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Acquisition fuels Boise Cascade gain

But earnings fall just short of Wall Street expectations

SHARE Acquisition fuels Boise Cascade gain

BOISE — Boise Cascade Corp. swung to a profit in the first quarter as the acquisition of the nation's third largest office supply retailer more than doubled sales, the company reported Tuesday.

But earnings, adjusted for a one-time gain from the sale last month of 79,000 acres of timberland in Louisiana, fell just short of Wall Street expectations as production problems hampered paper operations.

Last December's purchase of Cleveland-based OfficeMax Inc. resulted in January-March sales jumping to more than $3.5 billion. Profits came to $63.5 million, or 66 cents per share. A year earlier, the company recorded a $27.5 million loss, or 27 cents a share, on sales of under $1.9 billion.

Adjusting for the one-time gain from the timberland sale, Boise Cascade posted per-share income of 26 cents. Analysts surveyed by Thomson First Call had expected earnings of 28 cents a share, and that was a penny lower than the forecast a week ago.

"They missed a consensus by two pennies, and we're talking a commodity producer, not a bank. I thought it was a pretty solid quarter," said Steven Chercover, an analyst with D.A. Davidson and Co. in Portland, Ore. "Clearly building materials is carrying the burden right now, but paper is getting better and they expect to return to profitability in the second quarter."

Chairman George Harad predicted that the company's performance would continue to strengthen as 2004 continues.

"For Boise overall, we continue to expect significantly higher sales and income for full year 2004, relative to 2003, both as the result of the acquisition of OfficeMax and strong or improving performance in all of our businesses," Harad said.

Building product sales, which reported record operating income in the first quarter, should remain strong, Harad said, and paper production should return to profitability this spring with a return to normal output and higher prices.

The OfficeMax acquisition increased the company's office products sales by 150 percent at the same time sales at locations in operation both this winter and a year earlier were up 5 percent.

Harad said the company was on target to secure $80 million in savings from folding OfficeMax into the Boise Cascade operations. But he also warned that the company's contract and retail office supply segments would likely follow historical patterns with a weak second quarter.

Chris Milliken, division president of Boise Office Solutions, said a reduced number of sales promotions could affect sales, and store remodeling would likely increase costs.

Shares in Boise Cascade fell 43 cents to close at $36.43 on the New York Stock Exchange.