BOISE, Idaho, Jan. 22 /PRNewswire-FirstCall/ -- Boise Cascade Corporation
(NYSE: BCC) today reported fourth quarter 2003 net income of $6.9 million, or
5 cents per diluted share. Before a special item and the net impact of the
OfficeMax acquisition, Boise's net income was $18.3 million, or 24 cents per
diluted share. By comparison, Boise reported net income of $6.2 million, or 5
cents per diluted share, in fourth quarter 2002 and $30.0 million, or 43 cents
per diluted share, in third quarter 2003, before a special item.
For the full year 2003, net income was $8.3 million, or a loss of 8 cents
per diluted share. Before special items and the net impact of the OfficeMax
acquisition, Boise posted net income of $31.8 million, or 32 cents per diluted
share. In 2002, before a special item, net income was $7.3 million, or a loss
of 10 cents per diluted share.
Financial Highlights
($ in millions, except per-share amounts)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Sales $2,352 $1,801 $2,111 $8,245 $7,412
Net income $6.9 $6.2 $32.9 $8.3 $11.3
Net income (loss) per
diluted share $0.05 $0.05 $0.48 $(0.08) $(0.03)
Before special items and
net impact of OfficeMax
acquisition
Net income $18.3 $6.2 $30.0 $31.8 $7.3
Net income (loss) per
diluted share $0.24 $0.05 $0.43 $0.32 $(0.10)
A reconciliation of special items and the impact of the OfficeMax
acquisition on Boise's reported financial performance is presented below and
included in the notes to the consolidated financial statements.
Special Items and Impact of OfficeMax Acquisition
Increase (Decrease)
($ in millions)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Boise Office Solutions, Contract
Integration costs and other $(3.0) $-- $-- $(3.0) $--
2003 cost-reduction program -- -- -- (9.2) --
Boise Office Solutions, Retail
Operating income 6.1 -- -- 6.1 --
Boise Building Solutions
Write-down of impaired assets (14.7) -- -- (14.7) --
Boise Paper Solutions
2003 cost-reduction program -- -- -- (0.2) --
Corporate and Other
OfficeMax acquisition costs (2.3) -- -- (2.3) --
2003 cost-reduction program -- -- -- (0.7) --
Sale of IdentityNow -- -- -- -- (23.6)
Total before interest expense
and income taxes (13.9) -- -- (24.0) (23.6)
Interest expense (4.9) -- -- (4.9) --
Income taxes 7.4 -- 2.9 14.2 27.6
Increase (decrease) in net income
before cumulative effect of
accounting changes $(11.4) $-- $2.9 $(14.7) $4.0
Sales in fourth quarter 2003 were $2.4 billion, 31% higher than sales in
fourth quarter 2002. Sales for full year 2003 were $8.2 billion, an 11%
increase over sales in 2002. The sales increases were mostly due to strong
prices for wood products and growth in Boise Office Solutions, including the
OfficeMax acquisition. Excluding the impact of the OfficeMax acquisition,
sales increased 14% and 7% for the fourth quarter and full year, respectively.
Boise Office Solutions
($ in millions)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Sales $1,248 $906 $934 $4,025 $3,546
Operating income $40.0 $32.4 $31.0 $115.5 $123.0
Operating income before
special items and impact
of OfficeMax acquisition $36.9 $32.4 $31.0 $121.6 $123.0
On December 9, 2003, Boise acquired OfficeMax, Inc. Following that
acquisition, the company began reporting two operating segments, Contract and
Retail, within Boise Office Solutions, its office products distribution
business. Taken together, the two operating segments make up our Boise Office
Solutions business.
For fourth quarter 2003, Boise Office Solutions reported operating income
of $40.0 million, compared with $32.4 million in fourth quarter 2002 and $31.0
million in third quarter 2003. For full year 2003, the business reported
operating income of $115.5 million, compared with $123.0 million in 2002.
Before special items and the net impact of the OfficeMax acquisition,
Boise Office Solutions earned $36.9 million, compared with $32.4 million in
fourth quarter 2002 and $31.0 million in third quarter 2003. For full year
2003, the business had operating income of $121.6 million, compared with
$123.0 million in 2002.
Sales of $1.2 billion in fourth quarter 2003 were 38% higher than sales in
fourth quarter 2002 and 34% higher than in third quarter 2003, due primarily
to the acquisition of OfficeMax. Year-over-year same-store sales, which
exclude OfficeMax sales, rose 4% in the fourth quarter, with the increase
attributable to foreign exchange rates.
Full-year sales of $4.0 billion in this business were 14% higher than the
year earlier, while same-store sales rose 5%, with 4% of the lift generated by
foreign exchange rates. Sales volume of Boise's office papers increased 4% to
568,000 tons.
Boise Office Solutions, Contract Segment
($ in millions)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Sales $965 $906 $934 $3,742 $3,546
Operating income $33.9 $32.4 $31.0 $109.4 $123.0
Operating income before special
items and impact of OfficeMax
acquisition $36.9 $32.4 $31.0 $121.6 $123.0
For fourth quarter 2003, Boise Office Solutions, Contract, reported
operating income of $33.9 million, compared with $32.4 million in fourth
quarter 2002 and $31.0 million in third quarter 2003. For full year 2003, this
segment reported operating income of $109.4 million, compared with $123.0
million in 2002.
Before special items in fourth quarter 2003 and full year 2003 and the
impact of the OfficeMax acquisition, operating income in Boise Office
Solutions, Contract, in the fourth quarter was $36.9 million, up from $32.4
million in fourth quarter a year ago and $31.0 million in third quarter 2003.
When excluding the same items for full year 2003, the segment reported
operating income of $121.6 million, compared with $123.0 million in 2002.
Sales of $965 million in fourth quarter 2003 were 6% higher than sales in
fourth quarter 2002 and 3% higher than in third quarter 2003. Year-over-year
same-store sales in the fourth quarter rose 4%; however, excluding foreign
exchange rates, same-store sales were essentially flat.
Full-year sales of $3.7 billion for this segment were 6% higher than the
year earlier, while same-store sales rose 5%, fueled by a 4% lift from foreign
exchange rates.
Excluding special items and the impact of the OfficeMax acquisition, the
fourth-quarter operating margin for the Contract segment was 3.9%, up from
3.6% in the fourth quarter a year ago and 3.3% in the third quarter. For the
full year, the operating margin, before special items and the impact of the
OfficeMax acquisition, was 3.3%, compared with 3.5% in 2002.
Boise Office Solutions, Retail Segment
($ in millions)
4Q
2003
Sales $283
Operating income $6.1
Boise began reporting its Boise Office Solutions, Retail, segment on
December 10, 2003. For 17 selling days in fourth quarter 2003, the segment
recorded sales of $283 million, operating income of $6.1 million, and an
operating margin of 2.2%.
Boise Building Solutions
($ in millions)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Sales $776 $568 $828 $2,872 $2,470
Operating income $37.6 $2.3 $56.4 $95.4 $39.7
Operating income before special
item $52.3 $2.3 $56.4 $110.1 $39.7
For fourth quarter 2003, Boise Building Solutions reported operating
income of $37.6 million, compared with $2.3 million in fourth quarter 2002 and
$56.4 million in third quarter 2003. For full year 2003, the business
reported operating income of $95.4 million, compared with $39.7 million in
2002.
In December 2003, we recorded a $14.7 million pretax charge for the write-
down of impaired assets at our plywood and lumber operations in Yakima,
Washington.
Before the special item, Boise Building Solutions reported operating
income of $52.3 million in fourth quarter 2003, compared with $2.3 million in
fourth quarter 2002 and $56.4 million in third quarter 2003. For the full
year, before the special item, the business earned $110.1 million, compared
with $39.7 million in 2002. The sharp improvement in results was due
primarily to very strong plywood markets in the second half of 2003.
The business reported sales of $776 million in fourth quarter 2003, 37%
higher than in fourth quarter 2002. Fourth-quarter sales in building
materials distribution rose 42% year over year, while sales of engineered wood
products increased 31%.
Fourth-quarter sales declined 6% from third quarter 2003, reflecting
seasonal volume decreases. Sequentially, distribution sales fell 9%, and
sales of engineered wood products declined 17%.
Full year 2003 segment sales rose 16%. Sales increased 21% in building
materials distribution and 20% in engineered wood products, again reflecting a
year of strong demand and high product prices.
Fourth quarter 2003 plywood unit volumes were up 6% from fourth quarter
2002 but declined 10% from third-quarter levels. Fourth-quarter lumber unit
volumes declined 5% from fourth quarter 2002 and 4% from third quarter 2003.
For full year 2003, plywood unit volumes increased 6% over 2002, while lumber
volumes were down 8% for the same comparison period.
Average plywood prices rose 52% in the fourth quarter, compared with a
year ago, and were 15% higher than third quarter 2003 levels. Lumber prices
were 5% higher, relative to both comparison quarters. For the full year,
average plywood prices increased 17%, while lumber prices declined 8%.
Delivered-log costs in 2003 declined 4% from 2002.
Boise Paper Solutions
($ in millions)
4Q 4Q 3Q Full Year
2003 2002 2003 2003 2002
Sales $451 $455 $474 $1,853 $1,878
Operating income (loss) $(14.4) $23.4 $0.2 $(13.9) $38.6
Operating income (loss) before
special items $(14.4) $23.4 $0.2 $(13.7) $38.6
For fourth quarter 2003, Boise Paper Solutions reported an operating loss
of $14.4 million, compared with income of $23.4 million in fourth quarter 2002
and $200,000 in third quarter 2003. For full year 2003, the segment reported
an operating loss of $13.9 million, compared with income of $38.6 million in
2002. The weak fourth-quarter results were primarily due to lower product
prices, relative to comparison periods. The full-year unfavorable comparison
was due to higher unit costs and reduced sales volumes.
Sales decreased 1% in the fourth quarter, compared with fourth quarter
2002, and declined 5% from third quarter 2003 levels, in both cases due to
lower product prices. Full year 2003 sales decreased 1% from 2002 sales.
Average net selling prices for Boise's paper products declined 6% in the
fourth quarter, compared with the fourth quarter a year ago, and 3%, compared
with third quarter 2003. For the full year, average product prices were
slightly higher than 2002 levels.
Unit volumes in fourth quarter 2003 rose 6% from the year-ago fourth
quarter but declined slightly from third quarter 2003. For the full year,
unit sales volumes declined 2% from 2002 volumes.
Boise took approximately 58,000 tons of market-related curtailment, mostly
in uncoated free sheet, during the fourth quarter, compared with 36,000 tons
in fourth quarter 2002 and 32,000 tons in third quarter 2003. For the full
year, Boise took 197,000 tons of market-related curtailment, up 54,000 tons,
or 38%, from the prior year.
Fourth-quarter unit manufacturing costs in Boise Paper Solutions were flat
with those of comparison periods. Full year 2003 costs were 2% higher than in
2002, primarily because of higher fiber and chemical costs.
Outlook
"Boise's sales and income should increase substantially in 2004," said
George J. Harad, chairman and chief executive officer.
"With the acquisition of OfficeMax, Boise Office Solutions will post
sharply higher sales and operating income in 2004. Same-store sales growth
should continue to be positive. However, operating margins will be lower in
2004 than in 2003, as we integrate the lower-margin retail business into our
operations," Harad said.
"We expect another good year for Boise Building Solutions in 2004," Harad
added. "Plywood and lumber prices in January are well above levels at this
time last year and recently have been rising.
"We believe the very difficult year Boise Paper Solutions experienced in
2003 was the cyclical low. A recovery should begin this year, driven by
recovery in white-collar employment, and hence improving demand, and a weak
U.S. dollar, which should discourage imports. Over the course of the year,
Boise Paper Solutions should move from its current loss position to positive
quarterly operating income," Harad said.
WEBCAST AND CONFERENCE CALL
Boise will host an audiovisual webcast and conference call today at noon
Eastern 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 http://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 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 projections of our financial
performance in 2004. These are forward-looking statements, and they are
subject to a number of risks and uncertainties that could cause our actual
results to differ materially from those we have projected. Our projections
for Boise Office Solutions depend greatly on our ability to successfully
integrate OfficeMax and Boise Office Solutions. The integration process
involves many complex operational and personnel-related challenges. Any
costs, difficulties, or delays in the integration may negatively impact the
financial performance of Boise Office Solutions. The relationship between the
supply and demand of paper and wood products heavily influences our financial
performance in Boise Building Solutions and Boise Paper Solutions. Weak
demand, excess supply, changes in manufacturing capacity, or changes in our
cost structures could cause our financial performance in these segments to
differ materially from what we have projected. All of our businesses operate
in highly competitive markets. Changes in the economy, both domestically and
abroad, and changes in interest rates, employment rates, and even weather can
change the competitive dynamics and financial performance of our businesses.
In July, we announced that we would be evaluating strategic alternatives for
our paper and wood products businesses. The timing, outcome, and
implementation of that evaluation may significantly affect the company, its
financial results, and its business prospects. For further information about
the risks that could cause our actual results to differ from those we project
here, please refer to our SEC filings, including the report on Form 10-Q for
the quarter ended September 30, 2003.
About Boise Cascade Corporation
Boise, headquartered in Boise, Idaho, provides solutions to help customers
work more efficiently, build more effectively, and create new ways to meet
business challenges. We own or control more than 2 million acres of
timberland, primarily in the United States, to support our manufacturing
operations. Boise had sales of $8.2 billion in 2003. Boise Office Solutions,
headquartered in Itasca, Illinois, is a division of Boise and a premier
multinational contract and retail distributor of office supplies and paper,
technology products, and office furniture. Boise Office Solutions had 2003
sales of $4.0 billion. Boise Building Solutions, headquartered in Boise,
Idaho, is a division of Boise and manufactures plywood, oriented strand board,
lumber, particleboard, and engineered wood products. The business also
operates 28 facilities that distribute a broad line of building materials,
including wood products manufactured by Boise. Boise Building Solutions
posted manufacturing sales of $824 million and distribution sales of $2.0
billion in 2003. Boise Paper Solutions, headquartered in Boise, Idaho, is a
division of Boise and a manufacturer of office papers, a majority of which are
sold through Boise Office Solutions. Boise Paper Solutions also manufactures
printing, forms, and converting papers, newsprint, containerboard and
corrugated containers, and market pulp. The division had 2003 sales of $1.9
billion. Visit the Boise website at http://www.bc.com.
BOISE CASCADE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands, except per-share amounts)
Three Months Ended
December 31 September 30,
2003 2002 2003
Sales $2,352,318 $1,800,848 $2,110,601
Costs and expenses
Materials, labor, and
other operating expenses 1,863,666 1,438,211 1,695,809
Depreciation, amortization, and
cost of company timber harvested 81,001 77,203 78,019
Selling and distribution expenses 294,090 201,976 224,405
General and administrative expenses 49,540 39,264 38,576
Other (income) expense, net 21,666 1,627 1,133
2,309,963 1,758,281 2,037,942
Equity in net income (loss) of
affiliates 4,369 (81) 4,038
Income from operations 46,724 42,486 76,697
Interest expense (37,634) (33,016) (31,657)
Interest income 533 185 221
Foreign exchange gain (loss) (118) 203 133
(37,219) (32,628) (31,303)
Income before income taxes 9,505 9,858 45,394
Income tax provision (2,637) (3,651) (12,510)
Net income 6,868 6,207 32,884
Preferred dividends (3,317) (3,289) (3,191)
Net income applicable to common
shareholders $3,551 $2,918 $29,693
Net income per common share
Basic $0.05 $0.05 $0.51
Diluted $0.05 $0.05 $0.48
SEGMENT INFORMATION
Three Months Ended
December 31 September 30,
2003 2002 2003
(thousands)
Segment sales
Boise Office Solutions, Contract $964,655 $905,898 $934,050
Boise Office Solutions, Retail 283,153 -- --
1,247,808 905,898 934,050
Boise Building Solutions 776,324 568,163 828,097
Boise Paper Solutions 450,868 455,302 474,167
Intersegment eliminations and other (122,682) (128,515) (125,713)
$2,352,318 $1,800,848 $2,110,601
Segment income (loss)
Boise Office Solutions, Contract $33,857 $32,401 $30,961
Boise Office Solutions, Retail 6,125 -- --
39,982 32,401 30,961
Boise Building Solutions 37,630 2,328 56,445
Boise Paper Solutions (14,408) 23,396 191
Corporate and Other (16,065) (15,251) (10,546)
47,139 42,874 77,051
Interest expense (37,634) (33,016) (31,657)
Income before income taxes $9,505 $9,858 $45,394
Before special items and
impact of OfficeMax acquisition
Segment income (loss)
Boise Office Solutions, Contract $36,849 $32,401 $30,961
Boise Office Solutions, Retail -- -- --
36,849 32,401 30,961
Boise Building Solutions 52,329 2,328 56,445
Boise Paper Solutions (14,408) 23,396 191
Corporate and Other (13,788) (15,251) (10,546)
60,982 42,874 77,051
Interest expense (32,724) (33,016) (31,657)
Income before income taxes $28,258 $9,858 $45,394
BOISE CASCADE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands, except per-share amounts)
Year Ended December 31
2003 2002
Sales $8,245,146 $7,412,329
Costs and expenses
Materials, labor, and other operating
expenses 6,653,109 6,013,613
Depreciation, amortization, and
cost of company timber harvested 308,332 306,973
Selling and distribution expenses 950,129 785,883
General and administrative expenses 158,786 154,284
Other (income) expense, net 35,787 30,842
8,106,143 7,291,595
Equity in net income (loss) of
affiliates 8,822 (2,435)
Income from operations 147,825 118,299
Interest expense (132,545) (131,713)
Interest income 1,186 1,525
Foreign exchange gain (loss) 2,831 (325)
(128,528) (130,513)
Income (loss) before income taxes and
cumulative effect of accounting changes 19,297 (12,214)
Income tax (provision) benefit (2,222) 23,554
Income before cumulative effect of
accounting changes 17,075 11,340
Cumulative effect of accounting changes,
net of income tax (8,803) --
Net income 8,272 11,340
Preferred dividends (13,061) (13,101)
Net loss applicable to common
shareholders $(4,789) $(1,761)
Net income (loss) per common share
Basic and diluted before cumulative
effect of accounting changes $0.07 $(0.03)
Cumulative effect of accounting
changes (0.15) --
Basic and diluted $(0.08) $(0.03)
SEGMENT INFORMATION (1)
Year Ended December 31
2003 2002
(thousands)
Segment sales
Boise Office Solutions, Contract $3,741,913 $3,545,772
Boise Office Solutions, Retail 283,153 --
4,025,066 3,545,772
Boise Building Solutions 2,871,908 2,469,683
Boise Paper Solutions 1,852,624 1,878,003
Intersegment eliminations and other (504,452) (481,129)
$8,245,146 $7,412,329
Segment income (loss)
Boise Office Solutions, Contract $109,373 $123,004
Boise Office Solutions, Retail 6,125 --
115,498 123,004
Boise Building Solutions 95,442 39,669
Boise Paper Solutions (13,879) 38,572
Corporate and Other (45,219) (81,746)
151,842 119,499
Interest expense (132,545) (131,713)
Income (loss) before income taxes and
cumulative effect of accounting changes $19,297 $(12,214)
Before special items and
impact of OfficeMax acquisition
Segment income (loss)
Boise Office Solutions, Contract $121,588 $123,004
Boise Office Solutions, Retail -- --
121,588 123,004
Boise Building Solutions 110,141 39,669
Boise Paper Solutions (13,678) 38,572
Corporate and Other (42,252) (58,100)
175,799 143,145
Interest expense (127,635) (131,713)
Income before income taxes and
cumulative effect of accounting changes $48,164 $11,432
(1) Financial Information
In December 2003, we acquired OfficeMax, Inc. (see Note 2). After the
acquisition, we began reporting our office products business as two operating
segments, Contract and Retail, within Boise Office Solutions, our office
products distribution business. Taken together, the two operating segments
make up our Boise Office Solutions business. Accordingly, in December 2003,
we began operating our business using five (rather than four) reportable
segments: Boise Office Solutions, Contract; Boise Office Solutions, Retail;
Boise Building Solutions; Boise Paper Solutions; and Corporate and Other.
The consolidated financial statements include the accounts of the company
and all subsidiaries after elimination of intercompany balances and
transactions. The results of OfficeMax's operations are included after
December 9, 2003. Our Boise Office Solutions, Contract; Boise Building
Solutions; Boise Paper Solutions; and Corporate and Other segments have a
December 31 calendar year-end. Our Boise Office Solutions, Retail, segment
maintains a fiscal year that ends on the last Saturday in December, which in
2003 was December 27. We consolidate the fiscal-year results of Boise Office
Solutions, Retail, with the calendar-year results of our other segments.
The Consolidated Statements of Income (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 2003 Annual
Report on Form 10-K. The 2003 Annual Report on Form 10-K will be available in
March 2004. Net income (loss) for all periods presented involved estimates
and accruals.
Certain amounts in prior years' financial statements have been
reclassified to conform with the current year's presentation. These
reclassifications did not affect net income (loss).
(2) Acquisition of OfficeMax
On December 9, 2003, we completed our acquisition of OfficeMax, Inc.
OfficeMax is now a wholly owned subsidiary of Boise Cascade Corporation.
OfficeMax has operations in the United States, Canada, Puerto Rico, the U.S.
Virgin Islands, and Mexico. In addition to assuming $81.6 million of
OfficeMax's debt and incurring approximately $20.0 million of transaction
costs, we paid OfficeMax shareholders $1.3 billion for the acquisition, paying
60% of the purchase price in Boise common stock and 40% in cash. OfficeMax
shareholders had the opportunity to elect to receive cash or stock for their
OfficeMax shares. Each shareholder's election was subject to proration
depending on the elections of all OfficeMax shareholders. As a result of this
proration, OfficeMax shareholders electing Boise stock received approximately
.230419 share of Boise stock and $3.1746 in cash for each of their OfficeMax
shares. Fractional shares were paid in cash. OfficeMax shareholders who
elected cash or had no consideration preference, as well as those shareholders
who made no effective election, received $9.333 in cash for each of their
OfficeMax shares. After the proration, the $1.3 billion paid to OfficeMax
shareholders consisted primarily of $486.7 million in cash and the issuance of
27.3 million of Boise common shares valued at $808.2 million. The value of
the common shares issued was determined based on the average market price of
our common shares over a ten-day trading period before the acquisition closed
on December 9, 2003.
(3) Reconciliation of Net Income (Loss) and Diluted Income (Loss) Per
Share Before Special Items, the Impact of the OfficeMax Acquisition, and the
Cumulative Effect of Accounting Changes
We evaluate our results of operations both before and after special gains
and losses. We believe our presentation of financial measures before special
items enhances our investors' overall understanding of our recurring
operational performance. Specifically, we believe the results before special
items provide useful information to both investors and management by excluding
gains and losses that are not indicative of our core operating results. In
addition, in order to provide a meaningful comparison to the prior year and
prior quarters, we have excluded the impacts of the OfficeMax acquisition.
There were no special items during the three months ended December 31,
2002. In the following tables, we reconcile our financial measures before
special items and the impacts of the OfficeMax acquisition to our reported
financial results for the three months ended December 31, 2003 and September
30, 2003, and the years ended December 31, 2003 and 2002 (see Notes 4, 5, and
6).
Three Months Ended
December 31, 2003 September 30, 2003
Before
Special Special
Items Items Before
As and and As Special Special
Reported OfficeMax OfficeMax Reported Items Items
(millions, except per-share amounts)
Boise Office
Solutions,
Contract $33.9 $3.0 $36.9 $31.0 $-- $31.0
Boise Office
Solutions,
Retail 6.1 (6.1) -- -- -- --
40.0 (3.1) 36.9 31.0 -- 31.0
Boise Building
Solutions 37.6 14.7 52.3 56.4 -- 56.4
Boise Paper
Solutions (14.4) -- (14.4) 0.2 -- 0.2
Corporate and
Other (16.1) 2.3 (13.8) (10.5) -- (10.5)
47.1 13.9 61.0 77.1 -- 77.1
Interest expense (37.6) 4.9 (32.7) (31.7) -- (31.7)
Income before
income taxes 9.5 18.8 28.3 45.4 -- 45.4
Income tax
provision (2.6) (7.4) (10.0) (12.5) (2.9) (15.4)
Net income 6.9 $11.4 18.3 32.9 $(2.9) 30.0
Preferred
dividends or
supplemental
ESOP
contribution (3.0) (3.0) (2.9) (2.9)
Diluted income $3.9 $15.3 $30.0 $27.1
Average shares
used to determine
diluted income
per common
share 70.2 63.4(a) 62.7 62.7
Net income
per common
share
Diluted before
cumulative effect
of accounting
changes $0.05 $0.24 $0.48 $0.43
Cumulative effect
of accounting
changes -- -- -- --
Diluted $0.05 $0.24 $0.48 $0.43
(a) Adjusted to exclude the weighted-average number of Boise common
shares issued to OfficeMax shareholders electing stock (see Note 2).
Year Ended December 31
2003 2002
Before
Before
Special Special
Items Items Before
As and and As Special Special
Reported OfficeMax OfficeMax Reported Items Items
(millions, except per-share amounts)
Boise Office
Solutions,
Contract $109.4 $12.2 $121.6 $123.0 $-- $123.0
Boise Office
Solutions,
Retail 6.1 (6.1) -- -- -- --
115.5 6.1 121.6 123.0 -- 123.0
Boise Building
Solutions 95.4 14.7 110.1 39.7 -- 39.7
Boise Paper
Solutions (13.9) 0.2 (13.7) 38.6 -- 38.6
Corporate and
Other (45.2) 3.0 (42.2) (81.8) 23.6 (58.2)
151.8 24.0 175.8 119.5 23.6 143.1
Interest
expense (132.5) 4.9 (127.6) (131.7) -- (131.7)
Income (loss)
before income
taxes and
cumulative
effect
of accounting
changes 19.3 28.9 48.2 (12.2) 23.6 11.4
Income tax
(provision)
benefit (2.2) (14.2) (16.4) 23.5 (27.6) (4.1)
Income before
cumulative
effect
of accounting
changes 17.1 14.7 31.8 11.3 (4.0) 7.3
Cumulative effect
of accounting
changes, net of
income tax (8.8) 8.8 -- -- -- --
Net income 8.3 $23.5 31.8 11.3 $(4.0) 7.3
Preferred
dividends or
supplemental ESOP
contribution (13.1) (11.8) (13.1) (13.1)
Diluted income $(4.8) $20.0 $(1.8) $(5.8)
Average shares
used to
determine
diluted income
(loss) per
common share 60.1 62.5(a) 58.2 58.2
Net income
(loss) per
common share
Diluted before
cumulative
effect of
accounting
changes $0.07 $0.32 $(0.03) $(0.10)
Cumulative
effect of
accounting
changes (0.15) -- -- --
Diluted $(0.08) $0.32 $(0.03) $(0.10)
(a) Adjusted to exclude the weighted-average number of Boise common
shares issued to OfficeMax shareholders electing stock (see Note 2).
(4) 2003 Special Items and Impact of the OfficeMax Acquisition
First Quarter
In first quarter 2003, we announced the termination of approximately 550
employees and recorded a pretax charge of $10.1 million for employee-related
costs in "Other (income) expense, net" in the Consolidated Statement of
Income. 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 the Boise
Office Solutions, Contract, segment, $0.2 million in the Boise Paper Solutions
segment, and $0.7 million in our Corporate and Other segment. Employee-
related costs are primarily for severance payments, most of which were paid in
2003 with the remainder to be paid in 2004. This special item decreased net
income $6.1 million, after taxes, for the year ended December 31, 2003.
Third Quarter
During third quarter 2003, we recorded a net $2.9 million, one-time tax
benefit related to a favorable tax ruling, net of changes in other tax items.
Fourth Quarter
In December 2003, we recorded a $14.7 million pretax charge for the write-
down of impaired assets at our plywood and lumber operations in Yakima,
Washington. We also recorded $5.7 million of tax benefits associated with the
write-down. The write-down resulted from our internal review of the
operations and indications of current market value. We recorded the write-
down in our Boise Building Solutions segment in "Other (income) expense, net,"
and the tax benefits are included in "Income tax (provision) benefit" in the
Consolidated Statements of Income for the three and 12 months ended December
31, 2003. This special item decreased net income $9.0 million, after taxes,
for the three and 12 months ended December 31, 2003.
To present a meaningful comparison to prior periods, we also excluded both
the income related to the former OfficeMax operations for the period from
December 10, 2003, through December 27, 2003, and costs, including incremental
interest expense, directly related to the acquisition. The net impact of
these items reduced pretax income $4.1 million, or $2.5 million after taxes,
for the three and 12 months ended December 31, 2003.
(5) 2002 Special Items
In December 2001, we wrote down our 29% investment in IdentityNow by $54.3
million to its estimated fair value of $25 million and recorded $4.6 million
of tax benefits associated with the write-down. In May 2002, we sold all of
the stock of our wholly owned subsidiary that held our investment in
IdentityNow. In second quarter 2002, we recorded a $23.6 million pretax loss
related to this sale in our Corporate and Other segment and in "Other (income)
expense, net" in the Statement of Income. We also recorded $27.6 million of
tax benefits associated with this sale and our previous write-down in "Income
tax (provision) benefit." For the year ended December 31, 2002, this
transaction resulted in a net after-tax gain of $4 million, or 7 cents per
basic and diluted share.
(6) Cumulative Effect of Accounting Changes
Effective January 1, 2003, we adopted the provisions of SFAS No. 143,
Accounting for Asset Retirement Obligations, which affects the way we account
for landfill closure costs. This statement requires us to record an asset and
a liability (discounted) for estimated closure and closed-site monitoring
costs and to depreciate the asset over the landfill's expected useful life.
Previously, we accrued for the closure costs over the life of the landfill and
expensed monitoring costs as incurred. On January 1, 2003, we recorded a one-
time 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 Financial Accounting
Standards Board's (FASB) 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, for the three months ended
September 30 and December 31, 2003, and the year ended December 31, 2003,
approximately $10 million, $14 million, and $45 million of vendor allowances
reduced "Materials, labor, and other operating expenses" that would have
previously been recognized primarily as a reduction of "Selling and
distribution expenses." In accordance with the provisions of EITF 02-16,
prior-period financial statements have not been reclassified to conform with
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. For the year ended December 31,
2003, this change resulted in a one-time, noncash, after-tax charge of $4.7
million, or 8 cents per share.
(7) Income Taxes
Our effective tax provision rate for the year ended December 31, 2003, was
11.5%, compared with an effective tax benefit rate of 192.8% for the year
ended December 31, 2002. Before the special items and the impacts of the
OfficeMax acquisition discussed in Notes 2, 4, and 5 above, our estimated tax
provision rates for the year ended December 31, 2003 and 2002, were 34% and
36%. The difference between the estimated tax provision rates before special
items was due to the sensitivity of the rate to changing income levels and the
mix of domestic and foreign sources of income.
(8) Net Income (Loss) Per Common Share
Net income (loss) per common share was determined by dividing net income
(loss), as adjusted, by applicable shares outstanding. For the three months
ended December 31, 2002, and the years ended December 31, 2003 and 2002, the
computation of diluted income (loss) per share was antidilutive; therefore,
amounts reported for basic and diluted income (loss) were the same.
Three Months Ended
December 31 September 30,
2003 2002 2003
(thousands, except per-share amounts)
BASIC
Net income $6,868 $6,207 $32,884
Preferred dividends (3,317) (3,289) (3,191)
Basic income $3,551 $2,918 $29,693
Average shares used to determine
basic income per common share 65,313 58,283 58,411
Basic income per common share $0.05 $0.05 $0.51
DILUTED
Basic income $3,551 $2,918 $29,693
Preferred dividends eliminated 3,317 -- 3,191
Supplemental ESOP contribution (3,007) -- (2,891)
Diluted income $3,861 $2,918 $29,993
Average shares used to determine
basic income per common share 65,313 58,283 58,411
Stock options and other 1,582 -- 956
Series D Convertible Preferred Stock 3,310 -- 3,330
Average shares used to determine
diluted income per common share 70,205 58,283 62,697
Diluted income per common share $0.05 $0.05 $0.48
Year Ended December 31
2003 2002
(thousands, except per-share amounts)
BASIC AND DILUTED
Income before cumulative effect
of accounting changes $17,075 $11,340
Preferred dividends (a) (13,061) (13,101)
Basic and diluted income (loss)
before cumulative effect of accounting
changes 4,014 (1,761)
Cumulative effect of accounting
changes, net of income tax (8,803) --
Basic and diluted loss $(4,789) $(1,761)
Average shares used to determine
basic and diluted income (loss)
per common share 60,093 58,216
Basic and diluted income (loss) per
common share before cumulative effect of
accounting changes $0.07 $(0.03)
Cumulative effect of accounting changes (0.15) --
Basic and diluted loss per common share $(0.08) $(0.03)
(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.
SOURCE Boise Cascade Corporation
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http://www.bc.com
CONTACT:
media, Ralph Poore, +1-208-384-7294, or home,
+1-208-331-2023, or investor, Vincent Hannity, +1-208-384-6390,
or cell, +1-208-890-6385, both of Boise Cascade Corporation
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