UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report: Date of Earliest Event Reported:

May 2, 2003 May 2, 2003

 

BOISE CASCADE CORPORATION
(Exact name of registrant as specified in its charter)

 

 

Item 7.	Financial Statements and Exhibits
(c)	Exhibits.
	Exhibit 99	Boise Cascade Corporation First Quarter 2003 Fact Book
Item 9.	Regulation FD Disclosure.

 

Boise Cascade Corporation is furnishing the information required by Item 12 of Form 8-K, “Results of Operations and Financial Condition,” under this Item 9 in accordance with SEC Release No. 33-8216.

 

On May 2, 2003, we issued our First Quarter 2003 Fact Book, a copy of which is attached as Exhibit 99.

 

We present our consolidated financial statements in accordance with generally accepted accounting principles (GAAP).  To supplement the GAAP presentations, we also present the results of our operations before nonroutine gains and losses.  For example, in the first quarter of 2003, we present results that exclude the effect of employee-related costs associated with our cost reduction program.  We also exclude the cumulative effect of two accounting changes that took effect during the first quarter.

 

We believe our presentation of non-GAAP financial measures enhances our investors’ overall understanding of our recurring operational performance and our prospects for the future.  Specifically, we believe the results before nonroutine items provides useful information to both investors and management by excluding gains and losses that are not indicative of our core operating results.

 

We have reconciled the non-GAAP financial measures to our reported financial performance in the financial notes that accompany our Fact Book.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	BOISE CASCADE CORPORATION
	By	/s/ Karen E. Gowland
		Karen E. Gowland Vice President and Corporate Secretary
Date:  May 2, 2003

 

2

 

EXHIBIT INDEX

 

Number		Description
99		Boise Cascade Corporation First Quarter 2003 Fact Book

 

3

Exhibit 99

 

 

First Quarter 2003 Fact Book

 

For additional information, contact:

 

Vince Hannity
Vice President, Corporate Communications
and Investor Relations
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Phone:  208 384 6390

 

Visit Boise’s website at www.bc.com

 

 

First Quarter 2003 Operating Highlights

 

Boise reported a net loss in first quarter 2003 of $27.5 million, or 53¢ per diluted share, compared with a net loss of $6.6 million, or 17¢ per diluted share, in first quarter 2002.  Before nonroutine items, the company posted a net loss of $12.6 million, or 27¢ per diluted share.

 

Nonroutine items in first quarter 2003 totaled $14.9 million after tax, or 26¢ per share.  This total includes an after-tax charge of $6.1 million, or 11¢ per share, for employee-related costs associated with Boise’s cost-reduction program.  We also recorded one-time, noncash, after-tax charges of $4.1 million, or 7¢ per share, for the adoption of a new accounting standard for asset retirement obligations and $4.7 million, or 8¢ per share, for the adoption of a new accounting standard for vendor allowances.  A more detailed explanation of these items, including a reconciliation of the effect of these items on our net loss and our segments, is included in the Notes to Consolidated Financial Statements on the last two pages of this fact book.  There were no nonroutine items in the quarter ended March 31, 2002.

 

Sales in first quarter 2003 increased 4% to $1.9 billion, compared with $1.8 billion in the year-ago first quarter.

 

Boise Office Solutions:  Operating income in first quarter 2003 was $20.7 million as reported and  $29.9 million before the nonroutine charge for employee-related costs, down from $37.4 million in first quarter 2002.  Results declined due to a lower gross margin, higher operating costs (including higher pension expense), and winter weather disruptions.  The operating margin was 2.2% as reported and 3.2% before the nonroutine item, compared with 4.2% in first quarter 2002.  First-quarter sales, as well as sales for locations operating in both periods, increased 6%, compared with the same quarter a year ago.

 

Boise Building Solutions:  This segment reported an operating loss of $8.5 million in first quarter 2003, compared with operating income of $8.8 million in the year-ago first quarter.  Results declined due to weak market conditions, winter weather disruptions, and higher pension expense.  Sales increased 3% from first quarter 2002 sales, primarily because of a 4% increase in sales by our building materials distribution business and a 13% increase in sales of engineered wood products.

 

Boise Paper Solutions:  The operating loss in this segment was $700,000 as reported and $500,000 before the nonroutine charge for employee-related costs, compared with a loss of $10.8 million in first quarter 2002.  Sales increased 3%, compared with first quarter 2002.  Results improved primarily because of 4% higher average product prices and 1% lower manufacturing costs.

 

 

 

Boise Cascade Corporation
Corporate Communications Department
1111 West Jefferson Street PO Box 50 Boise, ID 83728

 

News Release

 

Media Contact	Investor Contact
Ralph Poore	Vincent Hannity
Office 208 384 7294  Home 208 331 2023	Office 208 384 6390  Home 208 345 8141

 

For Immediate Release:  April 22, 2003

 

BOISE ANNOUNCES FIRST QUARTER 2003 FINANCIAL RESULTS

 

BOISE, Idaho — Boise Cascade Corporation (NYSE:BCC) today reported a first quarter 2003 net loss of $27.5 million, or 53 cents per diluted share, compared with a net loss of $6.6 million, or 17 cents per diluted share, in first quarter 2002.  Fourth quarter 2002 net income was $6.2 million, or 5 cents per diluted share.

 

Before nonroutine items, the company had a first quarter 2003 net loss of $12.6 million, or 27 cents per diluted share.

 

FINANCIAL HIGHLIGHTS
($ in millions, except per-share amounts)

 

		1Q 2003			1Q 2002			4Q 2002
Sales		$	1,853		$	1,788		$	1,801
Net income (loss)		$	(27.5	)	$	(6.6	)	$	6.2
Net income (loss) per diluted share		$	(0.53	)	$	(0.17	)	$	0.05
BEFORE NONROUTINE ITEMS
Net income (loss)		$	(12.6	)	$	(6.6	)	$	6.2
Net income (loss) per diluted share		$	(0.27	)	$	(0.17	)	$	0.05

 

Nonroutine items in first quarter 2003 totaled $14.9 million after tax, or 26 cents per share.  The total includes an after-tax charge of $6.1 million, or 11 cents per share, for employee-related costs associated with the company’s cost-reduction program.  We also recorded one-time, noncash, after-tax charges of $4.1 million, or 7 cents per share, for the adoption of a new accounting standard for asset retirement obligations and $4.7 million, or 8 cents per share, for the adoption of a new accounting standard

 

 

 

for vendor allowances.  A more detailed explanation of these items and a reconciliation to our reported financial performance are included in the notes to the consolidated financial statements.

 

Sales in first quarter 2003 increased 4% to $1.9 billion, compared with $1.8 billion in the first quarter a year ago.  Sales in fourth quarter 2002 were $1.8 billion.

 

REVIEW OF OPERATIONS

 

Boise Office Solutions
($ in millions)

 

		1Q 2003			1Q 2002			4Q 2002
Sales		$	938		$	884		$	906
Operating income		$	20.7		$	37.4		$	32.4
Operating income before nonroutine item		$	29.9		$	37.4		$	32.4

 

Boise Office Solutions.  Before the nonroutine charge for employee-related costs, Boise Office Solutions operating income was $29.9 million, down from $37.4 million in first quarter 2002 and $32.4 million in fourth quarter 2002.  Segment results declined, relative to comparison periods, due to a lower gross margin, higher operating costs, including higher pension expense, and winter weather disruptions.  Operating margin was 2.2% as reported, or 3.2% before the nonroutine item, compared with 4.2% in first quarter 2002 and 3.6% in fourth quarter 2002.

 

First quarter 2003 sales, as well as sales for locations operating in both periods, increased 6% to $938 million, compared with the same quarter a year ago.  Sales increased in all three product categories.  Sales of office supplies and paper rose 3%, sales of technology products increased 13%, and sales of furniture were up 9%.  Boise’s cut-size office papers sold through Boise Office Solutions increased 9% to 143,000 tons, compared with a year ago.

 

Boise Building Solutions
($ in millions)

 

		1Q 2003			1Q 2002			4Q 2002
Sales		$	575		$	560		$	568
Operating income (loss)		$	(8.5	)	$	8.8		$	2.3
Operating income (loss) before nonroutine items		$	(8.5	)	$	8.8		$	2.3

 

 

 

Boise Building Solutions.  Boise Building Solutions reported an operating loss of $8.5 million in first quarter 2003, compared with operating income of $8.8 million in the same quarter a year ago and operating income of $2.3 million in fourth quarter 2002.  Results were lower than comparison quarters due to weak pricing for our products, winter weather disruptions, and higher pension expense.

 

Relative to first quarter 2002, average plywood and lumber prices declined 5% and 14%, respectively, while oriented strand board (OSB) prices increased 8%.  Unit sales volumes for structural panels rose modestly year over year, while lumber volume declined.  Building materials distribution sales increased 4%, compared with first quarter 2002. Sales of engineered wood products grew 13%.

 

Relative to fourth quarter 2002, average prices declined 8% in lumber, were flat in plywood, and rose 10% in OSB.  Unit sales volumes were higher in plywood and lumber but were down modestly in OSB.

 

Boise Paper Solutions
($ in millions)

 

		1Q 2003			1Q 2002			4Q 2002
Sales		$	468		$	456		$	455
Operating income (loss)		$	(0.7	)	$	(10.8	)	$	23.4
Operating income (loss) before nonroutine items		$	(0.5	)	$	(10.8	)	$	23.4

 

Boise Paper Solutions.  The operating loss in Boise Paper Solutions was $700,000, or $500,000 before the nonroutine item, in first quarter 2003, compared with an operating loss of $10.8 million in first quarter 2002 and operating income of $23.4 million in fourth quarter 2002.  Segment results improved over those of a year ago, primarily because of higher average product prices (up 4%) and lower unit manufacturing costs (down 1%).

 

The decline in segment performance from fourth quarter 2002 was due primarily to a 5% rise in unit manufacturing costs.  The rise included increases in pension expense, energy and energy-related costs, and higher operating costs due to maintenance projects and market-related production curtailments.  Average product prices in paper were off slightly from fourth-quarter levels.

 

OUTLOOK

 

“At this point, we see few signs of sustained recovery in our businesses,” said George J. Harad, chairman and chief executive officer.  “Accordingly, we expect Boise’s performance in the second quarter to be similar to or modestly improved over first-quarter results.  Sales and income in our office products business are likely to decline in the second quarter from first-quarter levels, as they typically do, but year-over-year sales comparisons should continue to be positive.  We expect wood products markets to

 

 

 

strengthen modestly as better weather allows the building season to get underway.  Paper business results should be similar to the first quarter, with no significant change expected in market conditions or costs.”

 

Boise delivers office, building, and paper solutions that help our customers manage productive offices and construct well-built homes — two of the most important activities in our society.  Boise’s 24,000 employees help people work more efficiently, build more effectively, and create new ways to meet business challenges. Boise also provides constructive solutions for environmental conservation by managing natural resources for the benefit of future generations.  Boise posted sales of $7.4 billion in 2002.  Visit the Boise website at http://www.bc.com.

 

WEBCAST AND CONFERENCE CALL

 

Boise will host an audiovisual webcast and conference call on Tuesday, April 22, 2003, at noon Eastern Daylight Time, at which we will review the company’s recent performance and discuss the outlook for our businesses.  You can join the webcast through the Boise website. Go to www.bc.com, and click on Investor Relations to find the link to the webcast.  Please go to the website at least 15 minutes before the start of the webcast to register and to download and install any necessary audio software.  To join the conference call, dial (800) 374-0165 at least 10 minutes before the start of the call. The archived webcast will be available on the Presentations page of the Investor Relations section of Boise’s website.

 

FORWARD-LOOKING STATEMENTS

 

The Outlook section of this release includes forward-looking statements.  These statements are subject to a number of risk factors that could cause actual results to differ from those projected. Those factors include, among other things, changes in foreign or domestic competition; changes in the condition of both foreign and domestic economies; changes in market demand for the company’s products, which may be influenced by economic vitality; changes in production capacity across paper and wood products markets; the number of housing starts affected by changing interest rates; changes in cost structure; and other factors included in our filings with the Securities and Exchange Commission.

 

 

 

Financial Highlights Boise and Subsidiaries

 

											2003
		2000			2001			2002			First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Year
		(millions, except per-share amounts)
Sales and Income
Sales		$	7,806.7		$	7,422.2		$	7,412.3		$	1,853.2
Income from operations		444.0			81.1			118.3			1.7
Net income (loss) before cumulative effect of accounting changes		178.6			(42.5		)	11.3			(18.7		)
Cumulative effect of accounting changes, net of income tax		—			—			—			(8.8		)
Net income (loss)		$	178.6		$	(42.5	)	$	11.3		$	(27.5	)
Net income (loss) per common share
Diluted before cumulative effect of accounting changes		$	2.73		$	(.96	)	$	(.03	)	$	(.38	)
Cumulative effect of accounting changes		—			—			—			(.15		)
Diluted		$	2.73		$	(.96	)	$	(.03	)	$	(.53	)
Cash dividends paid per common share		$	.60		$	.60		$	.60		$	.15
Financial Condition
Capital expenditures		485.8			380.0			266.2			48.5
Total assets		5,266.9			4,934.0			4,947.4			4,970.9
Long-term debt, less current portion		$	1,714.8		$	1,062.9		$	1,387.4		$	1,472.7
Current portion of long-term debt and short-term borrowings		93.3			440.0			153.7			105.5
Guarantee of ESOP debt		107.9			80.9			51.4			51.4
Total debt		$	1,916.0		$	1,583.8		$	1,592.5		$	1,629.6
Shareholders’ equity		$	1,757.0		$	1,578.4		$	1,399.5		$	1,372.1
Shareholders’ equity per common share		$	28.85		$	25.10		$	21.59		$	21.17
Financial Ratios
Return on sales		2.3		%	(.6		)%	.2		%	(1.5		)%
Debt to equity		1.09:1			1.00:1			1.14:1			1.19:1
Debt to total capitalization		52.0		%	47.5		%	50.3		%	51.3		%
Other Information
Effective tax (provision) benefit rate		(39.0		)%	11.5		%	NM		(1)	35.9		%
Number of common shares outstanding at the end of the period (thousands)		57,337			58,062			58,284			58,292
Average number of common shares (thousands)
Basic		57,288			57,680			58,216			58,289
Diluted(2)		61,413			61,797			62,090			61,880
Common stock price
High		$	43.94		$	38.00		$	38.81		$	28.15
Low		$	21.75		$	26.99		$	19.61		$	20.72
Close		$	33.63		$	34.01		$	25.22		$	21.85

 

(1)            NM = not meaningful.

(2)          For the first quarter of 2003 and the years ended December 31, 2001 and 2002, the computation of diluted net loss per share was antidilutive; accordingly, diluted net loss per share was calculated using the average basic shares outstanding.

 

 

 

Summary of Operations Boise and Subsidiaries

 

		2002
Quarterly Results by Segment (Unaudited)(1)		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Year
		(millions, except per-share amounts)
Sales by Segment
Boise Office Solutions		$	884.5		$	855.5		$	899.9		$	905.9		$	3,545.8
Boise Building Solutions		560.2			669.9			671.5			568.2			2,469.7
Boise Paper Solutions		456.0			481.6			485.2			455.3			1,878.0
Other		18.3			19.4			19.4			18.9			76.0
		1,919.0			2,026.4			2,075.9			1,948.3			7,969.5
Intersegment eliminations		(130.8		)	(138.4		)	(140.7		)	(147.4		)	(557.2		)
Trade sales		$	1,788.2		$	1,888.0		$	1,935.3		$	1,800.8		$	7,412.3
Income (Loss) by Segment
Boise Office Solutions		$	37.4		$	23.4		$	29.8		$	32.4		$	123.0
Boise Building Solutions		8.8			14.0			14.5			2.3			39.7
Boise Paper Solutions		(10.8		)	8.8			17.2			23.4			38.6
Corporate and Other		(12.8		)	(37.9		)	(15.9		)	(15.3		)	(81.8		)
		22.6			8.4			45.6			42.9			119.5
Interest expense		(30.0		)	(30.0		)	(28.7		)	(29.7		)	(118.5		)
Income (loss) before income taxes and minority interest		(7.4		)	(21.6		)	16.9			13.2			1.0
Income tax (provision) benefit		2.8			26.9			(6.3		)	(4.9		)	18.4
Income (loss) before minority interest		(4.6		)	5.3			10.5			8.2			19.4
Minority interest, net of income tax		(2.0		)	(2.0		)	(2.0		)	(2.0		)	(8.1		)
Net income (loss)		$	(6.6	)	$	3.2		$	8.5		$	6.2		$	11.3
Net income (loss) per common share
Basic		$	(.17	)	$	.00		$	.09		$	.05		$	(.03	)
Diluted		$	(.17	)	$	.00		$	.09		$	.05		$	(.03	)

 

		2003
		First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Year
		(millions, except per-share amounts)
Sales by Segment
Boise Office Solutions		$	938.3
Boise Building Solutions		574.6
Boise Paper Solutions		468.2
Other		19.4
		2,000.5
Intersegment eliminations		(147.3		)
Trade sales		$	1,853.2
Income (Loss) by Segment
Boise Office Solutions		$	20.7
Boise Building Solutions		(8.5		)
Boise Paper Solutions		(.7		)
Corporate and Other		(8.7		)
		2.8
Interest expense		(28.9		)
Loss before income taxes, minority interest, and cumulative effect of accounting changes		(26.1		)
Income tax benefit		9.4
Loss before minority interest and cumulative effect of accounting changes		(16.7		)
Minority interest, net of income tax		(2.0		)
Loss before cumulative effect of accounting changes		(18.7		)
Cumulative effect of accounting changes, net of income tax		(8.8		)
Net loss		$	(27.5	)
Net loss per common share
Basic and diluted before cumulative effect of accounting changes		$	(.38	)
Cumulative effect of accounting changes		(.15		)
Basic and diluted		$	(.53	)

 

(1)    Columns may not add due to rounding.

 

 

 

Statistical Review / 2002

 

		2002
		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Year
Boise Office Solutions
Sales by Product Line (millions)
Office supplies and paper		$	552		$	534		$	550		$	559		$	2,195
Technology products		246			240			265			259			1,010
Office furniture		86			82			85			88			341
Sales by Geography (millions)
United States		$	686		$	665		$	707		$	701		$	2,759
International		198			191			193			205			787
Sales Growth
Sales growth		(9		)%	(1		)%	6		%	6		%	0		%
Same-location sales growth		(8		)%	(1		)%	6		%	5		%	0		%
Margins (percentage of sales)
Gross profit margin		23.6		%	23.1		%	22.4		%	23.5		%	23.1		%
Operating profit		4.2		%	2.7		%	3.3		%	3.6		%	3.5		%
Boise Building Solutions
Sales Volumes
Plywood (thousand square feet) (3/8” basis)		440,525			462,648			460,952			424,078			1,788,203
OSB (thousand square feet) (3/8” basis)(1)		100,161			98,273			107,176			111,076			416,686
Particleboard (thousand square feet) (3/4” basis)		49,749			51,182			47,617			40,675			189,223
Lumber (thousand board feet)		95,911			108,455			99,858			91,057			395,281
LVL (hundred cubic feet)		17,895			20,844			20,879			17,925			77,543
I-joists (thousand equivalent lineal feet)		34,995			47,102			46,954			36,714			165,765
Engineered wood products (millions)		$	60		$	76		$	77		$	61		$	274
Building materials distribution (millions)		$	375		$	464		$	470		$	387		$	1,696
(1) Includes 100% of the sales volume of Voyageur Panel, of which we own 47%.
Selected Prices (average net selling prices)
Plywood (thousand square feet) (3/8” basis)		$	231		$	238		$	227		$	220		$	229
OSB (thousand square feet) (3/8” basis)		131			136			127			128			130
Particleboard (thousand square feet) (3/4” basis)		230			248			254			223			239
Lumber (thousand board feet)		481			465			470			446			466
LVL (hundred cubic feet)		1,491			1,485			1,498			1,454			1,483
I-joists (thousand equivalent lineal feet)		896			886			890			872			886
Boise Paper Solutions
Sales Volumes (thousands of short tons)
Uncoated free sheet		355			370			364			336			1,425
Containerboard		160			167			168			159			654
Newsprint		84			111			110			101			406
Other		49			62			37			31			179
		648			710			679			627			2,664
Corrugated containers (millions of square feet)		1,061			1,065			1,205			1,132			4,463
Selected Prices (average net selling prices per short ton)
Uncoated free sheet		$	712		$	712		$	722		$	746		$	722
Containerboard		327			332			351			361			343
Selected Prices (average net selling prices)
Plywood (thousand square feet) (3/8” basis)		$	231		$	238		$	227		$	220		$	229
Newsprint		368			349			367			371			363

 

 

 

Statistical Review / 2003

 

		2003
		First Quarter			Second Quarter		Third Quarter		Fourth Quarter		Year
Boise Office Solutions
Sales by Product Line (millions)
Office supplies and paper		$	567
Technology products		277
Office furniture		94
Sales by Geography (millions)
United States		$	709
International		229
Sales Growth
Sales growth		6		%
Same-location sales growth		6		%
Margins (percentage of sales)
Gross profit margin		23.8		%
Operating profit		2.2		%
Boise Building Solutions
Sales Volumes
Plywood (thousand square feet) (3/8” basis)		463,212
OSB (thousand square feet) (3/8” basis)(1)		106,581
Particleboard (thousand square feet) (3/4” basis)		41,192
Lumber (thousand board feet)		93,524
LVL (hundred cubic feet)		20,685
I-joists (thousand equivalent lineal feet)		40,534
Engineered wood products (millions)		$	68
Building materials distribution (millions)		$	391

 

(1) Represents 100% of the sales volume of Voyageur Panel, of which we own 47%.

 

Selected Prices (average net selling prices)
Plywood (thousand square feet) (3/8” basis)		$	220
OSB (thousand square feet) (3/8” basis)		141
Particleboard (thousand square feet) (3/4” basis)		219
Lumber (thousand board feet)		412
LVL (hundred cubic feet)		1,453
I-joists (thousand equivalent lineal feet)		867
Boise Paper Solutions
Sales Volumes (thousands of short tons)
Uncoated free sheet		353
Containerboard		158
Newsprint		106
Other		33
		650
Corrugated containers (millions of square feet)		1,122
Selected Prices (average net selling prices per short ton)
Uncoated free sheet		$	747
Containerboard		341
Newsprint		374

 

 

 

Consolidated Statements of Loss (Unaudited) Boise and Subsidiaries

 

		Three Months Ended March 31
		2003			2002
		(thousands, except per-share amounts)
Sales		$	1,853,243		$	1,788,223
Costs and expenses
Materials, labor, and other operating expenses		1,515,189			1,460,984
Depreciation, amortization, and cost of company timber harvested		75,582			72,734
Selling and distribution expenses		214,162			191,687
General and administrative expenses		35,373			35,003
Other (income) expense, net		11,152			3,620
		1,851,458			1,764,028
Equity in net loss of affiliates		(59		)	(1,573		)
Income from operations		1,726			22,622
Interest expense		(28,880		)	(30,048		)
Interest income		114			255
Foreign exchange gain (loss)		956			(228		)
		(27,810		)	(30,021		)
Loss before income taxes, minority interest, and cumulative effect of accounting changes		(26,084		)	(7,399		)
Income tax benefit		9,364			2,775
Loss before minority interest and cumulative effect of accounting changes		(16,720		)	(4,624		)
Minority interest, net of income tax		(2,023		)	(1,996		)
Loss before cumulative effect of accounting changes		(18,743		)	(6,620		)
Cumulative effect of accounting changes, net of income tax		(8,803		)	—
Net loss		(27,546		)	(6,620		)
Preferred dividends		(3,266		)	(3,262		)
Net loss applicable to common shareholders		$	(30,812	)	$	(9,882	)
Net loss per common share
Basic and diluted before cumulative effect of accounting changes		$	(0.38	)	$	(0.17	)
Cumulative effect of accounting changes		(0.15		)	—
Basic and diluted		$	(0.53	)	$	(0.17	)
Segment Information
Segment sales
Boise Office Solutions		$	938,279		$	884,454
Boise Building Solutions		574,644			560,166
Boise Paper Solutions		468,213			455,975
Intersegment eliminations and other		(127,893		)	(112,372		)
		$	1,853,243		$	1,788,223
Segment income (loss)
Boise Office Solutions		$	20,672		$	37,423
Boise Building Solutions		(8,453		)	8,781
Boise Paper Solutions		(685		)	(10,803		)
Corporate and Other		(8,738		)	(12,752		)
		2,796			22,649
Interest expense		(28,880		)	(30,048		)
Loss before income taxes, minority interest, and cumulative effect of accounting changes		$	(26,084	)	$	(7,399	)

 

 

 

Consolidated Balance Sheets (Unaudited) Boise and Subsidiaries

 

		March 31						December 31
		2003			2002			2002
		(thousands, except share amounts)
Assets
Current
Cash and cash equivalents		$	85,256		$	56,290		$	65,152
Receivables, less allowances of $12,206, $12,435, and $13,111		481,639			518,614			423,976
Inventories		676,707			636,194			717,966
Deferred income tax benefits		63,601			74,781			52,131
Other		36,145			49,356			36,524
		1,343,348			1,335,235			1,295,749
Property
Property and equipment
Land and land improvements		72,277			69,785			70,731
Buildings and improvements		739,997			688,131			709,127
Machinery and equipment		4,676,910			4,619,172			4,678,112
		5,489,184			5,377,088			5,457,970
Accumulated depreciation		(2,962,806		)	(2,788,299		)	(2,915,940		)
		2,526,378			2,588,789			2,542,030
Timber, timberlands, and timber deposits		326,583			320,343			328,720
		2,852,961			2,909,132			2,870,750
Goodwill		409,500			388,123			400,541
Investments in equity affiliates		35,553			60,589			35,641
Other assets		329,567			314,723			344,719
Total assets		$	4,970,929		$	5,007,802		$	4,947,400
Liabilities and Shareholders’ Equity
Current
Short-term borrowings		$	14,800		$	55,400		$	28,000
Current portion of long-term debt		90,654			195,999			125,651
Income taxes payable		7,535			—			9,512
Accounts payable		519,083			500,223			519,596
Accrued liabilities
Compensation and benefits		208,638			140,164			218,085
Interest payable		24,655			29,195			29,928
Other		143,552			162,937			122,832
		1,008,917			1,083,918			1,053,604
Debt
Long-term debt, less current portion		1,472,670			1,322,347			1,387,398
Guarantee of ESOP debt		51,448			80,889			51,448
		1,524,118			1,403,236			1,438,846
Other
Deferred income taxes		166,033			311,208			165,357
Compensation and benefits		668,260			427,696			667,694
Other long-term liabilities		58,971			41,322			49,868
		893,264			780,226			882,919
Minority interest
Company-obligated mandatorily redeemable securities of subsidiary trust holding solely debentures of parent		172,500			172,500			172,500
Commitments and contingent liabilities
Shareholders’ equity
Preferred stock – no par value; 10,000,000 shares authorized;
Series D ESOP:  $.01 stated value; 4,218,361, 4,420,113, and 4,280,615 shares outstanding		189,826			198,905			192,628
Deferred ESOP benefit		(51,448		)	(80,889		)	(51,448		)
Common stock – $2.50 par value; 200,000,000 shares authorized; 58,291,781, 58,195,175, and 58,283,719 shares outstanding		145,729			145,488			145,709
Additional paid-in capital		474,715			470,830			474,533
Retained earnings		917,175			969,876			952,215
Accumulated other comprehensive loss		(303,867		)	(136,288		)	(314,106		)
Total shareholders’ equity		1,372,130			1,567,922			1,399,531
Total liabilities and shareholders’ equity		$	4,970,929		$	5,007,802		$	4,947,400

 

 

 

Consolidated Statements of Cash Flows (Unaudited) Boise and Subsidiaries

 

		March 31
		2003			2002
		(thousands)
Cash provided by (used for) operations
Net loss		$	(27,546	)	$	(6,620	)
Items in net loss not using (providing) cash
Equity in net loss of affiliates		59			1,573
Depreciation, amortization, and cost of company timber harvested		75,582			72,734
Deferred income tax benefit		(13,304		)	(8,563		)
Pension and other post-retirement benefits expense		20,529			9,318
Cumulative effect of accounting changes		8,803			—
Other		(956		)	228
Receivables		(47,848		)	(93,892		)
Inventories		33,508			16,759
Accounts payable and accrued liabilities		(7,434		)	1,277
Current and deferred income taxes		(10,159		)	(518		)
Pension and other post-retirement benefits payments		(2,806		)	(2,279		)
Other		20,419			10,498
Cash provided by operations		48,847			515
Cash provided by (used for) investment
Expenditures for property and equipment		(43,419		)	(43,682		)
Expenditures for timber and timberlands		(2,253		)	(2,136		)
Investments in equity affiliates		29			—
Other		(8,309		)	(17,314		)
Cash used for investment		(53,952		)	(63,132		)
Cash provided by (used for) financing
Cash dividends paid
Common stock		(8,743		)	(8,709		)
Preferred stock		(30		)	(37		)
		(8,773		)	(8,746		)
Short-term borrowings		(13,200		)	6,700
Additions to long-term debt		120,000			149,851
Payments of long-term debt		(70,159		)	(85,955		)
Other		(2,659		)	355
Cash provided by financing		25,209			62,205
Increase (decrease) in cash and cash equivalents		20,104			(412		)
Balance at beginning of year		65,152			56,702
Balance at March 31		$	85,256		$	56,290

 

 

 

Notes to Consolidated Financial Statements Boise and Subsidiaries

 

(1)         Financial Information.  The Consolidated Statements of Loss and Segment Information are unaudited statements, which do not include all Notes to Consolidated Financial Statements, and should be read in conjunction with the company’s 2002 Annual Report on Form 10-K.  Net loss for the three months ended March 31, 2003 and 2002, involved estimates and accruals.

 

(2)         Reconciliation of Net Loss and Diluted Loss Per Share Before Nonroutine Item and Cumulative Effect of Accounting Changes.  We evaluate our results of operations both before and after nonroutine gains and losses.  The following table shows our March 31, 2003, net loss and net loss per diluted share, as reported and as adjusted for the nonroutine item and the cumulative effect of accounting changes (see Notes 3 and 4).  There were no nonroutine items during the quarter ended March 31, 2002.

 

		Three Months Ended March 31, 2003
		As Reported			Nonroutine Items			Before Nonroutine Items
		(millions, except per-share amounts)
Boise Office Solutions (a)		$	20.7		$	9.2		$	29.9
Boise Building Solutions		(8.5		)	—			(8.5		)
Boise Paper Solutions		(0.7		)	0.2			(0.5		)
Corporate and Other		(8.7		)	0.7			(8.0		)
		2.8			10.1			12.9
Interest Expense		(28.9		)	—			(28.9		)
Loss before income taxes, minority interest, and cumulative effect of accounting changes		(26.1		)	10.1			(16.0		)
Income tax (provision) benefit		9.4			(4.0		)	5.4
Loss before minority interest and cumulative effect of accounting changes		(16.7		)	6.1			(10.6		)
Minority interest, net of income tax		(2.0		)	—			(2.0		)
Loss before cumulative effect of accounting changes		(18.7		)	6.1			(12.6		)
Cumulative effect of accounting changes, net of income tax		(8.8		)	8.8			—
Net loss		$	(27.5	)	$	14.9		$	(12.6	)
Net loss per common share (b)
Diluted before cumulative effect of accounting changes		$	(0.38	)	$	0.11		$	(0.27	)
Cumulative effect of accounting changes		(0.15		)	0.15			—
Diluted		$	(0.53	)	$	0.26		$	(0.27	)

 

(a)          The Boise Office Solutions operating margin of 2.2%, as reported, was calculated based on $20.7 million of segment income, and the operating margin of 3.2%, before the nonroutine item, was calculated based on $29.9 million of segment income.

 

(b)         Calculated using 58.3 million average diluted shares outstanding (see Note 5).

 

(3)         First Quarter 2003 Nonroutine Item.  In March 2003, we announced measures to reduce 2003 operating costs by approximately $45 million, net of severance costs, and to hold capital spending to approximately $245 million, before acquisitions.  We are taking these actions because of continued economic weakness, higher pension costs, higher energy costs, business disruptions from severe winter weather in the eastern United States, and global political uncertainty.  We are reducing operating costs by freezing salaries, severely restricting hiring, reducing discretionary spending at all levels of the company, and eliminating about 700 job positions.  We will eliminate these positions by terminating approximately 550 employees and leaving vacant positions unfilled.

 

Under our existing plan, in first quarter 2003, we recorded a pretax charge of $10.1 million for employee-related costs in “Other (income) expense, net” in the Consolidated Statement of Loss.  We recorded these costs in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 112, Employers’ Accounting for Postemployment Benefits.  We recorded $9.2 million in Boise Office Solutions, $0.2 million in Boise Paper Solutions, and $0.7 million in our Corporate and Other segment.  Employee-related costs are primarily for severance payments, most of which will be paid in 2003 with the remainder in 2004.  This nonroutine item increased our net loss $6.1 million and diluted loss per share 11 cents for the three months ended March 31, 2003.

 

 

 

(4)         Cumulative Effect of Accounting Changes.  Effective January 1, 2003, we adopted the provisions of SFAS No. 143, Accounting for Asset Retirement Obligations.  This statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  The statement changed our accounting for landfill closure costs.  This statement requires us to record an asset and a liability (discounted) for the estimated costs of legal obligations associated with the retirement of long-lived assets.  The asset is depreciated over the expected useful life of the asset.  Previously, we accrued for estimated landfill closure costs over the periods that benefited from the use of the landfill.  On January 1, 2003, we recorded a one-time, noncash, after-tax charge of $4.1 million, or 7 cents per share, as a cumulative-effect adjustment for the difference between the amounts recognized in our consolidated financial statements prior to the adoption of this statement and the amount recognized after adopting the provisions of SFAS No. 143.

 

Effective January 1, 2003, we adopted an accounting change for vendor allowances to comply with the guidelines issued by the FASB’s Emerging Issues Task Force (EITF) 02-16, Accounting by a Reseller for Cash Consideration Received From a Vendor.  Under EITF 02-16, consideration received from a vendor is presumed to be a reduction of the cost of the vendor’s products or services, unless it is for a specific incremental cost to sell the product.  As a result, in the first quarter, approximately $10 million of vendor allowances that would have been recognized previously as a reduction of “Selling and distribution expenses” are now reflected as a reduction of “Materials, labor, and other operating expenses.”  Prior periods have not been reclassified to conform to the current year’s presentation.

 

In addition, under the new guidance, vendor allowances reside in inventory with the product and are recognized when the product is sold, changing the timing of our recognition of these items.  This change resulted in a one-time, noncash, cumulative-effect adjustment of $4.7 million, or 8 cents per share.

 

(5)         Net Loss Per Common Share.  Net loss per common share was determined by dividing net loss, as adjusted, by applicable shares outstanding.  For all periods presented, the computation of diluted net loss per share was antidilutive; therefore, amounts reported for basic and diluted loss were the same.

 

		Three Months Ended March 31
		2003			2002
		(thousands, except per- share amounts)
Loss before cumulative effect of accounting changes		$	(18,743	)	$	(6,620	)
Preferred dividends(a)		(3,266		)	(3,262		)
Basic and diluted loss before cumulative effect of accounting changes		(22,009		)	(9,882		)
Cumulative effect of accounting changes, net of income tax		(8,803		)	—
Basic and diluted loss		$	(30,812	)	$	(9,882	)
Average shares used to determine basic and diluted loss per common share		58,289			58,099
Basic and diluted loss per common share before cumulative effect of accounting changes		$	(0.38	)	$	(0.17	)
Cumulative effect of accounting changes		(0.15		)	—
Basic and diluted loss per common share		$	(0.53	)	$	(0.17	)

 

(a)          The dividend attributable to our Series D Convertible Preferred Stock held by our ESOP (employee stock ownership plan) is net of a tax benefit.