials, labor, and other operating expenses 877,340 863,700 3,453,730 3,411,500
Depreciation and cost of company timber harvested 60,050 67,190 236,430 267,710
Selling and administrative expenses 89,870 69,900 336,970 283,450
___________ _________ ___________ ___________
1,027,260 1,000,790 4,027,130 3,962,660
___________ _________ ___________ ___________
Equity in Net Income (Loss) of Affiliates 1,230 1,580 (22,930) 13,570
___________ _________ ___________ ___________
Income (Loss) From Operations 77,280 (4,310) 91,690 19,780
___________ _________ ___________ ___________
Interest expense (37,770) (35,590) (147,800) (148,310)
Interest income 900 330 1,690 1,330
Foreign exchange gain (loss) -- (420) (130) 1,610
Loss on subsidiary's sale of stock -- -- (10,200) --
___________ _________ ___________ ___________
(36,870) (35,680) (156,440) (145,370)
___________ _________ ___________ ___________
Income (Loss) Before Income Taxes 40,410 (39,990) (64,750) (125,590)
Income tax provision (benefit) 14,550 (16,310) (2,140) (48,450)
___________ _________ ___________ ___________
Net Income (Loss) $ 25,860 $ (23,680) $ (62,610) $ (77,140)
Net Income (Loss) Per Common Share
Primary $.32 $(.98) $(3.08) $(3.17)
Fully diluted $.32 $(.98) $(3.08) $(3.17)
Segment Information
Segment Sales
Paper and paper products $ 523,687 $ 476,323 $ 1,794,898 $ 1,920,653
Office products 259,081 179,888 908,520 682,819
Building products 391,872 388,278 1,653,425 1,530,824
Intersegment eliminations and other (65,760) (47,589) (216,453) (175,996)
___________ _________ ___________ ___________
$ 1,108,880 $ 996,900 $ 4,140,390 $ 3,958,300
Segment Operating Income (Loss)
Paper and paper products $ 43,154 $ (34,169) $ (38,473) $ (137,770)
Office products 10,278 7,710 42,008 35,631
Building products 37,710 32,540 150,978 158,773
Equity in net income (loss) of affiliates 1,230 1,580 (22,930) 13,570
Corporate and other (15,092) (11,971) (39,893) (50,424)
___________ _________ ___________ ___________
Income (Loss) From Operations $ 77,280 $ (4,310) $ 91,690 $ 19,780
Balance Sheets (Unaudited) Boise Cascade Corporation and Subsidiaries
December 31
Assets 1994 1993
(expressed in thousands)
Current
Cash and cash items $ 22,447 $ 14,860
Short-term investments at cost, which approximates market 7,007 7,569
___________ ___________
29,454 22,429
Receivables, less allowances of $1,987,000 and $1,264,000 405,661 366,187
Inventories 423,589 446,609
Deferred income tax benefits 42,487 38,831
Other 17,073 13,397
___________ ___________
918,264 887,453
___________ ___________
Property
Property and equipment
Land and land improvements 37,775 56,871
Buildings and improvements 439,936 571,712
Machinery and equipment 4,078,302 4,642,434
___________ ___________
4,556,013 5,271,017
Accumulated depreciation (2,062,106) (2,261,360)
___________ ___________
2,493,907 3,009,657
Timber, timberlands, and timber deposits 397,721 366,054
___________ ___________
2,891,628 3,375,711
___________ ___________
Investments in Equity Affiliates 204,498 22,700
Other Assets 279,687 227,109
___________ ___________
Total Assets $ 4,294,077 $ 4,512,973
Liabilities and Shareholders' Equity
Current
Notes payable $ 56,000 $ 31,000
Current portion of long-term debt 58,534 145,185
Accounts payable 306,848 288,300
Accrued liabilities
Compensation and benefits 107,866 103,188
Interest payable 36,043 32,194
Other 92,552 88,568
___________ ___________
657,843 688,435
___________ ___________
Debt
Long-term debt, less current portion 1,625,148 1,593,348
Guarantee of ESOP debt 230,956 246,856
___________ ___________
1,856,104 1,840,204
___________ ___________
Other
Deferred income taxes 137,260 222,464
Other long-term liabilities 278,012 257,346
___________ ___________
415,272 479,810
___________ ___________
Shareholders' Equity
Preferred stock -- no par value; 10,000,000 shares authorized;
Series D ESOP: $.01 stated value; 6,294,891 and
6,395,047 shares outstanding 283,270 287,777
Deferred ESOP benefit (230,956) (246,856)
Series E: $.01 stated value; 862,500 shares outstanding
in each period 191,466 191,466
Series F: $.01 stated value; 115,000 shares outstanding
in each period 111,043 111,043
Series G: $.01 stated value; 862,500 shares outstanding
in each period 176,404 176,404
Common stock -- $2.50 par value; 200,000,000 shares authorized;
38,284,186 and 37,987,529 shares outstanding 95,710 94,969
Retained earnings 737,921 889,721
___________ ___________
Total shareholders' equity 1,364,858 1,504,524
___________ ___________
Total Liabilities and Shareholders' Equity $ 4,294,077 $ 4,512,973
Shareholders' Equity Per Common Share $21.77 $25.92
Statements of Cash Flows (Unaudited) Boise Cascade Corporation and Subsidiaries
Year Ended December 31
1994 1993
(expressed thousands)
Cash Provided By (Used for) Operations
Net loss $ (62,610) $ (77,140)
Items in loss not using (providing) cash
Equity in net (income) loss of affiliates 15,040 (5,270)
Loss on subsidiary's sale of stock 10,200 --
Depreciation and cost of company timber harvested 236,430 267,710
Deferred income tax benefit (2,174) (46,243)
Amortization and other 17,836 16,817
Gain on sales of operating assets -- (8,300)
Receivables (69,567) (116)
Inventories 6,139 (30,679)
Accounts payable and accrued liabilities 55,329 15,696
Current and deferred income taxes 9,036 13,137
Other 94 (14,391)
_________ __________
Cash provided by operations 215,753 131,221
_________ __________
Cash Provided By (Used for) Investment
Expenditures for property and equipment (187,040) (216,818)
Expenditures for timber and timberlands (5,174) (4,663)
Investments in equity affiliates (25,347) 896
Purchases of facilities (78,454) --
Sales of operating assets 171,383 23,992
Other (50,428) 7,971
_________ __________
Cash used for investment (175,060) (188,622)
_________ __________
Cash Provided By (Used for) Financing
Cash dividends paid
Common stock (22,844) (22,772)
Preferred stock (60,871) (44,731)
_________ __________
(83,715) (67,503)
Notes payable 25,000 27,000
Additions to long-term debt 138,842 83,807
Payments of long-term debt (115,569) (269,180)
Issuance of preferred stock -- 287,442
Other 1,774 (2,068)
_________ __________
Cash provided by (used for) financing (33,668) 59,498
_________ __________
Increase in Cash and Short-Term Investments 7,025 2,097
Balance at the Beginning of the Year 22,429 20,332
_________ __________
Balance at the End of the Year $ 29,454 $ 22,429
Notes to Quarterly Financial Statements Boise Cascade
Corporation and Subsidiaries
Operating Highlights. These statements are unaudited statements
which do not include all Notes to Financial Statements and should
be read in conjunction with the 1994 Annual Report of the
Company. The 1994 Annual Report will be available in March 1995.
The net income (loss) for the three months ended December 31,
1994 and 1993, was subject to seasonal variations and necessarily
involved adjustments to estimates made at interim periods for
accruals and allocations.
On September 29, 1994, the Company's Canadian subsidiary,
Rainy River Forest Products Inc. ("Rainy River"), agreed to the
sale of C$420,000,000 units of common stock and debentures in an
initial public offering, primarily in Canada, and
US$110,000,000 of senior secured notes in a public offering in
the United States. The sale was completed October 13, 1994. The
equity securities were sold at a premium to the net book value of
the Canadian company, but the translation into U.S. dollars and
other costs of the transaction resulted in a charge to the
Company of $6,800,000 after tax, or 18 cents per fully diluted
common share in the third quarter 1994. In addition, recognition
by the Company of a noncash charge for U.S. taxes on
undistributed Canadian earnings amounted to $20,200,000, or
53 cents per fully diluted common share.
Boise Cascade holds approximately 60% of Rainy River's
economic equity and 49% of its voting equity. Rainy River has
been accounted for on the equity method retroactive to January 1,
1994, in the Company's consolidated financial statements. In the
Company's Statements of Income (Loss) for the three months and
the year ended December 31, 1994, Rainy River's results of
operations are included in "Equity in net income (loss) of
affiliates." Equity in net income and losses of other affiliates
has also been reclassified for all periods presented.
The effective tax rate for 1994, exclusive of the impact of
the charge for U.S. taxes on undistributed earnings, was 34.5%.
The effective tax rate for 1993, exclusive of the impact of the
adjustments to net deferred tax liabilities, was 40.25%. The
decrease in the benefit rate was due primarily to reflecting the
1994 results of operations of Rainy River, including the tax
effect, in "Equity in net income (loss) of affiliates."
Results for the third quarter of 1993 included a net pretax
gain of $5,300,000, or 9 cents per fully diluted common share
after tax, which was primarily attributable to an asset sale.
In the second quarter of 1993, the Canadian federal
government reduced the statutory tax rate applicable to the
Company. 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. 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. In
accordance with the provisions of the income tax accounting
standard, net deferred tax liabilities are adjusted when rate
changes are adopted. The one-time, second-quarter adjustment
resulted in a benefit of $5,020,000, or 13 cents per fully
diluted common share, and the third-quarter adjustment resulted
in a charge of $7,120,000, or 19 cents per fully diluted share.
During the first quarter of 1993, the Company sold its
interest in a specialty paper producer at a pretax gain of
$8,644,000, or 14 cents per fully diluted common share after
taxes.
Net Loss Per Common Share. The computation of fully diluted net
loss per share was antidilutive in each of the periods presented;
therefore, the amounts reported for primary and fully diluted
loss are the same.
Net loss per common share was determined by dividing net
loss, as adjusted, by applicable shares outstanding. The loss
was adjusted by the aggregate amount of dividends on the
Company's preferred stock. The dividend attributable to the
Company's Series D convertible preferred stock held by the
Company's ESOP (employee stock ownership plan) is net of a tax
benefit. Preferred dividends for the year ended December 31,
1994, were $54,586,000, compared with $43,076,000 for the year
ended December 31, 1993. The average number of common shares
outstanding at December 31, 1994, was 38,110,000. For the same
period in 1993, the average shares outstanding were 37,958,000.
Primary average shares include only common shares outstanding.
On January 15, 1995, the Company's Series E preferred stock
was converted to 8,625,000 shares of common stock.
The significant subsidiaries of the Company are as follows:
State or Other
Jurisdiction Percentage of
of Incorporation Voting Securities
or Organization Owned
Boise Southern Company Louisiana 100.00
Oxford Paper Company Delaware 100.00
5
1,000
12-MOS
DEC-31-1994
DEC-31-1994
22,447
7,007
405,661
1,987
423,589
918,264
4,953,734
(2,062,106)
4,294,077
657,843
1,856,104
95,710
0
762,183
506,965
4,294,077
4,140,390
4,141,750
3,690,160
4,027,130
0
0
147,800
(64,750)
(2,140)
(62,610)
0
0
0
(62,610)
(3.08)
(3.08)
Rainy River Forest Products Inc.
Consolidated Balance Sheets (Note 1)
(in thousands of Canadian dollars)
December 31
1994 1993
Assets
Current assets
Cash and short-term investments $ 71,547 $ 5,371
Accounts receivable
Trade 99,733 13,939
Boise Cascade Corporation and affiliated
companies (Note 13) 18,070 35,442
Inventories (Note 4) 43,946 41,379
Income tax refunds receivable - 10,351
Other 1,646 1,261
__________ __________
Total current assets 234,942 107,743
__________ __________
Property
Property and equipment 1,182,658 988,819
Accumulated depreciation (474,481) (432,762)
__________ __________
Net property and equipment (Notes 5 and 8) 708,177 556,057
Other assets (Note 6) 49,613 45,790
__________ __________
Total assets $ 992,732 $ 709,590
Approved by the Board
(Signed) Martin J. O'Brien (Signed) Donald S. Macdonald
Director Director
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Rainy River Forest Products Inc.
Consolidated Balance Sheets (Note 1)
(in thousands of Canadian dollars)
December 31
1994 1993
Liabilities and Capital
Current liabilities
Accounts payable and accrued liabilities
Trade $ 90,142 $ 65,467
Boise Cascade Corporation and affiliated
companies (Note 13) 32,744 3,307
__________ __________
Total current liabilities 122,886 68,774
__________ __________
Long-term debt (Note 8) 154,301 172,094
Deferred taxes (Note 7) 77,026 102,660
Advances from Boise Cascade Corporation (Note 13) - 15,432
Other long-term liabilities 438 2,725
Capital
Convertible subordinated debentures (Note 11) 210,000 -
__________ __________
Owners' equity
Share capital (Note 12) 215,886 14,489
Equity invested 210,301 330,650
Cumulative translation account 1,894 2,766
__________ __________
Total owners' equity 428,081 347,905
__________ __________
Total liabilities and capital $ 992,732 $ 709,590
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Rainy River Forest Products Inc.
Consolidated Statements of Operations (Note 1)
(in thousands of Canadian dollars, except per share amounts)
Year ended December 31
1994 1993 1992
Sales
Manufactured products $496,653 $447,629 $425,233
Brokered products (Notes 1 and 13) 54,926 - -
________ ________ ________
551,579 447,629 425,233
________ ________ ________
Cost of products sold
Manufactured products 479,201 440,642 434,121
Brokered products 52,374 - -
Selling, general, and administrative
expenses 18,921 18,999 19,175
Depreciation (Note 2) 42,030 39,838 37,183
Other (income) expense, net (Note 3) (1,755) (1,490) 1,397
________ ________ ________
590,771 497,989 491,876
________ ________ ________
Loss from operations (39,192) (50,360) (66,643)
Interest expense (17,008) (6,894) (5,970)
Interest income 2,634 1,544 6,770
Foreign exchange loss (Note 8) (11,322) (4,437) (1,706)
________ ________ ________
Loss before income taxes (64,888) (60,147) (67,549)
Credit for income taxes (Note 7) (21,013) (20,364) (24,179)
________ ________ ________
Net loss $(43,875) $(39,783) $(43,370)
Net loss per share (Note 12) $(1.81) $(1.92) $(2.09)
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Rainy River Forest Products Inc.
Consolidated Statements of Changes in Financial Position (Note 1)
(in thousands of Canadian dollars)
Year ended December 31
1994 1993 1992
Operating activities
Cash provided by (used for) operations
Net loss $(43,875) $(39,783) $(43,370)
Adjustments to reconcile net loss to cash
provided by (used for) operations
Depreciation 42,030 39,838 37,183
Deferred taxes (22,423) (20,921) (3,271)
Amortization and other (Note 2) 10,841 3,767 3,600
________ ________ ________
(13,427) (17,099) (5,858)
Changes in assets and liabilities, net of
effects of foreign currency adjustments
(Increase) decrease in accounts receivable (65,855) 2,127 (14,275)
(Increase) decrease in inventories (2,101) (3,828) 1,362
Increase in accounts payable and
accrued liabilities 51,573 562 17,700
Increase in prepaid pension costs (2,313) (3,909) (938)
Income taxes 7,324 11,608 (2,773)
Other, net (1,252) 869 1,160
________ ________ ________
Net cash used for operations (26,051) (9,670) (3,622)
________ ________ ________
Investing activities
Capital expenditures (104,257) (62,842) (44,924)
Purchase of deink facility (Note 1) (83,042) - -
Distributions from (investments in) equity
investment 5,736 (1,609) (3,799)
Other, net (3,083) 1,315 2,231
________ ________ ________
Net cash used in investing activities (184,646) (63,136) (46,492)
________ ________ ________
Financing activities
Advances from (to) Boise Cascade Corporation (15,432) 11,395 1,498
Capital contribution from (repayment to)
Boise Cascade Corporation (Note 1) (76,474) 36,121 18,021
Issuance of common shares, net 201,397 - -
Issuance of convertible subordinated debentures 210,000 - -
Issuance of long-term debt 148,500 26,476 31,787
Payment of long-term debt (172,094) - -
Cost of issuance of convertible subordianted
debentures and debt (19,283) - -
________ ________ ________
Net cash provided by financing activities 276,614 73,992 51,306
________ ________ ________
Effect of exchange rate changes on
cash and short-term investments 259 - -
________ ________ ________
Net increase in cash and short-term investments 66,176 1,186 1,192
Cash and short-term investments at beginning of year 5,371 4,185 2,993
________ ________ ________
Cash and short-term investments at end of year $ 71,547 $ 5,371 $ 4,185
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Rainy River Forest Products Inc.
Consolidated Statements of Owners' Equity (Note 1)
(in thousands of Canadian dollars)
Year ended December 31
1994 1993 1992
Share capital at beginning of year $ 14,489 $ 14,489 $ 14,489
Issuance of common shares, net (Note 12) 201,397 - -
________ ________ ________
Share capital at end of year $215,886 $ 14,489 $ 14,489
Equity invested at beginning of year $330,650 $333,283 $357,997
Capital contributions (reductions):
Contribution to effect Boise Cascade's
purchase of a 50% interest in a
deinked recycled pulp facility at
Tacoma, Washington (Note 1) 83,042 - -
Acquisition of paper mill (Note 1) (186,096) - -
Intercompany payable to Boise Cascade
Corporation and other (Note 13) 26,580 37,150 18,656
________ ________ ________
(76,474) 37,150 18,656
Net loss (43,875) (39,783) (43,370)
________ ________ ________
Equity invested at end of year (Note 12) $210,301 $330,650 $333,283
Foreign currency translation account
at beginning of year $ 2,766 $ 1,800 $ (1,663)
Adjustment from translation of foreign
currency statements and related long-term
debt (Notes 2 and 8) (872) 966 3,463
________ ________ ________
Foreign currency translation account at
end of year $ 1,894 $ 2,766 $ 1,800
Owners' equity at end of year $428,081 $347,905 $349,572
The accompanying notes are an integral part of these Consolidated Financial
Statements.
AUDITORS' REPORT
To the Shareholders of Rainy River Forest Products Inc.:
We have audited the consolidated balance sheets of Rainy River Forest
Products Inc. as at December 31, 1994 and 1993 and the consolidated
statements of operations, changes in financial position and owners' equity
for each of the years in the three-year period ended December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as
at December 31, 1994 and 1993 and the results of its operations and the
changes in its financial position for each of the years in the three-year
period ended December 31, 1994, in accordance with generally accepted
accounting principles in Canada.
Winnipeg, Canada
January 12, 1995 Arthur Andersen & Co.
Rainy River Forest Products Inc.
Notes to Consolidated Financial Statements
(in Canadian dollars)
1. COMPANY BACKGROUND AND BASIS OF PRESENTATION
Rainy River Forest Products Inc. (the "Company"), formerly named Boise
Cascade Canada Ltd., is a major producer and seller of uncoated groundwood
papers and newsprint. It owns and operates an uncoated groundwood papers
and kraft pulp mill at Fort Frances, Ontario, and newsprint mills at
Kenora, Ontario, and Tacoma, Washington (the "West Tacoma mill").
Effective as of October 13, 1994, the Company concluded an exclusive
newsprint marketing agreement with Boise Cascade Corporation ("Boise
Cascade") to purchase, at a brokerage discount for resale to customers of
the Company, all of the newsprint produced at Boise Cascade's mill located
at DeRidder, Louisiana.
Prior to October 13, 1994, the Company was a wholly-owned subsidiary of
Boise Cascade. On October 13, 1994, the Company completed the sale of
140,000 units ($420,000,000) in an initial public offering, primarily in
Canada, at a price of $3,000 per unit. Each unit consisted of 100 common
shares at $15 per share (see Note 12) and 15 convertible subordinated
debentures at $100 per debenture. The aggregate of $210,000,000 of
debentures sold bear interest at 8% per year, mature on October 15, 2004,
and are convertible at any time prior to redemption or maturity into 5.7971
common shares for each debenture, representing a conversion price of $17.25
per common share (see Note 11). A concurrent sale of US$110,000,000 of
senior secured notes was made in a public offering in the United States.
The notes mature on October 15, 2001, bear interest at 10.75%, and are
redeemable commencing October 15, 1999 (see Note 8). The proceeds from the
public offerings were used primarily to purchase the West Tacoma mill from
Boise Cascade and to pay indebtedness to Boise Cascade and others (see
Note 8).
The West Tacoma mill includes a deinked recycled pulp facility which
commenced operation in August 1993. The deinked pulp facility was owned by
an unconsolidated 50/50 venture between Boise Cascade and a third party
until April 30, 1994, at which time Boise Cascade purchased the third-party
interest. That purchase resulted in consolidation of the deinked facility
with the West Tacoma mill, including $83,095,000 attributable to property
and equipment and $2,435,000 for accounts receivable and other assets.
Liabilities assumed included $2,488,000 of accounts payable and accrued
liabilities, and a capital contribution from Boise Cascade of $83,042,000
was recorded. The West Tacoma mill was acquired from Boise Cascade on
September 28, 1994. The cost of that acquisition was reflected as a
reduction in the Company's equity because the assets and liabilities of the
West Tacoma mill had previously been included in the Company's financial
statements in accordance with the accounting method described below.
For the periods prior to October 13, 1994, the financial statements were
prepared on a basis similar to a pooling of interest to include the
historical financial records of the Company and Boise Cascade's historical
records for the West Tacoma mill and a deinked recycled pulp facility. The
financial statements are intended to represent the operations of the
described facilities as though they had been carried on as a separate
consolidated entity. For the periods prior to October 13, 1994, the
financial statements may not necessarily be representative of results that
would have been attained if the above facilities had operated within a
separate consolidated entity. For the period subsequent to October 13,
1994, the financial statements include brokerage sales and related cost of
sales attributable to a marketing agreement applicable to the sale of
newsprint produced at DeRidder, Louisiana. No such related activity has
been included for the periods prior to that date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the results of the Company and its subsidiaries after elimination of
intercompany balances and transactions. The deinked recycled pulp facility
discussed previously was accounted for on the equity basis prior to Boise
Cascade's purchase of the third party interest and has been consolidated
with the West Tacoma mill since that purchase.
Net Loss per Share. The net loss per share was determined by dividing the
reported net loss by the weighted average number of shares outstanding
after giving retroactive effect to the stock split that is described in
Note 12. For purposes of calculating net loss per share, the non-voting
equity shares held by Boise Cascade (see Note 12) are considered to be
equivalent to the Company's common shares. The 1994 net loss per share,
assuming full dilution attributable to the 8% convertible subordinated
debentures and outstanding stock options, has not been shown because an
assumed conversion of that debt or exercise of those options would have
reduced the net loss per share reported. The Company had no dilutive
securities prior to the October 13, 1994, initial public offerings.
Foreign Currency Translation. Income and expense items attributable to
operations located in Canada that are denominated in foreign currencies are
translated into Canadian dollars at average exchange rates prevailing
during the year. Foreign currency denominated assets and liabilities are
translated at exchange rates prevailing at the balance sheet date, and
translation exchange gains and losses, with the exception of the gains or
losses arising from the translation of foreign currency denominated long-
term debt, are included in income as they occur. The US$110,000,000 senior
secured notes are considered to be an effective hedge of the Company's net
investment in its U.S. subsidiary, which among other things, owns the West
Tacoma mill. Accordingly, the gains or losses arising from the translation
of this foreign currency denominated long-term debt are deferred as a
component of the "Cumulative translation account" on the Balance Sheets.
Income and expense items attributable to operations in the United States,
all of which are considered to be self-sustaining, are translated into
Canadian dollars at average exchange rates prevailing during the year.
Assets and liabilities are translated at year-end exchange rates. Capital
contributions and reductions are translated at the exchange rate prevailing
at the date of the applicable transaction. Foreign exchange adjustments
arising from this translation process are deferred and included in the
"Cumulative translation account" on the Balance Sheets.
Inventories. Inventories are valued at the lower of average cost and net
realizable value after provision for slow-moving or obsolete items.
Financing Costs. Costs incurred in connection with the issuance of
convertible subordinated debentures and senior secured notes were
capitalized and are being amortized over a five-year period. Share capital
on the Balance Sheet for December 31, 1994, is shown net of the costs of
issuance.
Property. Property and equipment are recorded at cost. Cost includes
expenditures for major improvements and replacements and includes
capitalized interest associated with significant capital additions.
Depreciation at pulp and paper mills is determined by the units-of-
production method, and other operations use the straight-line method.
Estimated service lives of principal items of property and equipment range
from 20 to 40 years. In 1994, depreciation rates applied to certain
manufacturing assets were adjusted in order to more closely approximate
their anticipated lives. The revised rates, which are comparable with
general practice in the forest products industry, resulted in a net
reduction in depreciation expense for the year ended December 31, 1994, of
$5,762,000. The pulp and paper mills use group depreciation methods and
include gains and losses from partial sales and retirements in accumulated
depreciation. Gains and losses at other operations are included in income
as they occur.
Environmental Remediation and Compliance. Environmental expenditures
resulting in additions to property and equipment that increase useful lives
are capitalized, while other environmental expenditures are charged to
expense. Liabilities are recorded when assessments and/or remedial efforts
are probable and the cost can be reasonably estimated (see Note 9).
Pensions. The Company uses the projected benefit approach allocated on
years of service to determine the cost of pension benefits earned by its
employees. Pension expense includes benefits earned by employees during
the year, interest on the actuarial surplus or unfunded liability,
amortization of experience gains or losses and amortization of the
actuarial surplus or unfunded liability over the estimated remaining
service life of the employees.
3. OTHER INCOME AND EXPENSE
"Other (income) expense, net" on the Statements of Operations includes
gains and losses on the sale and disposition of property, equity in
earnings of an unconsolidated 50% owned deinked recycled pulp facility
until April 30, 1994, when the third party interest was acquired, and other
miscellaneous items.
4. INVENTORIES
Inventories include the following:
December 31
1994 1993
(expressed in thousands)
Finished goods and work in process $ 4,519 $ 6,250
Supplies 28,732 26,407
Raw materials 10,695 8,722
________ ________
$ 43,946 $ 41,379
5. PROPERTY
Property includes the following:
December 31
1994 1993
(expressed in thousands)
Land and land improvements $ 17,052 $ 16,431
Buildings and improvements 214,313 177,287
Machinery and equipment 851,897 730,262
Construction in progress 99,396 64,839
__________ __________
1,182,658 988,819
Less accumulated depreciation
Buildings and improvements (87,416) (81,154)
Machinery and equipment (387,065) (351,608)
__________ __________
(474,481) (432,762)
__________ __________
Net property and equipment $ 708,177 $ 556,057
Interest capitalized during the year ended December 31, 1994, was $484,000,
compared with $199,000 in 1993.
6. OTHER ASSETS
Other long-term noncurrent assets include the following:
December 31
1994 1993
(expressed in thousands)
Prepaid pension costs (see Note 10) $ 25,937 $ 23,624
Financing costs 19,283 -
Deferred foreign exchange loss - 9,387
Investment in unconsolidated 50% owned
deinked recycled pulp facility (see Note 2) - 6,753
Other 4,393 6,026
________ ________
$ 49,613 $ 45,790
7. INCOME TAXES
The credit for income taxes consists of the following:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Current
Canada $ 1,410 $ 2,307 $(13,860)
United States - (1,750) (7,048)
________ ________ ________
1,410 557 (20,908)
________ ________ ________
Deferred
Canada (13,618) (15,223) (4,373)
United States (8,805) (5,698) 1,102
________ ________ ________
(22,423) (20,921) (3,271)
________ ________ ________
Total credit for income taxes $(21,013) $(20,364) $(24,179)
A reconciliation of the statutory Canadian federal and provincial income
taxes and the reported credit for income taxes is as follows:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Statutory Canadian federal and provincial
credit for income taxes $(28,771) $(26,669) $(29,951)
(Increases) decreases resulting from:
Manufacturing and processing
profits tax 3,431 3,120 3,010
Difference in tax rate for
foreign subsidiaries 2,260 2,042 1,809
Large corporation tax 1,286 1,167 1,153
Other, net 781 (24) (200)
________ ________ ________
Total credit for income taxes $(21,013) $(20,364) $(24,179)
The components of deferred taxes are as follows:
December 31
1994 1993
(expressed in thousands)
Deferred tax assets
Net operating loss carryforwards $ 33,375 $ 27,414
Investment tax credit carryforwards 8,999 16,256
West Tacoma mill acquisition costs 7,805 -
Share issuance costs 4,576 -
Other 1,462 1,357
________ ________
56,217 45,027
________ ________
Deferred tax liabilities
Property and equipment 119,436 132,652
Prepaid pension costs 10,134 8,997
Deferred charges 1,247 1,104
Other 2,426 4,217
________ ________
133,243 146,970
________ ________
Net deferred tax liabilities $ 77,026 $101,943
"Other current assets" on the Balance Sheets include deferred tax assets of
$717,000 at December 31, 1993. At December 31, 1994, the Company had net
operating loss carryforwards for Canadian federal income tax purposes of
$81,900,000 of which $46,700,000 expire in 2000, and $35,200,000 expire in
2001. It had net operating loss carryforwards for Ontario income tax
purposes of $101,300,000 of which $65,900,000 expire in 2000, and
$35,400,000 expire in 2001. Investment tax credit carryforwards at
December 31, 1994, expire as follows: $2,120,000 in 1995, $2,924,000 in
1996, $1,587,000 in 1997, $1,483,000 in 1998, and $855,000 between 1999 and
2003.
The results of Canadian operations were included in Canadian income tax
returns. The income tax benefit for losses incurred by the Canadian
operations was recorded based on the anticipated ability to utilize those
losses on the Canadian income tax returns. The results for the Company's
U.S. operations were included in Boise Cascade's consolidated U.S. income
tax returns for periods prior to September 28, 1994. Commencing on that
date, the Company's wholly-owned U.S. subsidiary includes the results of
operations in the United States in its U.S. income tax return. No income
tax benefits were recorded, however, because of uncertainties as to the
subsidiary's ability to utilize the tax losses incurred on its U.S. income
tax return.
The loss before income taxes by country of origin consists of the
following:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Canada $(41,125) $(38,744) $(50,060)
United States (23,763) (21,403) (17,489)
________ ________ ________
Loss before income taxes $(64,888) $(60,147) $(67,549)
8. DEBT
Long-term debt consists of the following:
December 31
1994 1993
(expressed in thousands)
10.75% senior secured notes (US$110 million),
due in 2001 $ 154,301 $ -
Revolving credit borrowings, with interest
rates averaging 4.0% in 1993 - 145,618
Due to banks, with interest rates averaging
4.0% in 1993 - 26,476
__________ __________
Total long-term debt $ 154,301 $ 172,094
The 10.75% senior secured notes were issued on October 13, 1994, pursuant
to a public offering in the United States. The notes are redeemable at the
option of the Company from October 15, 1999, to October 14, 2000,
at 101.79% of the principal amount and at par between October 15, 2000, and
the maturity date (plus, in each case, accrued interest if any). The notes
are secured by the Company's facilities at Fort Frances, Ontario, and
certain related contractual rights, including the Company's Forest
Management Agreements that are tributary to such facility. The notes are
senior in right of payment to all subordinated indebtedness of the Company.
The indenture governing the notes contains certain covenants that, among
other things, limit the type and amount of additional indebtedness that may
be incurred by the Company and certain of its subsidiaries and impose
limitations on investments, sales or transfers of assets, dividends and
other payments, the creation of liens, sale-leaseback transactions,
transactions with affiliates, and mergers.
At December 31, 1994, no borrowings had been made by the Company under its
revolving credit agreement with a number of banks. Aggregate borrowings
under the agreement are limited to the lesser of $100,000,000 or a defined
amount based primarily on the level of qualifying accounts receivable and
inventory that amounted to $83,975,000 at the end of 1994. Outstanding
borrowings are secured by accounts receivable and inventory. The agreement
permits borrowings in either Canadian or United States dollars and provides
for a range of floating interest rate options. At December 31, 1994, the
interest rates available ranged from 8.2% to 8.5% for borrowings in
Canadian dollars and from 7.75% to 9.5% for borrowings in U.S. dollars.
The agreement expires on October 13, 1997, subject to a one-year extension
by the Company with the consent of the banks, and subject to that
extension, borrowings outstanding are payable at that time.
The Company may borrow up to US$50,000,000 from Boise Cascade until
October 13, 1997. Borrowings may be made under the agreement with Boise
Cascade when borrowings from banks under the revolving credit agreement
exceed 60% of the total borrowing permitted, the amount of unencumbered
cash or marketable securities is less than $12,000,000, and there is no
continuing event of default. The agreement is subject to termination after
October 13, 1996, if the Company achieves a defined interest coverage.
Interest is payable at 3% over LIBOR. Under defined circumstances,
interest payment requirements may be satisfied by issuance of junior
subordinated promissory notes bearing the same interest and repayment terms
as the principal borrowed under the agreement. Borrowings under this
agreement, including any outstanding promissory notes, are unsecured but
rank in priority to the 8% convertible subordinated debentures, and are due
October 15, 2002. Earlier payment is required under some circumstances,
and prepayment is permitted at any time without penalty.
The revolving credit agreement pursuant to which borrowings were
outstanding at December 31, 1993, was cancelled in April 1994 and replaced
with bridge financing guaranteed by Boise Cascade. Borrowings of
$202,865,000 under the bridge financing, with an interest rate averaging
5.5%, were repaid with proceeds received from the initial public offerings
(see Note 1).
At December 31, 1994, no payments were due on long-term debt during the
years 1995 through 1999.
Deferred foreign exchange losses of $16,101,000 were charged to operations
in March 1994 as a result of payment of long-term debt in April 1994 (see
Note 6). Net foreign exchange gains of $6,700,000 were recorded during the
nine months subsequent to March 1994, principally as a result of exchange
gains on bank bridge loans prior to their refinancing in late 1994.
9. COMMITMENTS
At December 31, 1994, outstanding purchase orders and contracts with
respect to commitments for capital expenditures were $36,769,000.
Management believes that the Company met the environmental compliance
standards applicable to it at December 31, 1994, and it estimates that
capital expenditures required to meet known future environmental compliance
standards will approximate $62,669,000 during the five-year period ending
December 31, 1999. This spending is expected to consist of $40,696,000 at
the Kenora mill, $19,544,000 at the Fort Frances mill, and $2,429,000 at
the West Tacoma mill.
10. RETIREMENT AND BENEFIT PLANS
Substantially all of the Company's employees are covered by pension plans.
Effective November 1, 1994, the West Tacoma mill and uncoated groundwood
papers and newsprint marketing and sales employees were transferred from
the Boise Cascade plans in which they had previously participated to one of
two separate pension plans (the "West Tacoma Plans") established for those
employees.
The pension plans are noncontributory except for one plan for Canadian
hourly employees that is contributory. The plans are funded and trusteed.
The Company's contributions to the pension plans vary from year to year,
but the Company has made at least the minimum statutory contribution
required in each year. The plans provide reduced benefits for early
retirement, and the plans covering Canadian hourly employees take into
account offsets for governmental pension benefits.
The assumptions used in the calculations of pension expense and plan
obligations are estimates of factors that will determine, among other
things, the amount and timing of future benefit payments. Effective
December 31, 1994, the discount rate for the Canadian plans was increased
to 9.25% from the 8.25% rate that was adopted at December 31, 1992. The
salary escalation assumption used for these plans remained at 5.5%,
compared with the 6.5% rate used prior to year-end 1993. The asset return
assumption used during the periods presented was 10%. A discount rate of
8.25% was adopted for the West Tacoma Plans at December 31, 1994, along
with salary escalation and asset return assumptions of 5% and 9.75%.
The components of net pension expense for the plans are as follows:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Benefits earned by employees $ 3,408 $ 3,151 $ 2,916
Interest cost on projected benefit
obligation 14,290 13,114 12,379
Earnings from plan assets (1,451) (38,469) (9,102)
Net amortization and deferral (15,149) 24,010 (5,033)
________ ________ ________
Total pension expense $ 1,098 $ 1,806 $ 1,160
"Net amortization and deferral" in the table on the previous page consists
of the net effect of amortization of previously unrecognized past service
costs, the difference between actual return on plan assets and the
actuarially expected return on plan assets, the amortization of
unrecognized net gains or losses from previous periods, and recognition of
a portion of the unrecognized transitional asset.
The following table sets forth the funding status of the pension plans
along with the amounts recorded on the Balance Sheets with respect to those
plans. The amounts shown at December 31, 1994, include the West Tacoma
Plans.
December 31
1994 1993
(expressed in thousands)
Actuarial present value of benefit obligation
Vested benefits $ (137,951) $ (129,715)
Nonvested benefits (13,519) (11,902)
__________ __________
Accumulated benefit obligation (151,470) (141,617)
Provision for salary escalation (31,668) (26,335)
__________ __________
Projected benefit obligation (183,138) (167,952)
Plan assets at fair value, primarily
common stock and fixed-income securities 187,247 181,174
__________ __________
Plan assets greater than projected
benefit obligation 4,109 13,222
Unrecognized items 21,828 10,402
__________ __________
Prepaid pension costs $ 25,937 $ 23,624
"Unrecognized items" in the table consists of the sum of the unamortized
portion of the transitional asset, unamortized net gains and losses arising
from differences between the actual return on plan assets and the
actuarially expected return on plan assets, and unamortized past service
costs.
Boise Cascade realized pension income of $264,000 during the first ten
months of 1994 for West Tacoma mill employees and uncoated groundwood and
newsprint marketing and sales employees. On November 1, 1994, these
employees were transferred to the new West Tacoma Plans. The estimated
fair market value of the assets applicable to salaried employees exceeded
the projected benefit obligation at November 1, 1994, by $486,000. The
projected benefit obligation applicable to hourly employees exceeded the
fair market value of assets by $2,313,000. The assets were not transferred
to the new plans until early 1995, and accordingly, the fair market value
of assets in the preceding table includes a receivable of $10,304,000
representing amounts due from Boise Cascade pension plans. In 1993, Boise
Cascade's pension expense for these employees was $32,000, compared with
pension income of $34,000 for 1992.
11. CONVERTIBLE SUBORDINATED DEBENTURES
On October 13, 1994, the Company completed the sale of $210,000,000 of 8%
convertible subordinated debentures due October 15, 2004, as a part of a
public offering (see Note 1). The debentures are convertible by the
holders any time prior to redemption or maturity into 5.7971 common shares
for each debenture, representing a conversion price of $17.25 per common
share. The debentures are not redeemable prior to October 15, 1997. From
October 15, 1997, up to and including October 14, 1999, the debentures are
redeemable at par plus accrued and unpaid interest, providing that the
average closing price of the Company's common shares on The Toronto Stock
Exchange exceeds $21.5625 during a specified period prior to the delivery
of the notice of redemption. The Company has the option, subject to
regulatory approval and absent an event of default, of repaying the
debentures upon redemption or at maturity in common shares of the Company.
The debentures are unsecured and are subordinate in right of payment to
liabilities of the Company for borrowed money, the deferred purchase price
of assets or services, and trade debts.
12. SHARE CAPITAL
Authorized Share Capital. The Company's authorized share capital consists
of an unlimited number of common shares, 10,000,000 non-voting equity
shares, and an unlimited number of preference shares issuable in series.
Issued and Outstanding Capital. Issued and outstanding capital consists of
the following:
December 31
1994 1993
(expressed in thousands)
Common shares (27,450,980 in 1994
and 20,704,000 in 1993) $210,809 $ 14,489
Non-voting equity shares (7,253,020 in 1994) 5,077 -
________ ________
Total share capital $215,886 $ 14,489
All of the common shares outstanding were owned by Boise Cascade through
October 12, 1994. On October 4, 1994, a share split of approximately
262-for-one occurred which increased common shares outstanding from 79,000
to 20,704,000. On October 14, 1994, Boise Cascade converted 7,253,020 of
its common shares to non-voting equity shares. These non-voting shares are
convertible by Boise Cascade on a one-to-one basis into common shares
following the issuance of common shares by the Company, providing that the
number of non-voting equity shares converted may not exceed the number of
common shares being issued by the Company. In addition, the non-voting
equity shares will be automatically converted upon a transfer from Boise
Cascade to another holder who is not affiliated with Boise Cascade. No
dividend or other distribution may be declared or paid on the common or
non-voting equity shares without an equal dividend or other distribution
being declared and paid on the non-voting equity or common shares as the
case may be.
On October 13, 1994, the Company completed the sale of 14,000,000 of its
common shares at $15 per share in a public offering (see Note 1). Share
issuance costs of $13,179,000, net of related tax benefits of $4,576,000,
were recorded as a reduction in share capital. Following that sale, Boise
Cascade held 49% of the Company's common shares (33.9% assuming conversion
of the 8% convertible subordinated debentures). Boise Cascade has agreed
not to purchase or otherwise acquire any of the Company's voting securities
prior to October 13, 1995, if that acquisition would result in Boise
Cascade owning 50% or more of the Company's outstanding voting securities.
The Company's "Equity invested" for 1994 includes a reduction of
$159,516,000 resulting primarily from the purchase of the West Tacoma mill,
including the recycled deinked pulp facility, and repayment of certain
advances from Boise Cascade. The cost of the West Tacoma acquisition was
reflected as a reduction in equity because the net assets of that mill were
previously included in the financial statements pursuant to a method which
was similar to the pooling of interest accounting method. A contribution
to equity of $83,042,000 resulted from consolidation of the deinked
recycled pulp facility following Boise Cascade's purchase of a 50% interest
in that facility that was held by a third party.
The Company's ability to declare and pay dividends is restricted by
covenants in certain credit agreements. Under the most restrictive of
these covenants, which is contained in the indenture for the 10.75% senior
secured notes, the payment of dividends is subject to various conditions
and the amount of restricted payments. The restricted payments, which are
defined to include cash dividends, are limited to the sum of (i) 50% of
consolidated net income accrued since September 30, 1994, (minus 100% of
any consolidated net losses), (ii) the net cash proceeds received by the
Company after completion of the public offering described in Note 1 from
any subsequent sale of its capital shares, and (iii) an amount equal to the
net reduction in certain investments (as defined) after October 1, 1994,
and minus (iv) the aggregate amount of certain permitted investments (as
defined). At December 31, 1994, the Company's available margin was
negative in the amount of $3,316,000.
In April 1994, the Company established a stock option plan for directors,
executive officers, and other employees. The aggregate common shares
reserved for issuance under the plan is not to exceed 1.5 million shares.
During 1994, options covering 227,259 common shares were granted at an
exercise price of $15 per share. In general, one-third of the options vest
on the first, second, and third anniversaries of the date of grant and are
exercisable for a maximum period of ten years from the date of grant.
13. RELATED PARTY TRANSACTIONS
A series of continuing agreements between the Company and Boise Cascade for
varying periods became effective prior to or upon completion of the public
offerings. The agreements included the following:
- an agreement with an initial term of ten years pursuant to which
the Company will receive a brokerage discount of between 3% and 5%
(declining to 3% by 1999) of the net selling price of newsprint
produced at Boise Cascade's mill located at DeRidder, Louisiana,
and resold by the Company to its customers;
- an agreement whereby Boise Cascade will provide up to US$50,000,000
under an unsecured line of credit that will be available under
certain circumstances (see Note 8);
- an agreement with an initial term of ten years whereby the Company
will continue to sell market pulp produced at its mill at Fort
Frances, Ontario, to Boise Cascade's mill at International Falls,
Minnesota, at a price based on a formula which discounts a market
price indicator by a number of factors to recognize, among other
things, savings obtained by the Company in delivering the pulp to a
single adjacent customer;
- certain other agreements formalizing relationships between the
Company's Fort Frances mill and Boise Cascade's mill at
International Falls that address, among other things, sales and
exchanges of goods and services;
- an agreement with an initial term of ten years whereby Boise
Cascade will sell, at an approximate market price, a monthly amount
of wood chips to the Company's West Tacoma mill. In addition,
Boise Cascade will use its best efforts to negotiate, on terms
specified by the Company, supply agreements with third parties for
additional wood chips and hog fuel for that mill;
- an agreement related to the administration of tax matters; and
- an agreement whereby Boise Cascade will provide certain
administrative and financial services for a fee.
The terms and conditions of each of the agreements is subject to change in
accordance with the provisions of the applicable agreement.
The revenues and costs attributable to these contracts during 1994 are as
follows (expressed in thousands):
Sales
Manufactured products $ 21,812
Brokered products 54,926
Cost of products sold
Manufactured products 9,003
Brokered products 52,374
Purchases 6,709
Administrative services 6,057
The costs allocated and other intercompany transactions related to advances
from Boise Cascade for the Canadian operations prior to implementation of
the continuing agreements discussed at the beginning of this note were as
follows:
Primarily for
the Period from
January 1, 1994 Year ended
through December 31
October 12, 1994 1993 1992
(expressed in thousands)
Sales $(41,122) $(48,099) $(49,289)
Sales commissions 7,999 10,320 10,372
Purchases 5,893 9,282 7,704
Management fees 4,303 5,210 5,077
Research and development costs 1,844 2,272 2,203
Organization 5,190 - -
Cash transfers and other, net 461 32,410 25,431
________ ________ ________
(15,432) 11,395 1,498
Advances from Boise Cascade
Beginning of year 15,432 4,037 2,539
________ ________ ________
End of year $ - $ 15,432 $ 4,037
The Company's sales to Boise Cascade were comprised primarily of sales of
pulp from the mill at Fort Frances, Ontario, to Boise Cascade's mill at
International Falls, Minnesota. The allocation of Boise Cascade costs to
the Company's Canadian operations was based on methods that management
believes were reasonable.
Boise Cascade charged or credited intercompany interest on the outstanding
balance of the advance from Boise Cascade based on prime interest rates
plus one percent. Net interest charged was $314,000 for the period from
January 1, 1994, through October 12, 1994, and $252,000 and $135,000 for
the years ended December 31, 1993 and 1992.
Boise Cascade did not allocate corporate and other overhead costs to the
Company with respect to the operation of the West Tacoma mill. Management
believes that a reasonable estimate of the allocation of such costs to the
West Tacoma mill would have approximated $2,902,000 for the period from
January 1, 1994, through October 12, 1994, and $3,923,000 and $3,711,000
for the years ended December 31, 1993 and 1992.
Included in "Intercompany payable to Boise Cascade Corporation and other"
on the Statements of Owners' Equity are purchases of $6,735,000 for the
period from January 1, 1994, through October 12, 1994, and $6,822,000 and
$6,605,000 for the years ended December 31, 1993 and 1992. These purchases
consisted primarily of wood chips priced at an estimated fair market value.
Prior to October 13, 1994, the Company sold most of its U.S. dollar
denominated trade receivables to Boise Cascade at the end of each month.
Boise Cascade assumed the credit risk associated with the collection of the
sold receivables. The balances transferred are reflected on the Balance
Sheets as "Accounts receivable -- Boise Cascade Corporation and affiliated
companies." Commencing October 13, 1994, the Company retained the
receivables previously sold to Boise Cascade and is responsible for their
collection.
The costs incurred by the Company pursuant to applicable related party
agreements that were put into place in connection with the Company's public
offerings will differ from the cost of services previously provided by
Boise Cascade and from allocated costs and estimated allocations due to
differences in scale, organizational structure, management structure, and
other factors.
14. SEGMENT INFORMATION
An analysis of operations by geographic area is as follows:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Sales from
Canada $410,882 $367,964 $351,833
United States 140,697 79,665 73,400
________ ________ ________
$551,579 $447,629 $425,233
Loss before income taxes
Canada $(16,928) $(24,211) $(43,012)
United States (24,019) (22,430) (17,157)
Interest expense (17,008) (6,894) (5,970)
Corporate and other (6,933) (6,612) (1,410)
________ ________ ________
$(64,888) $(60,147) $(67,549)
Depreciation
Canada $ 32,795 $ 34,157 $ 32,592
United States 9,235 5,681 4,591
________ ________ ________
$ 42,030 $ 39,838 $ 37,183
Capital expenditures (including
purchase of deinked facility)
Canada $ 86,434 $ 45,432 $ 34,604
United States 100,865 17,410 10,320
________ ________ ________
$187,299 $ 62,842 $ 44,924
Assets
Canada $690,702 $610,202 $607,469
United States 302,030 99,388 77,645
________ ________ ________
$992,732 $709,590 $685,114
No single unaffiliated customer accounts for more than ten percent of
consolidated sales. Export sales to unaffiliated companies in the United
States were $308,136,000, $282,383,000, and $268,679,000 for the years
ended December 31, 1994, 1993, and 1992.
15. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"), which except as
is discussed below, are not materially different than generally accepted
accounting principles in the United States ("U.S. GAAP").
Postretirement benefits other than pensions. The cost of postretirement
benefits other than pensions is recorded at the time such costs are paid
pursuant to Canadian GAAP. Such costs are required to be accrued over the
working lives of active employees pursuant to U.S. GAAP.
The application of U.S. GAAP at January 1, 1992, which was the date the
requirement was first adopted by Boise Cascade, would have increased "Other
long-term liabilities" at December 31, 1994 and 1993, by $4,175,000 and
$5,680,000.
In determining these changes, discount rates of 9.25% for Canadian plans
and 8.25% for U.S. plans were adopted effective at December 31, 1994,
compared with discount rates of 8.25% and 7.5% that were adopted effective
at December 31, 1993. Postretirement benefits other than pensions at
December 31, 1994, are fixed and not affected by the medical care trend
rate.
The accrued postretirement obligation for benefits other than pensions
would have been as follows:
December 31
1994 1993
(expressed in thousands)
Retirees $ 1,350 $ 2,540
Fully eligible active employees - 1,110
Other active employees 1,880 1,950
________ ________
Accumulated postretirement health care
benefit obligation 3,230 5,600
Unrecognized items 945 80
________ ________
Accrued postretirement health care
benefit obligation $ 4,175 $ 5,680
The Company has not funded any of the accrued postretirement health care
benefit obligation.
Postemployment benefits. Severance, disability, and other benefits
provided to former or inactive employees that are required to be accrued by
U.S. GAAP are immaterial.
Convertible subordinated debentures. The Company's 8% convertible
subordinated debentures would be classified as long-term debt pursuant to
U.S. GAAP.
Other disclosures required by U.S. GAAP are as follows:
Cash flows. Cash paid for interest and refunds for income taxes are as
follows:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Interest, net of amounts capitalized $ 10,100 $ 6,846 $ 5,924
Income tax refunds, net 9,218 12,709 25,248
Rental expense. Rental expense for operating and month-to-month leases
amounted to $3,882,000, $4,486,000, and $3,758,000 for the years ended
December 31, 1994, 1993, and 1992.
Fair value of financial instruments. Cash and short-term investments,
long-term debt and convertible subordinated debentures had fair values at
December 31, 1994, that approximated their carrying amounts.
Accounts payable and accrued liabilities. The major components of
"Accounts payable and accrued liabilities" on the Balance Sheets are as
follows:
December 31
1994 1993
(expressed in thousands)
Accounts payable $ 55,870 $ 43,766
Accrued compensation and benefits 15,164 16,224
Interest 7,250 342
Other 11,858 5,135
________ ________
$ 90,142 $ 65,467
Reconciliation of net loss. The primary differences in net loss, as
determined in accordance with Canadian GAAP and that which would be
reported pursuant to U.S. GAAP, are as follows:
Year ended December 31
1994 1993 1992
(expressed in thousands)
Loss before income taxes as reported $(64,888) $(60,147) $(67,549)
Foreign exchange deferrals (1) 9,387 (1,898) (7,673)
Recognition of investment tax credits (2) (2,073) (2,126) (2,158)
Estimated cost of services provided and
costs paid by Boise Cascade for the
West Tacoma mill (3) (2,902) (3,923) (3,711)
________ ________ ________
Loss before income taxes in
accordance with U.S. GAAP (60,476) (68,094) (81,091)
________ ________ ________
Credit for income taxes in accordance
with Canadian GAAP 21,013 20,364 24,179
Additional income tax (expense) credit
related to adjustments to arrive at
U.S. GAAP (1,588) 2,968 5,192
Change in statutory tax rates (4) 2,911 6,423 -
________ ________ ________
Net loss in accordance with U.S. GAAP before
cumulative effect of accounting changes (38,140) (38,339) (51,720)
Cumulative credit attributable to accounting
change for income taxes (4) - 13,675 -
Cumulative expense of accounting change for
postretirement benefits other than pensions,
net of income taxes (5) - - (3,105)
________ ________ ________
Net loss in accordance with U.S. GAAP $(38,140) $(24,664) $(54,825)
Net loss per share in accordance with
U.S. GAAP $(1.58) $(1.19) $(2.65)
Reconciliation of balance sheets. The primary differences reflected on the
Balance Sheets, as determined in accordance with Canadian GAAP and that
which would be reported pursuant to U.S. GAAP, are as follows:
Canadian Investment U.S.
GAAP Tax Credits(2) GAAP
(expressed in thousands)
December 31, 1994
Property and equipment $1,182,658 $ 36,894 $1,219,552
Accumulated depreciation (474,481) (23,481) (497,962)
__________ __________ __________
Net property and equipment $ 708,177 $ 13,413 $ 721,590
December 31, 1993
Property and equipment $ 988,819 $ 42,021 $1,030,840
Accumulated depreciation (432,762) (21,409) (454,171)
__________ __________ __________
Net property and equipment $ 556,057 $ 20,612 $ 576,669
December 31
1994 1993
(expressed in thousands)
Net deferred tax liabilities
Canadian GAAP (Note 7) $ 77,026 $ 101,943
Tax effect of adjustments to arrive at
U.S. GAAP
Foreign exchange deferrals (1) - (3,578)
Recognition of investment tax credits (2) 7,848 8,580
Estimated cost of services provided and
costs paid by Boise Cascade for the
West Tacoma mill (3) - (11,055)
Accounting change for income taxes,
including changes in statutory tax rates (4) (23,009) (20,098)
Accounting change for postretirement benefits
other than pensions (5) (1,505) (1,903)
__________ __________
U.S. GAAP $ 60,360 $ 73,889
December 31
1994 1993
(expressed in thousands)
Owners' equity
Canadian GAAP $ 428,081 $ 347,905
Effect of adjustments to arrive at U.S. GAAP
Foreign exchange deferrals (1) - (5,809)
Recognition of investment tax credits (2) 9,207 10,548
Estimated cost of services provided and costs paid
by Boise Cascade for the West Tacoma mill (3) - (17,048)
Accounting change for income taxes,
including changes in statutory tax rates (4) 23,009 20,098
Accounting change for postretirement benefits
other than pensions (5) (2,670) (3,105)
__________ __________
U.S. GAAP $ 457,627 $ 352,589
(1) Exchange gains and losses are required to be recognized as incurred
pursuant to U.S. GAAP. Early in 1994, a remaining unamortized deferral
for Canadian GAAP purposes, which would have previously been expensed
pursuant to U.S. GAAP, was written off in connection with the Company's
refinancing.
(2) Under Canadian GAAP, the application of investment tax credits as a
reduction in the depreciable basis of property and equipment resulted
in a reduction in depreciation expense. For U.S. GAAP purposes, the
Company elected to record the investment tax credits as a reduction of
income tax expense in the year the assets were placed in service.
(3) Certain related party services provided are required to be estimated
under U.S. GAAP if such costs have not been previously allocated (see
Note 13). For purposes of the reconciliation of deferred taxes and
owners' equity, these costs were assumed to have begun in 1988.
(4) At the beginning of 1993, U.S. GAAP applicable to accounting for and
reporting of income taxes was changed. In particular, deferred taxes
were required to reflect changes in statutory tax rates. These
adjustments reflect the initial adoption of that standard and the
effect of subsequent decreases in the Canadian federal and provincial
statutory tax rates.
(5) Under Canadian GAAP such benefits are recorded as such services are
provided. The accrual of the cost of ongoing postretirement benefits
other than pensions is not significantly different than cash payments
made for such benefits.
