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Boise Stock Takes Hit

Updated from 9:59 a.m. EDT

Third-quarter sales and earnings soared at Boise (BCC) thanks to its acquisition of OfficeMax, strong product prices and the sales of some of its Idaho timberlands. But the stock lost more than 10% on a tepid outlook.

The forest products company, in the midst of transforming itself into an office supply retailer, said Tuesday it earned $61.1 million, or 63 cents a share, nearly double last year's $32.9 million, or 48 cents a share. That figure, which included a $13.1 million pretax gain on the sale of timberlands, beat Wall Street estimates calling for earnings of 60 cents a share, according to Thomson First Call.

The stock came under pressure in afternoon trading, however, falling $3.90, or 11.5%, to $30.02. The company reportedly expressed caution about its back-to-school season on a post-earnings conference call.

In the third quarter, sales increased 73% to $3.65 billion, due largely to Boise's acquisition of OfficeMax, the nation's third-largest office supply retailer, in December 2003. It also benefited from price increases in some of its products, with paper up an average of 7% over last year, plywood up 14% and lumber up 29%.

The contract segment of Boise's office supply business posted a 17% increase in sales over the same quarter last year, and the retail segment's sales dipped 1% lower than OfficeMax retail sales on a pro forma basis in the third quarter of 2003.

Operating income for its lumber business totaled $94.6 million in the third quarter, compared with $56.4 million in the same quarter last year, while its paper business brought in $20.8 million, up from last year's $200,000.

The company is currently in the process of selling its forest product assets to Madison Dearborn Partners LLC, a private equity group, for approximately $3.7 billion. It expects to complete the sale on Oct. 29 and shift its core focus to the office products distribution business, facing off with the likes of Staples (SPLS) and Office Depot (ODP). It will change its name to OfficeMax and trade under the ticker symbol OMX on the New York Stock Exchange.

Following the completion of the sale, it will pay up to $800 million to repurchase all or a portion of certain outstanding debt securities. In addition, the company is making a simultaneous offer to pay up to $177 million to redeem its senior floating rate debentures.

The company is also expected to buy back shares or pay a dividend to shareholders following the sale.

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