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 in the United States and Canada. 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.
Financial information pertaining to each of the Company's industry segments and to each of its geographic areas for the years 1993, 1992, and 1991 is presented in Note 8, "Segment Information," of the Notes to Financial Statements of the Company's 1993 Annual Report and is incorporated herein by this reference.
The Company's sales and income are affected by the industry supply of product and 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, and demand for office products generally is somewhat lower during the second quarter. 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 also 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 Note 1 of the Notes to Financial Statements of the Company's 1993 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; uncoated groundwood papers for newspaper inserts and books; 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 8 U.S. and 2 Canadian paper mills. The total annual practical capacity of the mills was approximately 4.1 million tons at December 31, 1993. 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 and thermomechanical pulp primarily from wood waste pro- duced as a byproduct of wood products manufacturing. In 1993, the Company started up a recycled pulp mill at its existing paper mill in Steilacoom (West Tacoma), Washington. Pulp mills in the Midwest, Northeast, South, and Canada 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.
The Company currently manufactures corrugated containers at 7 plants, which have annual practical capacity of approximately 3.3 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 primarily sells its corrugated containers through its own sales personnel.
The following table sets forth sales volumes of paper and paper products for the years indicated:
1993 1992 1991 1990 1989 Paper (thousands of short tons)
Uncoated free sheet papers 1,215 1,110 1,050 891 835 Newsprint 860 831 838 873 859 Containerboard 559 560 540 529 536 Coated papers 418 397 371 365 389 Uncoated groundwood papers 299 319 319 314 305 Market pulp 205 260 284 307 286 Other(1) - - - 43 91 ______ ______ ______ ______ ______ 3,556 3,477 3,402 3,322 3,301
(millions of square feet)
Corrugated containers(2) 2,961 4,715 6,478 7,087 7,091
(1) Includes specialty paperboard and carbonless paper. The Company sold its specialty paperboard mills on June 30, 1989. In 1990, the Company discontinued production of carbonless paper.
(2) On June 30, 1992, the Company sold 11 corrugated container plants.
In keeping with the Company's periodic reviews of the opportunities and challenges for each of its businesses, in February 1994, the Company announced its intention to combine the majority of its newsprint, uncoated groundwood, and related assets into an independently managed Canadian company which would have access to financial markets. Locations involved include Kenora and Fort Frances, Ontario, Canada, and Steilacoom (West Tacoma), Washington. The new entity also would have responsibility for the sale of newsprint produced at the Company's DeRidder, Louisiana, mill.
Office Products
The Company distributes a broad line of items for the office, including office supplies, paper, and office furniture. 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 primarily sourced from the Company's paper operations. The Company sells these office products directly to corporate, government, and other offices, primarily for next-day delivery.
Customers with multi-site 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's 24 distribution centers are located across the United States to provide next-day delivery to all domestic locations. The Company also operates 4 retail office supply stores in Hawaii. The Company plans to open a distribution center in Colorado late in the first quarter of 1994.
The following table sets forth sales dollars for the office products distribution business for the years indicated:
1993 1992 1991 1990 1989
Sales (millions) $ 683 $ 672(1) $1,039 $1,079 $1,014
(1)Early in 1992, the Company sold essentially all of its wholesale office products distribution operations, enabling the Company to focus on the commercial 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 plywood, lumber, 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 I-beam floor and ceiling 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 manufac- turing trade sales for 1993, 1992, and 1991 were $879 million, $761 million, and $615 million.
The following table sets forth annual practical capacities of the Company's wood products facilities as of December 31, 1993:
Number of Mills Practical Capacity (millions)
Plywood 12 1,895 square feet (3/8" basis) Lumber 13 756 board feet Particleboard 1 185 square feet (3/4" basis)
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 33% in 1993) of the wood products required by the Company's Building Materials Distribution Division are provided by the Company's manufacturing facilities, and the balance is purchased from out- side 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:
1993 1992 1991 1990 1989 (millions)
Plywood (square feet - 3/8" basis) 1,760 1,788 1,621 1,682 1,679 Lumber (board feet) 760 805 815 782 815 Particleboard (square feet - 3/4" basis) 182 186 182 179 188 Engineered wood products (sales dollars) $71 $38 $13 $ 1 $ - Building materials distribution (sales dollars) $590 $447 $328 $289 $279
Timber Resources
In recent years, heightened attention has been paid to developing and implementing recovery plans throughout the U.S. for species listed as threatened or endangered under the Endangered Species Act of 1973. Some of these plans have caused or could cause sharp curtailment in the use of public and private timberlands in the Pacific Northwest. The case of the spotted owl is a highly visible example of the negative impact of these plans on the paper and forest products industry.
In July 1993, the Clinton Administration announced a forest management plan that would reduce harvests in the so-called spotted owl forests of western Washington, western Oregon, and northern California to an average of 1.2 billion board feet annually for ten years - about a 75 percent reduction in harvest levels from those of the mid-'80s.
If the plan is implemented as announced, as much as 50 percent of the wood products manufacturing capacity in the owl forests could be shut down over time, as compared with 1988 levels. In this environment, Boise Cascade has a number of relative advantages. An important share of the Company's raw material needs is met by its own timberland - some 1.3 million acres in Washington, Oregon, and Idaho. The Company's wood products facilities are among the most efficient in the region, allowing it to bid competitively for any timber that is available.
The Company's Northwest pulp and paper mills already receive approximately 73 percent of their wood chip supply either directly from or through trades with the Company's wood products and whole-log chipping operations. The Company is taking additional steps to reduce its need for outside chip purchases. The Company's cottonwood tree plantation near its Wallula, Washington, mill should be ready for harvest in 1997, supplying a portion of its Northwest wood chip needs. In addition, two of the Company's Northwest paper mills are now using recycled fiber - and will use more - to produce recycled-content paper products.
Thus, the Company is 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, the Company cannot predict how the next several years will unfold. At year-end, the Company's lumber capacity had been reduced 8.5 percent from the year-end 1992 level to 756 million board feet, primarily reflecting shift reductions due to limited log supply.
Also difficult to predict is the impact of these timber constraints on the cost structure of the Northwest paper and forest products industry. Log costs for wood products facilities have already climbed dramatically over the last several years, while wood chip costs for the Company's Northwest pulp mills rose 75 percent from 1987 to 1991, before leveling off. Lumber and plywood prices, however, have outpaced log cost increases, resulting in strong profit margins in the wood products business. Because of excess industry supply, paper prices have not climbed to meet higher wood chip costs in the Northwest.
It is unclear what impact the developing recovery plans for various threatened or endangered species will have on pricing and cost trends in future years in the Northwest or across the nation.
Besides the 1.3 million acres of timberland in the Northwest, Boise Cascade also owns or controls another 4.8 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 1993, the Company's mills processed approximately 1.2 billion board feet of sawtimber and 2.4 million cords of pulpwood; 40% of the sawtimber and 58% of the pulpwood were har- vested from the Company's timber resources, and the balance was acquired from various private and government sources. Approximately 73% of the 1.1 million bone-dry tons of wood chips consumed by the Company's Northwest pulp and paper mills in 1993 were provided from the Company's Northwest wood products manufacturing facilities as residuals in the processing of solid wood products and from a whole-log chipping facility. Of the 660,000 bone-dry tons of residual chips used in the South, 46% were provided by the Company's Southern wood products manufacturing facilities.
At December 31, 1993, 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 were as follows:
Long-term leases generally provide the Company with timber harvest- ing 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 50 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.
A substantial portion of the wood requirements of the Company's pulp and paper mills in Kenora and Fort Frances, Ontario, Canada, are provided through four separate Forest Management Agreements with the Province of Ontario covering approximately 3 million acres of timberland. Stumpage charges are those in effect at the time the timber is harvested, as prescribed by the province's regulations. The agreements require the Company to assume responsibility for management of the timberlands; however, the Company is reimbursed for certain silvicultural expenses that are incurred. The agreements were signed in 1983 and 1984 and have initial terms of 20 years. At the end of each successive five-year period covered by the agreements, the remaining term will be extended by an additional five years, provided that the Company has fulfilled the timberland management responsibilities set forth in the agreements. In accordance with these provisions, those agreements have been extended.
The Company seeks to maximize the utilization of its timberlands through efficient management so that the timberlands will provide a continu- ous supply of wood for future needs. Site preparation, planting, fertil- izing, 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.
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 Quality
The Company invests substantial capital in order to comply with federal, state, and local environmental laws and regulations. During 1993, capital expenditures attributable to an ongoing pollution abatement program amounted to $46 million. It is anticipated that approximately $70 million will be spent in 1994 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 at these facilities. Anticipated expenditures pursuant to the ongoing pollution abatement program should enable the Company to continue to meet the environmental standards now applicable to its various facilities.
The Environmental Protection Agency (EPA) has proposed new rules to regulate air and water emissions from pulp and paper mills. These proposed rules would, among other things, set extremely stringent standards for color, chemical oxygen demand, and the discharge of all chlorinated organics. "Chlorinated organics" refers to a family of thousands of organic compounds that occur naturally and are also produced as byproducts of pulp-bleaching processes that use chlorine compounds.
Although the majority of these chemical compounds discharged are environmentally benign, a small percentage, including the chemical dioxin, are known to be toxic at sufficiently high concentrations. With this knowledge, Boise Cascade has invested in new pulping and bleaching equipment and has changed bleaching processes so that, today, the level of dioxin in mill effluent at most of the Company's pulp mills is so small that it cannot be measured using acceptable methodology.
Unfortunately, the proposed EPA rules do not discriminate between known toxins and other chlorinated organics, but rather seek to regulate the levels of all such compounds, regardless of their actual impact on human health or the environment. This approach is likely to require the elimination of elemental chlorine and may require the elimination of all chlorine compounds from the pulp-bleaching process, despite a lack of evidence that totally chlorine-free bleaching would result in significant or cost-effective improvement in the environment or public health. Moreover, the estimated cost of changing bleaching processes and capturing air emissions to accommodate the proposed regulations is staggering - as much as $12 billion for the U.S. pulp and paper industry as a whole. For Boise Cascade, the cost of complying with the proposed rules utilizing current technology could be several hundred million dollars over the next four or five years. Boise Cascade is working with industry associations and the EPA to achieve revisions to the proposed regulations that would better reflect scientific understanding of the effects, the risks of alternative pulp-bleaching processes, and the costs.
As of December 31, 1993, the Company was 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 53 sites where hazardous substances or other contaminants are located. The Company has resolved issues relating to several of these sites at minimal cost and believes that it may have minimal or no responsibility with regard to several other of these sites. In most cases, the Company is one of many potentially responsible parties, and its 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 of the currently outstanding sites, 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.
Employees
As of December 31, 1993, the Company had 17,362 employees, 9,071 of whom were covered under collective bargaining agreements. During 1993, the Company reached new labor agreements effective until mid-1998 at its pulp and paper mill in Kenora, Ontario, Canada. In February 1994, the Company and production and most of the maintenance workers at its International Falls, Minnesota, pulp and paper mill agreed to contract extensions. The agreements are effective until April 1999.
Collective bargaining agreements at the Company's four Pacific Northwest pulp and paper facilities and one converting operation expired in the spring of 1993. The Company is operating these mills without signed collective bargaining agreements. On February 1, 1994, the Company implemented its final contract offer at its Wallula, Washington, paper mill. The Company is in negotiations with unions representing employees at the other four mills. The Company is seeking changes in the amount of pay for time not worked, changes in work rules in order to increase operating flexibility, and other changes, all of which would improve productivity and efficiency.
The collective bargaining contracts at the Company's pulp and paper mill in Fort Frances, Ontario, Canada, expired in April 1993. The Company is operating this mill without signed collective bargaining agreements. Although negotiations are continuing, the terms of new agreements proposed by the Company have not been accepted by unions representing employees at this facility. The Company is seeking changes in work rules that would increase operating flexibility, which the Company believes is necessary for increased productivity and efficiency. In addition, there is some dispute over pension plan improvements. A number of the Company's Canadian competitors have already achieved some of the same work rule changes in their contract settlements. Prior to satisfactory resolution of the issues, another firm's mill was on strike for over 90 days. On March 2, 1994, the unions announced that they had selected March 16 as a date for strike. There are meetings scheduled for the Company and unions to meet prior to that date.
While the Company believes that the Pacific Northwest and Fort Frances, Ontario, negotiations can be resolved without work stoppages or strikes, it is not possible at this time to predict how the negotiations may conclude.
Among the negotiations scheduled for 1994 are labor contracts covering the Company's Northwest wood products facilities.
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 1993 were $221 million, compared with $283 million in 1992 and $299 million in 1991. Details of 1993 spending by segment and by type are as follows:
The level of capital investment in 1994 is expected to be about $300 million. The 1994 capital budget will be allocated to cost-saving, modernization, 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 55% of total 1993 energy requirements, compared with 54% in 1992 and 52% in 1991. The energy requirements fulfilled by purchased sources in 1993 were as follows: natural gas, 45%; electricity, 28%; residual fuel oil, 8%; and other sources, 19%.
Item 2.

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, 1993. Information concerning timber resources is presented in Item 1 of this Form 10-K.
Paper and Paper Products
10 pulp and paper mills located in Alabama, Louisiana, Maine, Minnesota, Oregon, Washington (3), and Ontario, Canada (2).
1 recycled pulp mill located in Washington.
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
24 office supply, paper, and office furniture distribution centers located in Arizona, California (2), Connecticut, Florida, Hawaii (4), Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas (2), Utah, and Washington. The Company plans to open a distribution center in Denver, Colorado, late in the first quarter of 1994.
4 retail outlets located in Hawaii.
Building Products
13 sawmills located in Alabama, Idaho (3), Louisiana, Oregon (5), and Washington (3).
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.
Item 3.

Item 3. Legal Proceedings
As of December 31, 1993, the Company was 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 53 sites where hazardous substances or other contaminants are located. On April 19, 1993, the Company filed a lawsuit in State District Court in Boise, Idaho, against 31 of its current and previous insurance carriers seeking insurance coverage for response costs the Company has incurred or may incur at these sites. 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.
In January 1994, the state of Maine Department of Environmental Protection requested that the Company enter into an administrative settlement to resolve alleged violations of the state's environmental laws during April 1991 through March 1993 at the Company's facility in Rumford, Maine. The alleged violations concern water discharges, air emissions, and hazardous waste. The Department has requested that the Company pay a fine of $359,000 and agree to an injunctive order. Negotiations with the Department are ongoing; it is expected that this matter will be resolved consensually, but at this time, the ultimate resolution of this matter and the dollar amount of any settlement cannot be determined.
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.

Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5.

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 1993 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 1993 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 1993 Annual Report. The information under these captions is incorporated herein by this reference.
Item 6.

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

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 captions "Financial Review" and "Discussion and Analysis" of the Company's 1993 Annual Report. The information under these captions is incorporated herein by this reference.
Item 8.

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 1993 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 1993 Annual Report and is incorporated herein by this reference.
The consolidated income (loss) statement for the three months ended December 31, 1993, is presented in the Company's Fact Book for the fourth quarter of 1993 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.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.

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, 1994. All of the nominees are presently directors. This information is incorporated herein by this reference.
Executive Officers as of February 28, 1994 Date First Elected as Name Age Position or Office an Officer
John B. Fery 64 Chairman of the Board and 11/29/60 Chief Executive Officer, Director
George J. Harad 49 President and Chief Operating Officer, Director 5/11/82
Peter G. Danis Jr. 62 Executive Vice President 7/26/77
Theodore Crumley 48 Senior Vice President and Chief Financial Officer 5/10/90
Rex L. Dorman 60 Senior Vice President 2/21/75
Alice E. Hennessey 57 Senior Vice President 10/28/71
Terry R. Lock 52 Senior Vice President 2/17/77
Richard B. Parrish 55 Senior Vice President 2/27/80
N. David Spence 58 Senior Vice President 12/8/87
John H. Wasserlein 52 Senior Vice President 2/10/82
J. Ray Barbee 46 Vice President 9/26/89
Stanley R. Bell 47 Vice President 9/25/90
John C. Bender 53 Vice President 2/13/90
Charles D. Blencke 50 Vice President 12/11/92
Tom E. Carlile 42 Vice President and Controller 2/4/94
A. Ben Groce 52 Vice President 2/8/91
J. Michael Gwartney 53 Vice President 4/25/89
John W. Holleran 39 Vice President and General Counsel 7/30/91
H. John Leusner 58 Vice President 12/11/92
Irving Littman 53 Vice President and Treasurer 11/1/84
Jeffrey G. Lowe 52 Vice President 12/11/92
Robert L. Merrill 51 Vice President 12/11/92
Carol B. Moerdyk 43 Vice President 5/10/90
D. Ray Ryden 60 Vice President 4/26/88
Donald F. Smith 52 Vice President 12/8/87
J. Kirk Sullivan 58 Vice President 9/30/81
Gary M. Watson 46 Vice President 2/5/93
A. James Balkins III 41 Corporate Secretary 9/5/91
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.
Rex L. Dorman, senior vice president and former chief financial officer, will retire from his position with the Company effective June 1, 1994. Theodore Crumley, formerly vice president and controller, was elected senior vice president and chief financial officer as of February 4, 1994, to replace him. Mr. Dorman will assist Mr. Crumley with the transition in the Company's financial management until June 1.
Tom E. Carlile was elected vice president and controller in February 1994. Mr. Carlile received a B.A. degree in accounting in 1973 from Boise State University in Boise, Idaho, and is a certified public accountant. He joined the Company in 1973 and held a variety of financial and planning positions before becoming director of finance and planning for the White Paper Division in 1989.
E. Thomas Edquist, senior vice president, retired from his position as an officer of the Company effective July 31, 1993. He continued to work for the Company until his retirement on December 31, 1993.
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.

Item 11. Executive Compensation
Information concerning compensation of the Company's executive officers for the year ended December 31, 1993, is presented under the caption "Compensation Tables" in the Company's definitive proxy statement dated March 7, 1994. This information is incorporated herein by this reference.
Item 12.

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, 1993, is set forth under the caption "Beneficial Ownership" in the Company's definitive proxy statement dated March 7, 1994, and is incorporated herein by this reference.
(b) Information concerning security ownership of management as of December 31, 1993, is set forth under the caption "Security Ownership of Directors and Executive Officers" in the Company's definitive proxy statement dated March 7, 1994, and is incorporated herein by this reference.
Item 13.

Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions during 1993 is set forth under the caption "Consulting Agreement" in the Company's definitive proxy statement dated March 7, 1994, and is incorporated herein by this reference.
PART IV
Item 14.

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, 1993, is incorporated herein by this reference from the Company's Fact Book for the fourth quarter of 1993.
(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 1993 Annual Report.
- Balance Sheets as of December 31, 1993, 1992, and 1991. - Statements of Income (Loss) for the years ended December 31, 1993, 1992, and 1991. - Statements of Cash Flows for the years ended December 31, 1993, 1992, and 1991. - Statements of Shareholders' Equity for the years ended December 31, 1993, 1992, and 1991. - Notes to Financial Statements. - Report of Independent Public Accountants.
(2) Financial Statement Schedules.
- Report of Independent Public Accountants. V Property and Equipment for the years ended December 31, 1993, 1992, and 1991. VI Accumulated Depreciation, Depletion, and Amortization of Property and Equipment for the years ended December 31, 1993, 1992, and 1991. VII Guarantees of Securities of Other Issuers as of December 31, 1993. IX Short-Term Borrowings for the years ended December 31, 1993, 1992, and 1991. X Supplementary Income Statement Information for the years ended December 31, 1993, 1992, and 1991. - Consent of Independent Public Accountants.
Schedules other than those listed are omitted because they are not applicable or because the required information is shown in the financial statements or notes.
(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 immedi- ately precedes such exhibits, and is incorporated herein by this reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31, 1993.
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), 33-45675 (filed February 12, 1992), and 33-16672 (filed September 10, 1987):
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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boise Cascade Corporation:
We have audited, in accordance with generally accepted auditing standards, the financial statements included in Boise Cascade Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 26, 1994. Our report on the financial statements includes an explanatory paragraph with respect to the change in the method of accounting for postretirement benefits other than pensions in accordance with Standard No. 106 of the Financial Accounting Standards Board as discussed in Note 5 of the financial state- ments. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Part IV, Item 14(a)(2) are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Boise, Idaho January 26, 1994
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 John B. Fery John B. Fery Chairman of the Board and Chief Executive Officer
Dated: March 11, 1994
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 11, 1994.
Signature Capacity
(i) Principal Executive Officer:
John B. Fery Chairman of the Board and John B. Fery 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 Paul J. Phoenix John B. Fery Paul J. Phoenix
Anne L. Armstrong A. William Reynolds Anne L. Armstrong A. William Reynolds
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 James A. McClure Ward W. Woods
BOISE CASCADE CORPORATION AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
COLUMN A COLUMN B ITEM CHARGED TO COSTS AND EXPENSES YEAR ENDED DECEMBER 31 1993 1992 1991 (expressed in thousands)
Maintenance and repairs $339,027 $345,257 $369,079
Taxes, other than payroll and income taxes 52,848 54,984 57,633
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports dated January 26, 1994, included or incor- porated by reference in this Form 10-K for the year ended December 31, 1993, 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. 33-38216); and the registration statement on Form S-3 (File No. 33-55396).
ARTHUR ANDERSEN & CO.
Boise, Idaho March 11, 1994
BOISE CASCADE CORPORATION
INDEX TO EXHIBITS Filed with the Annual Report on Form 10-K for the Year Ended December 31, 1993
Page Number Description Number (1)
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 Certificate of Designation of Cumulative Preferred Stock, Series F, dated January 29, 1993 31 3.5 Bylaws, as amended, July 30, 1993 35 3.6 Certificate of Designation of Conversion Preferred Stock, Series G, dated September 17, 1993 51 4.1 (5) Trust Indenture between Boise Cascade Corporation and Morgan Guaranty Trust Company of New York, Trustee, dated October 1, 1985, as amended - 4.2 (6) 1990 Revolving Loan Agreement -- $750,000,000, dated January 1, 1990, as amended - 4.3 (7) Shareholder Rights Plan, as amended September 25, 1990 - 9 Inapplicable - 10.1 Key Executive Performance Plan for Executive Officers, as amended February 3, 1994 65 10.2 1986 Executive Officer Deferred Compensation Plan, as amended July 29, 1993 81 10.3 1983 Board of Directors Deferred Compensation Plan, as amended July 29, 1993 93 10.4 1982 Executive Officer Deferred Compensation Plan, as amended July 29, 1993 103 10.5 Executive Officer Severance Pay Policy 115 10.6 Supplemental Early Retirement Plan for Executive Officers 119 10.7 Boise Cascade Corporation Supplemental Retirement Policy 131 10.8 1987 Board of Directors Deferred Compensation Plan, as amended July 29, 1993 135 10.9 1984 Key Executive Stock Option Plan and Form of Agreement, as amended through February 7, 1992 145 10.10 Executive Officer Group Life Insurance Plan description 157 10.11 Executive Officer Split-Dollar Life Insurance Plan 161 10.12 Form of Agreement with Executive Officers, as amended 175 10.13 Supplemental Health Care Plan for Executive Officers 189 10.14 Nonbusiness Use of Corporate Aircraft Policy, as amended 197 10.15 Executive Officer Financial Counseling Program description 201 10.16 Family Travel Program description 205 10.17 Form of Directors' Indemnification Agreement 209 10.18 Deferred Compensation and Benefits Trust, as amended through June 30, 1989 219 10.19 1991 Director Stock Option Plan 249 11 Inapplicable - 12 Ratio of Earnings (Losses) to Fixed Charges 259 13.1 Incorporated sections of the Boise Cascade Corporation 1993 Annual Report 263 13.2 Incorporated sections of the Boise Cascade Corporation 1993 Fact Book for the fourth quarter of 1993 301 18 Inapplicable - 19 Inapplicable - 22 Significant subsidiaries of the registrant 309 23 Inapplicable - 24 Consent of Arthur Andersen & Co. (See page 26) - 25 Inapplicable - 28 Inapplicable - 29 Inapplicable -
(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) 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.
(6) The 1990 Revolving Loan Agreement, as amended, was filed as Exhibit 4.1 in the Company's Form 10-K for the year ended December 31, 1989, filed with the Securities and Exchange Commission on March 8, 1990, and is incorporated herein by this reference. The Form of Second Amendment to the 1990 Revolving Loan Agreement was filed as Exhibit 4.2 in the Company's Form 10-Q for the quarter ended March 31, 1992, filed with the Securities and Exchange Commission on May 8, 1992, and the Form of Third Amendment to the 1990 Revolving Loan Agreement was filed as Exhibit 4 in the Company's Form 8-K, dated December 4, 1992, filed with the Securities and Exchange Commission on December 4, 1992, both of which are incorporated herein by this reference.
In reliance upon item 601(b)(4)(iii) of Regulation S-K, the registrant is not filing herewith various instruments (other than those mentioned in footnotes 5 and 6) defining the rights of holders of long-term debt of the registrant and its subsidiaries because the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.
(7) 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.


Item 1. Business
Lincoln National Corporation ("LNC") is a holding company. Through subsidiary companies, LNC operates multiple insurance businesses. Operations are divided into four major business segments, 1) Property-Casualty, 2) Life Insurance and Annuities, 3) Life-Health Reinsurance and 4) Employee Life-Health Benefits. Although one of the subsidiaries held by LNC was formed as early as 1905, LNC itself was formed in 1968. LNC is an Indiana corporation with its principal office at 200 East Berry Street, Fort Wayne, Indiana 46802-2706. As of December 31, 1993, there were 215 persons on the staff of LNC. Total employment of Lincoln National Corporation at December 31, 1993 on a consolidated basis was 11,890.
Although acquisition and disposition activity has occurred, there has been no activity of this nature during the past five years involving all or predominately all of a business segment.
Numeric presentations showing revenues, pre-tax income, and assets for LNC's four major business segments and other operations in which LNC engages through its subsidiaries are included in this report as part of the consolidated financial statements (see note 8 to the consolidated financial statements on page 54). The LNC "Other Operations" category includes LNC's investment management companies and unallocated corporate items, including corporate investment income, interest expense on short-term and long-term borrowings, and unallocated corporate overhead expenses.
Following is a brief description of the four major business segments:
1. Property-Casualty Property-Casualty insurance includes automobile, boiler and machinery, workers' compensation, fire and allied lines, inland marine, home-owners, general casualty, special risks and multiple peril insurance. Fidelity and surety bonds are also included within property-casualty insurance.
Most of LNC's property-casualty business is conducted through American States Insurance Company ("American States"), headquartered in Indianapolis, Indiana, and its property-casualty subsidiaries. These companies operate a multi-line property-casualty insurance business in most states of the United States through 22 semi-autonomous division offices with broad authority for underwriting, agency contracting, marketing and claims settlement for most lines of business. The distribution network involves approximately 5,000 independent local agencies.
Other companies within this business segment include Lincoln National Specialty Insurance Company ("LNSIC") which underwrites select coverages in the sports and entertainment market and Lincoln National Reinsurance Company which is a property-casualty company that is involved in servicing a closed block of reinsurance business.
Approximately 3,900 employees are involved in this business segment.
2. Life Insurance and Annuities The primary company within this business segment is The Lincoln National Life Insurance Company ("LNL"). Other companies within this business segment include, Security-Connecticut Life Insurance Company ("Security- Connecticut"), First Penn-Pacific Life Insurance Company ("First Penn"), American States Life Insurance Company ("American States Life"), and Lincoln National (UK) PLC.
LNL, the 6th largest U.S. stockholder-owned life insurance Company (1992 Fortune Rankings of 50 Largest Life Insurance Companies by Assets) is an Indiana corporation headquartered in Fort Wayne, Indiana. A network of 36 life insurance agencies, independent life insurance brokers, insurance agencies located within financial institutions and specifically trained employees sells fixed annuities, variable annuities, pension products, universal life, variable universal life and other individual insurance coverages in most states of the United States and various foreign countries including Canada. The distribution network includes approximately 1,900 career agents, 13,000 brokers and access to 42,000 stockbrokers and financial planners.
Security-Connecticut is a Connecticut corporation headquartered in Avon, Connecticut. It specializes in writing universal life and term insurance through independent general agencies in most states of the United States. A wholly owned subsidiary of Security-Connecticut, Lincoln Security Life Insurance Company, operates in the state of New York. In January 1993, LNC announced it would seek a buyer for Security-Connecticut. The sale of the common stock of Security-Connecticut Corporation (a recently formed holding company to which ownership of the operating companies was transferred prior to the sale) was completed on February 2, 1994 through an Initial Public Offering (IPO).
First Penn, headquartered in Oakbrook Terrace, Illinois, specializes in the writing and administration of universal life products through independent marketing companies and the sale of LNL's annuities through insurance agencies located within financial institutions in most states of the United States.
American States Life is an Indiana corporation headquartered in Indianapolis, Indiana. Its products, principally universal life and term insurance, are marketed through independent local agencies (who also offer property-casualty insurance) in most states of the United States.
Lincoln National (UK) PLC is a United Kingdom company headquartered in Wembley, England that is licensed to do business throughout the United Kingdom. The principal products produced by this operation known as unit- linked assets are similar to U.S. produced universal life products. This company was previously named Cannon Assurance Limited, but was renamed following the acquisition and merger of another UK company that previously operated as Citibank Life (UK). Lincoln National (UK) is the 16th largest writer of unit-linked new business premiums in the UK as measured in 1992 (Money Management Survey-New Business Trends, published in June 1993.)
Approximately 4,325 employees are involved in this business segment.
3. Life-Health Reinsurance The primary companies within this business segment are Lincoln National Life Reinsurance Company ("LNLR"), Lincoln National Reassurance Company, ("LNRAC"), Lincoln National Health & Casualty Insurance Company ("LNH&C") and LNL. These companies are headquartered in Fort Wayne, Indiana. A broad range of risk management products and services are offered to insurance companies, HMOs, self-funded employers and other primary market risk accepting organizations throughout the United States and economically attractive international markets. Marketing efforts are conducted primarily through the efforts of a reinsurance sales staff. Some business is presented by reinsurance intermediaries and brokers. The reinsurance organization is one of the largest life-health reinsurers worldwide (Swiss Re survey, May 1993).
LNH&C offers accident and health products and services on both a direct and reinsurance basis.
Other companies in this business segment include various general business corporations and foreign reinsurance companies. The general business corporations are used to support the segment's sales, service and administration efforts. One of the general business corporations, Lincoln National Risk Management Inc. has developed and patented a knowledge based underwriting system ("Life Underwriting System") which it is marketing to other insurance companies. The foreign reinsurance corporations are used to support LNC's U.S. companies through reinsuring select business.
Approximately 575 employees are involved in this business segment.
4. Employee Life-Health Benefits This segment's business is conducted through Employers Health Insurance Company ("Employers Health"), a Wisconsin Corporation, headquartered in Green Bay, Wisconsin. Employers Health manufactures and distributes group life and health insurance, managed health care, dental, disability products and flexible benefit administrative services with a primary focus on the small business market (companies with 2-150 employees). It also provides administrative services to medium and large self-funded accounts in Wisconsin and is extending such services to other core market areas for self-funded groups of 100 - 1,000 lives. Employers Health has a strong market position in the Midwest, California, Texas, Colorado, Georgia, Tennessee, Maryland and Virginia, representing approximately 80 percent of its in-force business. In December 1993, LNC announced it would attempt to sell a portion of its
ownership in Employers Health through an initial public offering (IPO) of Common Stock in a newly formed holding company known as EMPHESYS Financial Group, Inc. In March 1994, this IPO was completed and resulted in the sale of 64% of the company.
Approximately 2,590 employees are involved in this segment.
Liabilities for losses and loss adjustment expenses ("LAE") for the property- casualty business segment are estimated at the end of each accounting period using case-basis evaluations and statistical projections. These liabilities include estimates for the ultimate cost of claims 1) which have been reported but not settled and 2) which have been incurred but not yet reported. A provision for inflation is implicitly considered in the estimated liability as the development of the estimated liability is based on historical data which reflects past inflation and on other factors which are judged to be appropriate modifiers of past experience. Adjustments to previously established estimates are reflected in current operating results along with initial estimates for claims arising within the current accounting period. Further, beginning in 1993 such estimates no longer recognize the effects of reinsurance recoverable because such amounts are now recorded as an asset with the adoption of FAS 113 (see note 2 to the consolidated financial statements on page 38).
The reconciliation shows an increase (decrease) of ($26.5) million, $47.0 million, and $12.3 million to the December 31, 1992, 1991 and 1990 liability for losses and LAE, respectively, for claims arising in prior years. Such reserve adjustments, which affected current operations during 1993, 1992 and 1991, respectively, resulted from developed losses for prior years being different than were anticipated when the liabilities for losses and LAE were originally estimated.
The following table shows the development of the estimated liability for loss and LAE for the ten year period prior to 1993. Each column shows the liability as originally estimated and cumulative data on payments and re- estimated liabilities for that accident year and all prior accident years, making up that calendar year-end liability; and all amounts are reflected net of reinsurance recoverable for all years. As a result of adopting FAS 113 in 1993, the 1993 liability is $225 million less than reported in the financial statements. The resulting redundancy (deficiency) is also a cumulative amount for that year and all prior years. The reserves include an estimated liability for unreported environmental losses. Prior to 1993, this liability was generally recognized in the more recent accident years and allocated to the appropriate accident year when reported. In 1993, this estimated liability for unreported environmental losses was reallocated to more appropriate accident years and as a result increased the deficiency for the period 1983 and prior. Beginning in 1986, the overall reserves were strengthened and this action has been maintained as evidenced by the cumulative development reported for 1987 through 1993. Conditions and trends that have affected the development of these liabilities in the past may not necessarily recur in the future; therefore, it would not be appropriate to use this cumulative history in the projection of future performance.
In order to protect itself against losses greater than the amount it is willing to retain on any one risk or event, LNC's insurance subsidiaries purchase reinsurance from unaffiliated insurance companies (see note 7 to the consolidated financial statements on page 50).
In order to maximize returns on its investment portfolio, LNC's investment personnel continually monitor both current investment income produced by the portfolio and current market values of the portfolio. The type, maturity, quality and liquidity of investments selected to place in the segmented portfolios vary depending on the nature of the underlying liabilities that are being supported.
All the areas of business activity in which LNC is involved are highly competitive because of the marketing structure and the large number of competing companies.
At the end of 1992, the latest year for which data is available, there were approximately 1,200 groups and unaffiliated individual companies selling property and casualty insurance. LNC's group of companies writing property-casualty insurance ranked 25th in net written premiums for 1992 (A.M. Best Aggregates and Averages) among all such groups and companies.
At the end of 1992 there were more than 2,100 life insurance companies in the United States and LNL was the 13th largest stock and mutual life insurance company in the United States based on assets and 15th based on insurance in-force (1992 Fortune Ranking of 50 Largest Life Insurance Companies by Assets).
The business of LNC's property-casualty, life insurance and annuities, life-health reinsurance and employee life-health benefits business segments, in common with those of other insurance companies, is subject to regulation and supervision by the states, territories and foreign countries in which they are admitted to do business. The laws of these jurisdictions generally establish supervisory agencies with broad administrative powers relative to granting and revoking licenses to transact business, regulating trade practices, licensing agents, prescribing and approving policy forms, regulating premium rates for some lines of business, establishing reserve requirements, regulating competitive matters, prescribing the form and content of financial statements and reports, and regulating the type and amount of investments permitted. The ability to continue an insurance business is dependent upon the maintenance of the licenses in the various jurisdictions.
Because of the nature of the insurance business, there is no single customer or group of customers upon whom the business is dependent. Factors such as backlog, raw materials, patents (including trademarks, licenses, franchises, and any other concessions held), seasonality, or environmental impact do not have a material effect upon such business. However, within LNC's Life-Health Reinsurance segment, Lincoln National Risk Management, Inc. does own the patent for a knowledge based underwriting system known as "Life Underwriting System." LNC does not have a separate unit that conducts market research. Research activities related to new products or services or the improvement of existing products or services is completed by persons within the business segments. Expenses related to such activities are not material. Also, sales are not dependent upon select geographic areas and foreign sales are not material in relationship to either LNC's total sales or sales of individual business segments.
Item 2.

Item 2. Properties
LNC and the various operating businesses headquartered in Fort Wayne lease approximately 1.3 million square feet of office space in the Fort Wayne area. Approximately 1.0 million square feet of space is leased by operating businesses headquartered in Indianapolis, Indiana; Oakbrook Terrace, Illinois; Green Bay, Wisconsin; and Wembley, London England. In addition, branch offices owned or leased for all of the operating businesses referenced above as well as the space for some smaller operations total approximately 1.2 million square feet. As shown in the notes to consolidated financial statements, (see note 7 to the consolidated financial statements on page 49) the rental expense on operating leases for office space and equipment for continuing operations totaled $55.9 million for 1993 of which $49.6 million was for office space. This discussion regarding properties does not include information on investment properties.
Item 3.

Item 3. Legal Proceedings
LNC and its subsidiaries are involved in various pending or threatened legal proceedings arising from the conduct of their business. In some instances, these proceedings include claims for punitive damages and similar types of relief in unspecified or substantial amounts, in addition to amounts for alleged contractual liability or requests for equitable relief. After consultation with counsel and a review of available facts, it is management's opinion that these proceedings ultimately will be resolved without materially affecting the consolidated financial statements of LNC.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1993, no matters were submitted to security holders for a vote.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Exchanges: New York, Chicago, Pacific, London and Tokyo.
Stock Exchange Symbol: LNC
Dividend Guideline: The dividend on LNC's Common Stock is determined each quarter by the Corporation's Board of Directors. The Board takes into consideration the financial condition of the Corporation, including current and expected earnings, projected cash flows and anticipated financing needs. The Board also considers the ability to maintain the dividend through bad times as well as good so that the dividend rate would need to be reduced only under unusual circumstances. One guideline that the Board has found useful in recent years is to consider a dividend approximately equal to five percent of the book value per share with such book value computed excluding the impact of marking its securities available-for-sale to fair value.
Notes: 1. The data for 1992 and the first quarter of 1993 has been adjusted to reflect the effects of a June 1993 two-for-one split of LNC's Common Stock.
2. At December 31, 1993, the number of shareholders of record of LNC's Common Stock was 13,600.
3. The payment of dividends to shareholders is subject to the restrictions described in notes 5, Supplemental Financial Data, and 7, Restrictions, Commitments and Contingencies to the consolidated financial statements (see pages 45 and 48) and is discussed in the Management's Discussion and Analysis of Financial Information (see page 28).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The pages to follow review LNC's results of operations and financial condi- tion. Historical financial information is presented and analyzed. Where appropriate, factors that may affect future financial performance are identified and discussed.
On pages 9 through 22, the financial results of our business segments, investments and other operations are presented and discussed. Within these business segment discussions reference is made to "Income from Operations" (see definition in item 6

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no disagreements with LNC's independent auditors which are reportable pursuant to Item 304 of Regulation S-K.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
Information for this item relating to directors of LNC is incorporated by reference to the sections captioned "NOMINEES FOR DIRECTOR" and "DIRECTORS CONTINUING IN OFFICE" of LNC's Proxy Statement for the Annual Meeting scheduled for May 12, 1994.
Executive Officers of the Registrant as of December 31, 1993 were as follows:
Name Position with LNC and Business Experience (Age) During the Past Five Years
Robert A. Anker President, Chief Operating Officer and Director, (52) LNC since 1992. President and Chief Executive Officer, American States* (1990-1991). President and Chief Operating Officer, American States* (1985-1990).
Jon A. Boscia Executive Vice President, LNC since 1991. (42) President, Lincoln National Investment Management Company* since 1991. Senior Vice President, LNL* (1985-1991).
George E. Davis Senior Vice President, LNC since March 1993. (51) Vice President, Eastman Kodak Co. (1985-March 1993).
P. Kenneth Dunsire Executive Vice President, LNC since 1986. (62)
Jack D. Hunter Executive Vice President, LNC since 1986. General (57) Counsel since 1971.
William J. Lawson President and Chief Executive, Officer, Employers (54) Health* since 1988. Senior Vice President, LNL* (1984-1988).
F. Cedric McCurley President and Chief Executive Officer, American (59) States* since 1992. Executive Vice President, American States* (1986-1991).
H. Thomas McMeekin, III Senior Vice President, LNC since 1992. (40) Executive Vice President, Lincoln National Investment Management Company* (1987-1992).
Richard S. Robertson Executive Vice President, LNC since 1986. (51)
Ian M. Rolland Chairman and Director, LNC since 1992. (60) President and Director, LNC (1975-1991). Chief Executive Officer, LNC since 1977.
Richard C. Vaughan Senior Vice President and Chief Financial Officer, (44) LNC since 1992. Senior Vice President, LNL* since 1990. Vice President, EQUICOR, Inc. (1988-1990).
Donald L. Van Wyngarden Second Vice President and Controller, LNC since (54) 1975.
Thomas M. West Executive Vice President, LNL* since 1981. (53)
*Denotes a subsidiary of LNC
There is no family relationship between any of the foregoing executive officers, all of whom are elected annually.
Item 11.

Item 11. Executive Compensation
Information for this item is incorporated by reference to the section cap- tioned "EXECUTIVE COMPENSATION" of LNC's Proxy Statement for the Annual Meeting scheduled for May 12, 1994.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Information for this item is incorporated by reference to the sections captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS" of LNC's Proxy Statement for the Annual Meeting scheduled for May 12, 1994.
Item 13.

Item 13. Certain Relationships and Related Transactions Information for this item is incorporated by reference to the section cap- tioned "TERMINATION OF EMPLOYMENT ARRANGEMENTS" of LNC's Proxy Statement for the Annual Meeting scheduled for May 12, 1994.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Item 14(a)(1) Financial Statements
The following consolidated financial statements of Lincoln National Corpora- tion and subsidiaries are included in Item 8:
Consolidated Balance Sheets - December 31, 1993 and 1992
Consolidated Statements of Income - Years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Shareholders' Equity - Years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows - Years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Report of Independent Auditors
Item 14(a)(2) Financial Statement Schedules
The following consolidated financial statement schedules of Lincoln National Corporation and subsidiaries are included in Item 14(d):
I - Summary of Investments - Other than Investments in Related Parties III - Condensed Financial Information of Registrant V - Supplementary Insurance Information VI - Reinsurance VII - Guarantees of Securities of Other Issuers VIII - Valuation and Qualifying Accounts IX - Short-term Borrowings X - Supplementary Information Concerning Property-Casualty Insurance Operations
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or the required information is included in the consolidated financial statements, and therefore have been omitted.
Item 14(a)(3) Listing of Exhibits
The following exhibits of Lincoln National Corporation and subsidiaries are included in Item 14(c) - (Note: The numbers preceding the exhibits correspond to the specific numbers within Item 601 of Regulation S-K.):
3(a) The Articles of Incorporation of LNC as last amended May 24, 1991 are incorporated by reference to Exhibit 3(a) of LNC's Form 10-K for the year ended December 31, 1991 filed with the Commission on March 27, 1992.
3(b) The Bylaws of LNC as last amended January 1, 1992 are incorporated by reference to Exhibit 3(b) of LNC's Form 10-K for the year ended December 31, 1991 filed with the Commission on March 27, 1992.
4(a) Indenture for 8% Notes of LNC due March 15, 1997 and the specimen Notes is incorporated by reference to Exhibit 4(b) of LNC's Form 10-K for the year ended December 31, 1991, filed with the Commission on March 27, 1992.
4(b) First Supplemental Indenture and Specimen Notes for LNC's 7 1/8% Notes due July 15, 1999 are incorporated by reference to Annex B and Annex C of LNC's Form 8-K filed with the Commission on July 7, 1992.
4(c) First Supplemental Indenture and Specimen Notes for LNC's 7 5/8% Notes due July 15, 2002 are incorporated by reference to Annex B and Annex D of LNC's Form 8-K filed with the Commission on July 7, 1992.
4(d) Fiscal Agency Agreement related to sale of $100,000,000 aggregate principal amount of 9 3/4% Notes of LNC due October 20, 1995 and the specimen of 9 3/4% Notes.
10(a)* The Lincoln National Corporation 1986 Stock Option Incentive Plan as last amended May 13, 1993.
10(b)* The Lincoln National Corporation 1982 Stock Option Incentive Plan as last amended May 7, 1987.
10(c)* The Lincoln National Corporation Executives' Salary Continuation Plan as last amended January 1, 1992 is incorporated by reference to Exhibit 10(c) of LNC's Form 10-K for the year ended December 31, 1992, filed with the Commission on March 30, 1993.
10(d)* The Lincoln National Corporation Executive Value Sharing Plan is incorporated by reference to Exhibit 10(d) of LNC's Form 10-K for the year ended December 31, 1992, filed with the Commission on March 30, 1993.
10(e)* The Lincoln National Corporation Management Incentive Plan II as last amended August 1, 1989, is incorporated by reference to Exhibit 10(e) of LNC's Form 10-K for the year ended December 31, 1989, filed with the Commission on March 29, 1990.
10(f)* Lincoln National Corporation Executives' Severance Benefit Plan as last amended January 10, 1990, is incorporated by reference to Exhibit 10(f) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991.
10(g)* The Lincoln National Corporation Outside Directors Retirement Plan as last amended March 15, 1990, is incorporated by reference to Exhibit 10(g) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991.
10(h)* The Lincoln National Corporation Outside Directors Benefits Plan is incorporated by reference to Exhibit 10(h) of LNC's Form 10-K for the year ended December 31, 1992, filed with the Commission on March 30, 1993.
10(i) Lease and Agreement dated August 1, 1984, with respect to the American States' home office property, is incorporated by reference to Exhibit 10(i) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991.
10(j) Lease and Agreement dated August 1, 1984, with respect to LNL's home office property, is incorporated by reference to Exhibit 10(j) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991.
10(k) Lease and Agreement dated August 1, 1984, with respect to Lincoln National Pension Insurance Company's ("LNP") home office property, is incorporated by reference to Exhibit 10(k) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991. [LNP was merged into its parent, LNL, effective January 1, 1989.]
10(l) Lease dated March 1, 1984, with respect to Security- Connecticut's home office property, is incorporated by reference to Exhibit 10(l) of LNC's Form 10-K for the year ended December 31, 1990, filed with the Commission on March 28, 1991.
10(m)* Descriptions of compensation arrangements with Executive Officers.
10(n)* The Lincoln National Corporation Executives' Supplemental Pension Benefit Plan is incorporated by reference to Exhibit 10(n) of LNC's Form 10-K for the year ended December 31, 1992, filed with the Commission on March 30, 1993.
10(o)* Lincoln National Corporation Executive Savings and Profit Sharing Plan as amended as of January 1, 1992 is incorporated by reference to Exhibit 10(o) of LNC's Form 10-K for the year ended December 31, 1992, filed with the Commission on March 30, 1993.
10(p) Lease dated February 14, 1991, with respect to property occupied by select Fort Wayne operations of the Registrant is incorporated by reference to Exhibit 10(q) of LNC's Form 10-K for the year ended December 31, 1991 filed with the Commission on March 27, 1992.
10(q)* Lincoln National Corporation 1993 Stock Plan for Non-Employee Directors.
10(r)* Lincoln National Corporation Executives' Excess Compensation Benefit Plan.
*This exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report.
11 Computation of Per Share Earnings
21 The List of Subsidiaries of LNC.
23 Consent of Independent Auditors.
28 Information from Reports Furnished to State Insurance Regulatory Authorities.
Item 14(b) - During the fourth quarter of the year ended December 31, 1993, no reports on Form 8-K were filed with the Commission.
Item 14(c) - The exhibits of Lincoln National Corporation and subsidiaries are listed in Item 14(a)(3) above.
Item 14(d) - The financial schedules for Lincoln National Corporation and subsidiaries follow on pages 59 through 68.
(A) Investments which are deemed to have declines in value that are other than temporary are written down or reserved for to reduce their carrying value to their estimated realizable value.
These condensed financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes of Lincoln National Corporation and subsidiaries (see pages 30 through 54).
These condensed financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes of Lincoln National Corporation and subsidiaries (see pages 30 through 54).
These condensed financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes of Lincoln National Corporation and subsidiaries (see pages 30 through 54).
LINCOLN NATIONAL CORPORATION AND SUBSIDIARIES EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K For the Year Ended December 31, 1993
Exhibit Number Page 3(a) Articles of Incorporation of LNC as last amended May 24, 1991. 3(b) Bylaws of LNC as last amended January 1, 1992.
4(a) Indenture for 8% Notes due March 15, 1997 and Specimen Notes. 4(b) Indenture for 7 1/8% due July 15, 1999 and Specimen Notes.* 4(c) Indenture for 7 5/8% Notes due July 15, 2002 and Specimen Notes.* 4(d) Fiscal Agency Agreement for 9 3/4% Notes due October 30, 1995, and Specimen Notes. 71
10(a) Lincoln National Corporation 1986 Stock Option Incentive Plan. 101 10(b) Lincoln National Corporation 1982 Stock Option Incentive Plan. 110 10(c) The Lincoln National Corporation Executives' Salary Continuation Plan.*
10(d) The Lincoln National Corporation Executive Value Sharing Plan.* 10(e) The Lincoln National Corporation Management Incentive Plan II.* 10(f) Lincoln National Corporation Executives' Severance Benefit Plan as last amended January 10, 1990.* 10(g) The Lincoln National Corporation Outside Directors Retirement Plan.* 10(h) The Lincoln National Corporation Outside Directors Benefits Plan.* 10(i) Lease and Agreement dated August 1, 1984, with respect to the American States' home office property.* 10(j) Lease and Agreement dated August 1, 1984, with respect to LNL's home office property.* 10(k) Lease and Agreement dated August 1, 1984, with respect to LNP's home office property.* 10(l) Lease dated March 1, 1984, with respect to the Security-Connecticut's home office property.* 10(m) Descriptions of Compensation Arrangements with Executive Officers. 118 10(n) The Lincoln National Corporation Executives' Supplemental Pension Benefit Plan.* 10(o) The Lincoln National Corporation Executive Savings and Profit Sharing Plan as last amended January 1, 1992.* 10(p) Lease dated February 14, 1991, with respect to select Fort Wayne business operation's office space.* 10(q) Lincoln National Corporation 1993 Stock Plan for Non- Employee Directors. 120 10(r) Lincoln National Corporation Executives' Excess Compensation Benefit Plan. 125
11 Computation of Per Share Earnings. 128
21 List of Subsidiaries of LNC. 129
23 Consent of Independent Auditors. 135
28 Information from Reports Furnished to State Insurance Regulatory Authorities. P 136
*Incorporated by Reference
Signature Page
LINCOLN NATIONAL CORPORATION
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act By /s/ Ian M. Rolland March 10, 1994 of 1934, LNC has duly caused Ian M. Rolland, this report to be signed on (Chairman, Chief Executive Officer and behalf by the under- Director) signed, thereunto duly authorized. By /s/ Robert A. Anker March 10, 1994 Robert A. Anker, (President, Chief Operating Officer and Director)
By /s/ Richard C. Vaughan March 10, 1994 Richard C. Vaughan, (Senior Vice President and Chief Financial Officer)
By /s/ Donald L. Van Wyngarden March 10, 1994 Donald L. Van Wyngarden (Second Vice President and Controller)
Pursuant to the requirements By /s/ J. Patrick Barrett March 10, 1994 of the Securities Exchange J. Patrick Barrett Act of 1934, this report has been signed below by By /s/ Thomas D. Bell, Jr. March 10, 1994 the following Directors Thomas D. Bell, Jr of LNC on the date indicated. By /s/ Daniel R. Efroymson March 10, 1994 Daniel R. Efroymson
By /s/ Harry L. Kavetas March 10, 1994 Harry L. Kavetas
By /s/ M. Leanne Lachman March 10, 1994 M. Leanne Lachman
By /s/ Leo J. McKernan March 10, 1994 Leo J. McKernan
By /s/ Earl L. Neal March 10, 1994 Earl L. Neal
By /s/ John M. Pietruski March 10, 1994 John M. Pietruski
By /s/ Jill S. Ruckelshaus March 10, 1994 Jill S. Ruckelshaus
By /s/ Gordon A. Walker March 10, 1994 Gordon A. Walker
By /s/ Gilbert R. Whitaker,Jr. March 10, 1994 Gilbert R. Whitaker,Jr.