EX-99.1 2 a08-5979_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

OfficeMax
263 Shuman Blvd
Naperville, IL 60563

 

News Release

 

Media Contact

 

Investor Relations Contact

Bill Bonner

 

John Jennings

630 864 6066

 

630 864 6820

 

OFFICEMAX REPORTS FOURTH QUARTER AND FULL YEAR 2007 FINANCIAL RESULTS

 

NAPERVILLE, Ill., February 19, 2008 — OfficeMaxÒ Incorporated (NYSE: OMX) today announced the results for its fourth quarter and fiscal year ended December 29, 2007.  Total sales decreased 2.6% in the fourth quarter of 2007 to $2.2 billion compared to the fourth quarter of 2006, while total sales increased 1.3% for the full year 2007 to $9.1 billion compared to the full year 2006.  Net income increased in the fourth quarter of 2007 to $71.5 million, or $.92 per diluted share, from $58.0 million, or $.76 per diluted share, in the fourth quarter of 2006. Net income for the full year 2007 increased to $207.4 million, or $2.66 per diluted share, compared with net income of $91.7 million, or $1.19 per diluted share, reported in 2006.

 

Results for the fourth quarter and full year 2007 included items which are not expected to be ongoing.  All financial measures designated in this release as “adjusted” are non-GAAP financial measures that exclude the effect of certain special items.  A detailed description of these special items, and a reconciliation to the company’s GAAP financial results, are included in this press release.  Adjusted net income in the fourth quarter of 2007 increased 37% to $51.1 million, or $.65 per diluted share, from $37.2 million, or $.48 per diluted share, in the fourth quarter of 2006.  For the full year 2007, adjusted net income increased 18% to $188.1 million, or $2.41 per diluted share, from $159.1 million, or $2.10 per diluted share, in 2006.

 

 

1


 

“We demonstrated progress on our turnaround plan in the fourth quarter and for the full year 2007,” said Sam Duncan, Chairman and CEO of OfficeMax.  “In the fourth quarter, we were able to generate further operating income margin improvement, while we navigated a weaker economic environment. In our Contract segment, we experienced declining gross margin rates, but we lowered expenses.  In our Retail segment, we adjusted our promotional strategies for improved gross margin rates and invested in new stores.  For the full year 2007, by lowering costs and managing margins, we enabled operating income margin expansion and bottom-line earnings growth.”

 

Contract Segment Results

 

OfficeMax Contract segment sales decreased 0.8% to $1.2 billion in the fourth quarter of 2007 compared to the fourth quarter of 2006, reflecting U.S. Contract sales decline of 7.8%, partially offset by International Contract operations sales growth of 20.4% in U.S. dollars, or 3.4% in local currencies. U.S. Contract sales declined in the fourth quarter compared to the prior year period primarily due to lower sales from existing customer accounts, to the company’s initiative to be more disciplined in account acquisition and retention, and to lower sales from small market customers.  For the full year 2007, Contract segment sales increased 2.2% to $4.8 billion compared to the prior year, reflecting U.S. Contract sales decline of 1.2%, offset by International Contract operations sales growth of 12.3% in U.S. dollars, or 2.8% in local currencies.

 

Contract segment gross margin decreased to 21.7% in the fourth quarter of 2007 from 22.5% in the fourth quarter of 2006, primarily due to lower vendor income levels compared to the fourth quarter of 2006.  For the full year 2007, Contract segment gross margin decreased to 21.8% from 22.5% in 2006.  Contract segment operating expense as a percent of sales in the fourth quarter of 2007 improved to 17.3% from adjusted operating expense as a percent of sales of 18.2% in the fourth quarter of 2006.  The improvement was primarily due to targeted cost controls, including the reorganization of U.S. Contract, expense leverage in International

 

2


 

Contract operations, as well as reduced incentive compensation expense.  For the full year 2007, Contract segment operating expense as a percent of sales improved to 17.5% from adjusted operating expense as a percent of sales of 18.1% in 2006.

 

Contract segment operating income increased to $52.0 million, or 4.4% of sales, from adjusted operating income of $50.8 million, or 4.3% of sales, in the fourth quarter of 2006.  For the full year 2007, Contract segment operating income of $207.9 million, or 4.3% of sales, was consistent with adjusted operating income of $208.0 million, or 4.4% of sales, in 2006.

 

Retail Segment Results

 

OfficeMax Retail segment sales decreased 4.5% to $1.03 billion in the fourth quarter of 2007 compared to the fourth quarter of 2006, reflecting a same-store sales decrease of 7.3% partially offset by sales from new stores.  Retail same-store sales for the fourth quarter of 2007 declined across all major product categories due to weakness in consumer and small business customer purchases, as well as the company’s more targeted promotional activity during the holiday season.  For the full year 2007, OfficeMax Retail segment sales increased 0.3% to $4.27 billion compared to 2006, reflecting a same-store sales decrease of 1.2% partially offset by sales from new stores.  Adjusted for the company’s initiative to eliminate mail-in rebates, and to provide instant rebates in lieu of national, vendor-sponsored mail-in rebates, same-store sales decreased 0.5% for the full year 2007.

 

Retail segment gross margin increased to 30.0% in the fourth quarter of 2007 from 29.1% in the fourth quarter of 2006, primarily due to more effective promotional strategies that drove a sales mix shift to a higher percentage of core office supplies category sales, partially offset by occupancy costs for new stores.  For the full year 2007, Retail segment gross margin increased to 29.5% from 29.3% in 2006.  Retail segment operating expense as a percent of sales increased to 26.2% in the fourth quarter of 2007 from 25.1% in the fourth quarter of 2006,

 

3


 

primarily due to expense deleveraging from new stores and the same-store sales decrease, partially offset by reduced incentive compensation expense.  For the full year 2007, Retail segment operating expense as a percent of sales increased to 25.4% from adjusted operating expense as a percent of sales of 25.2% in 2006.

 

Retail segment operating income decreased to $39.1 million, or 3.8% of sales, from $42.3 million, or 3.9% of sales, in the fourth quarter of 2006.  For the full year 2007, Retail segment operating income decreased to $173.7 million, or 4.1% of sales, from adjusted operating income of $175.8 million, or 4.1% of sales, in 2006.

 

During the fourth quarter of 2007, OfficeMax opened 41 retail stores in the U.S., closed 2 retail stores in the U.S., and opened 3 retail stores in Mexico.  During 2007, OfficeMax opened 59 new retail stores in the U.S. and 15 stores in Mexico.  OfficeMax ended 2007 with a total of 976 retail stores, consisting of 908 retail stores in the U.S. and 68 retail stores in Mexico.

 

Corporate and Other Segment Results

 

The OfficeMax Corporate and Other segment includes support staff services and certain other expenses that are not fully allocated to the Retail and Contract segments.  Corporate and Other segment operating expense decreased to $3.2 million in the fourth quarter of 2007 from adjusted operating expense of $17.0 million in the fourth quarter of 2006, primarily due to lower incentive compensation costs, reduced legacy-related costs, and targeted cost controls.  For the full year 2007, Corporate and Other segment operating expense decreased to $37.4 million from adjusted operating expense of $71.6 million in 2006.

 

The company’s effective tax rate was 35.4% in the fourth quarter and 37.1% for the full year 2007, both benefiting from the resolution of certain tax matters.

 

4


 

As of December 29, 2007, OfficeMax reported total debt of $398.4 million, excluding $1.470 billion of timber securitization notes which have recourse limited to the $1.635 billion of timber installment notes receivable.  During the fourth quarter of 2007, OfficeMax generated $39.2 million of cash from operations, an increase of $3.3 million from the fourth quarter 2006.  For the full year of 2007, OfficeMax generated $70.6 million of cash from operations, a decrease of $305.1 million from 2006, primarily due to the termination of the company’s accounts receivable securitization program in July 2007 and a reduction in accounts payable.  OfficeMax invested $39.5 million and $140.8 million for capital expenditures in the fourth quarter of 2007 and full year 2007, respectively.

 

“In 2008, we look forward to continuing to implement our turnaround plan initiatives and realizing benefits from our efforts even as we expect to be impacted by a weaker U.S. economy,” Mr. Duncan concluded.  “We continued to experience pressure on sales in January and early February 2008, but we expect to pursue margin and cost management initiatives throughout 2008.  Overall, we remain steadfast in pursuing additional opportunities to create long-term shareholder value.”

 

As previously announced, OfficeMax intends to hold its 2008 Investor Day on Wednesday, March 19, 2008.  The company plans to provide additional details of initiatives driving its performance in 2008 and beyond at the Investor Day.  Details for accessing a webcast of the Investor Day will be announced at a future date.

 

Forward-Looking Statements

 

Certain statements made in this press release and other written or oral statements made by or on behalf of the company constitute “forward-looking statements” within the meaning of the federal securities laws, including statements regarding the company’s future performance, as

 

5


 

well as management’s expectations, beliefs, intentions, plans, estimates or projections relating to the future. Management believes that these forward-looking statements are reasonable. However, the company cannot guarantee that it will successfully execute its turnaround plans or that its actual results will be consistent with the forward-looking statements and you should not place undue reliance on them. These statements are based on current expectations and speak only as of the date they are made. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Important factors regarding the company which may cause results to differ from expectations are included in the company’s Annual Report on Form 10-K for the year ended December 30, 2006, under Item 1A “Risk Factors”, and in the company’s other filings with the SEC.

 

Conference Call Information

 

OfficeMax will host a conference call with analysts and investors today to discuss its fourth quarter 2007 financial results at 9:00 a.m. Eastern Time (8:00 a.m. Central Time).  To participate in the conference call, dial (800) 374-0165; international callers should dial (706) 634-0995.  An audio webcast of the conference call can be accessed via the Internet by visiting the Investors section of the OfficeMax website at http://investor.officemax.com.  The webcast will be archived and available online for one year following the call and will be posted on the “Presentations” page located within the Investors section of the OfficeMax website.

 

About OfficeMax
 

OfficeMax Incorporated (NYSE: OMX) is a leader in both business-to-business office products solutions and retail office products. The OfficeMax mission is simple. We help our customers do their best work.  The company provides office supplies and paper, in-store print and document services through OfficeMax ImPressTM, technology products and solutions, and furniture to consumers and to large, medium and small businesses. OfficeMax customers are served by approximately 36,000 associates through direct sales, catalogs, e-commerce and more than 900 stores. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more information, visit www.officemax.com.

 

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OFFICEMAX INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

(thousands)

 

 

 

December 29,

 

December 30,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

152,637

 

$

282,070

 

Receivables, net

 

720,878

 

562,528

 

Inventories

 

1,088,312

 

1,071,486

 

Other current assets

 

242,874

 

180,760

 

Total current assets

 

2,204,701

 

2,096,844

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

Property and equipment

 

1,279,609

 

1,189,686

 

Accumulated depreciation

 

(698,954

)

(610,061

)

Property and equipment, net

 

580,655

 

579,625

 

 

 

 

 

 

 

Goodwill and intangible assets, net

 

1,416,524

 

1,417,336

 

Timber notes receivable

 

1,635,000

 

1,635,000

 

Other non-current assets

 

446,888

 

487,243

 

 

 

 

 

 

 

Total assets

 

$

6,283,768

 

$

6,216,048

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term borrowings

 

$

14,197

 

$

—

 

Current portion of long-term debt

 

34,827

 

25,634

 

Accounts payable

 

861,285

 

997,700

 

Accrued liabilities and other

 

460,400

 

505,569

 

Total current liabilities

 

1,370,709

 

1,528,903

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

Long-term debt, less current portion

 

349,421

 

384,246

 

Timber notes securitized

 

1,470,000

 

1,470,000

 

Total long-term debt

 

1,819,421

 

1,854,246

 

 

 

 

 

 

 

Other long-term obligations:

 

 

 

 

 

Compensation and benefits

 

200,283

 

287,122

 

Other long-term liabilities

 

582,741

 

530,248

 

Total other long-term liabilities

 

783,024

 

817,370

 

 

 

 

 

 

 

Minority interest

 

32,042

 

29,885

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock

 

49,989

 

54,735

 

Common stock

 

188,481

 

187,226

 

Additional paid-in capital

 

922,414

 

893,848

 

Retained earnings

 

1,095,950

 

941,830

 

Accumulated other comprehensive income (loss)

 

21,738

 

(91,995

)

Total shareholders’ equity

 

2,278,572

 

1,985,644

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

6,283,768

 

$

6,216,048

 

 

 

7


 

OFFICEMAX INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(thousands, except per-share amounts)

 

 

 

Quarter Ended

 

 

 

December 29,

 

December 30,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Sales

 

$

2,198,072

 

$

2,256,805

 

Cost of goods sold and occupancy costs

 

1,634,848

 

1,678,157

 

Gross profit

 

563,224

 

578,648

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Operating and selling

 

400,492

 

409,619

 

General and administrative

 

76,356

 

94,435

 

Other operating, net

 

(1,521

)

9,186

 

Operating income

 

87,897

 

65,408

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(29,976

)

(30,806

)

Interest income

 

21,313

 

23,606

 

Other, net

 

32,546

 

36,174

 

 

 

23,883

 

28,974

 

 

 

 

 

 

 

Income from continuing operations before income taxes and minority interest

 

111,780

 

94,382

 

Income tax expense

 

(39,613

)

(39,201

)

 

 

 

 

 

 

Income from continuing operations before minority interest

 

72,167

 

55,181

 

Minority interest, net of income tax

 

(698

)

(791

)

 

 

 

 

 

 

Income from continuing operations

 

71,469

 

54,390

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

Income tax benefit

 

—

 

3,647

 

 

 

 

 

 

 

Income from discontinued operations

 

—

 

3,647

 

 

 

 

 

 

 

Net income

 

71,469

 

58,037

 

 

 

 

 

 

 

Preferred dividends

 

(1,014

)

(1,009

)

 

 

 

 

 

 

Net income applicable to common shareholders

 

$

70,455

 

$

57,028

 

 

 

 

 

 

 

 

 

Basic income per common share:

 

 

 

 

 

Continuing operations

 

$

0.93

 

$

0.72

 

Discontinued operations

 

—

 

0.04

 

Basic income per common share

 

$

0.93

 

$

0.76

 

 

 

 

 

 

 

Diluted income per common share:

 

 

 

 

 

Continuing operations

 

$

0.92

 

$

0.71

 

Discontinued operations

 

—

 

0.05

 

Diluted income per common share

 

$

0.92

 

$

0.76

 

 

 

 

 

 

 

Weighted Average Shares

 

 

 

 

 

Basic

 

75,385

 

74,625

 

Diluted

 

76,602

 

75,464

 

 

 

8


 

OFFICEMAX INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(thousands, except per-share amounts)

 

 

 

Year Ended

 

 

 

December 29,

 

December 30,

 

 

 

2007

 

2006

 

 

 

 

 

 

 

Sales

 

$

9,081,962

 

$

8,965,707

 

Cost of goods sold and occupancy costs

 

6,771,657

 

6,656,497

 

Gross profit

 

2,310,305

 

2,309,210

 

 

 

 

 

 

 

Operating and other expenses:

 

 

 

 

 

Operating and selling

 

1,633,606

 

1,641,147

 

General and administrative

 

338,593

 

361,818

 

Other operating, net

 

(6,065

)

140,343

 

Operating income

 

344,171

 

165,902

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Debt retirement expense

 

—

 

—

 

Interest expense

 

(121,271

)

(123,082

)

Interest income

 

87,940

 

89,723

 

Other, net

 

26,687

 

39,335

 

 

 

(6,644

)

5,976

 

 

 

 

 

 

 

Income from continuing operations before income taxes and minority interest

 

337,527

 

171,878

 

Income tax expense

 

(125,282

)

(68,741

)

 

 

 

 

 

 

Income from continuing operations before minority interest

 

212,245

 

103,137

 

Minority interest, net of income tax

 

(4,872

)

(4,083

)

 

 

 

 

 

 

Income from continuing operations

 

207,373

 

99,054

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

Operating loss

 

—

 

(17,972

)

Income tax benefit

 

—

 

10,639

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

—

 

(7,333

)

 

 

 

 

 

 

Net income

 

207,373

 

91,721

 

 

 

 

 

 

 

Preferred dividends

 

(3,961

)

(4,037

)

 

 

 

 

 

 

Net income applicable to common shareholders

 

$

203,412

 

$

87,684

 

 

 

 

 

 

 

Basic income (loss) per common share:

 

 

 

 

 

Continuing operations

 

$

2.70

 

$

1.30

 

Discontinued operations

 

—

 

(0.10

)

Basic income per common share

 

$

2.70

 

$

1.20

 

 

 

 

 

 

 

Diluted income (loss) per common share:

 

 

 

 

 

Continuing operations

 

$

2.66

 

$

1.29

 

Discontinued operations

 

—

 

(0.10

)

Diluted income per common share

 

$

2.66

 

$

1.19

 

 

 

 

 

 

 

Weighted Average Shares

 

 

 

 

 

Basic

 

75,274

 

73,142

 

Diluted

 

76,374

 

73,713

 

 

 

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OFFICEMAX INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(thousands)

 

 

 

Year Ended

 

 

 

December 29,
2007

 

December 30,
2006

 

 

 

 

 

 

 

Cash provided by operations:

 

 

 

 

 

Net income

 

$

207,373

 

$

91,721

 

Items in net income not using (providing) cash:

 

 

 

 

 

Depreciation and amortization

 

131,573

 

127,812

 

Other

 

39,062

 

50,563

 

Changes other than from acquisitions of business:

 

 

 

 

 

Receivables and inventory

 

(142,705

)

72,127

 

Accounts payable and accrued liabilities

 

(228,269

)

8,662

 

Income taxes and other

 

63,570

 

24,754

 

Cash provided by operations

 

70,604

 

375,639

 

 

 

 

 

 

 

Cash used for investment:

 

 

 

 

 

Expenditures for property and equipment

 

(140,843

)

(174,769

)

Other

 

1,909

 

10,833

 

Cash used for investment

 

(138,934

)

(163,936

)

 

 

 

 

 

 

Cash used for financing:

 

 

 

 

 

Cash dividends paid

 

(49,103

)

(47,546

)

Changes in debt, net

 

(11,554

)

(84,276

)

Proceeds from exercise of stock options

 

5,917

 

129,966

 

Other

 

(7,885

)

(33

)

Cash used for financing

 

(62,625

)

(1,889

)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

1,522

 

58

 

Increase (decrease) in cash and cash equivalents

 

(129,433

)

209,872

 

Cash and cash equivalents at beginning of period

 

282,070

 

72,198

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

152,637

 

$

282,070

 

 

10


 

OFFICEMAX INCORPORATED AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT INFORMATION

(unaudited)

(millions, except per-share data)

 

 

 

Quarter Ended

 

 

 

December 29 , 2007

 

December 30 , 2006

 

 

 

As Reported

 

Special
Items (a)

 

As
Adjusted
(c)

 

As
Reported

 

Special Items (b)

 

As Adjusted (c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

OfficeMax, Contract

 

$

1,168.7

 

 

 

$

1,168.7

 

$

1,178.7

 

 

 

$

1,178.7

 

OfficeMax, Retail

 

1,029.3

 

 

 

1,029.3

 

1,078.1

 

 

 

1,078.1

 

 

 

2,198.0

 

 

 

2,198.0

 

2,256.8

 

 

 

2,256.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

OfficeMax, Contract

 

$

52.0

 

$

—

 

$

52.0

 

$

48.4

 

$

2.4

 

$

50.8

 

OfficeMax, Retail

 

39.1

 

—

 

39.1

 

42.3

 

—

 

42.3

 

Corporate and Other

 

(3.2

)

—

 

(3.2

)

(25.3

)

8.3

 

(17.0

)

Operating income

 

87.9

 

—

 

87.9

 

65.4

 

10.7

 

76.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income margin

 

4.0

%

4.0

%

2.9

%

3.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(30.0

)

—

 

(30.0

)

(30.8

)

—

 

(30.8

)

Interest income and other

 

53.9

 

(32.4

)

21.5

 

59.8

 

(38.8

)

21.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes and minority interest

 

111.8

 

(32.4

)

79.4

 

94.4

 

(28.1

)

66.3

 

Income taxes

 

(39.6

)

12.0

 

(27.6

)

(39.2

)

10.9

 

(28.3

)

Income (loss) from continuing operations before minority interest

 

72.2

 

(20.4

)

51.8

 

55.2

 

(17.2

)

38.0

 

Minority interest, net of income tax

 

(0.7

)

—

 

(0.7

)

(0.8

)

—

 

(0.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

71.5

 

(20.4

)

51.1

 

54.4

 

(17.2

)

37.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

—

 

—

 

—

 

3.6

 

(3.6

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

—

 

—

 

—

 

3.6

 

(3.6

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

71.5

 

$

(20.4

)

$

51.1

 

$

58.0

 

$

(20.8

)

$

37.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.92

 

$

(0.27

)

$

0.65

 

$

0.71

 

$

(0.23

)

$

0.48

 

Discontinued operations

 

—

 

—

 

—

 

0.05

 

(0.05

)

—

 

Diluted income (loss) per common share

 

$

0.92

 

$

(0.27

)

$

0.65

 

$

0.76

 

$

(0.28

)

$

0.48

 

 

Totals may not foot due to rounding.

(a) See Note 4 for a discussion of these special items.

(b) See Notes 3 and 5 for a discussion of these special items.

(c) For the purpose of evaluating our results, net of taxes, we have presented the special items using an estimated effective annual tax rate.

 

11


 

OFFICEMAX INCORPORATED AND SUBSIDIARIES

SUPPLEMENTAL SEGMENT INFORMATION

(unaudited)

(millions, except per-share data)

 

 

 

Year Ended

 

 

 

December 29 , 2007

 

December 30 , 2006

 

 

 

As Reported

 

Special
Items (a)

 

As
Adjusted
(c)

 

As
Reported

 

Special
Items (b)

 

As
Adjusted
(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

OfficeMax, Contract

 

$

4,816.1

 

 

 

$

4,816.1

 

$

4,714.5

 

 

 

$

4,714.5

 

OfficeMax, Retail

 

4,265.9

 

 

 

4,265.9

 

4,251.2

 

 

 

4,251.2

 

 

 

9,082.0

 

 

 

9,082.0

 

8,965.7

 

 

 

8,965.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

OfficeMax, Contract

 

$

207.9

 

$

—

 

$

207.9

 

$

197.7

 

$

10.3

 

$

208.0

 

OfficeMax, Retail

 

173.7

 

—

 

173.7

 

86.3

 

89.5

 

175.8

 

Corporate and Other

 

(37.4

)

—

 

(37.4

)

(118.0

)

46.4

 

(71.6

)

Operating income

 

344.2

 

—

 

344.2

 

166.0

 

146.2

 

312.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income margin

 

3.8

%

3.8

%

1.9

%

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(121.3

)

—

 

(121.3

)

(123.1

)

—

 

(123.1

)

Interest income and other

 

114.6

 

(32.4

)

82.2

 

129.1

 

(48.0

)

81.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes and minority interest

 

337.5

 

(32.4

)

305.1

 

172.0

 

98.2

 

270.2

 

Income taxes

 

(125.2

)

12.0

 

(113.2

)

(68.8

)

(38.2

)

(107.0

)

Income (loss) from continuing operationsbefore minority interest

 

212.3

 

(20.4

)

191.9

 

103.2

 

60.0

 

163.2

 

Minority interest, net of income tax

 

(4.9

)

1.1

 

(3.8

)

(4.1

)

—

 

(4.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

207.4

 

(19.3

)

188.1

 

99.1

 

60.0

 

159.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

—

 

—

 

—

 

(18.0

)

18.0

 

—

 

Income tax benefit

 

—

 

—

 

—

 

10.6

 

(10.6

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

—

 

—

 

—

 

(7.4

)

7.4

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

207.4

 

$

(19.3

)

$

188.1

 

$

91.7

 

$

67.4

 

$

159.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

2.66

 

$

(0.25

)

$

2.41

 

$

1.29

 

$

0.81

 

$

2.10

 

Discontinued operations

 

—

 

—

 

—

 

(0.10

)

0.10

 

—

 

Diluted income (loss) per common share

 

$

2.66

 

$

(0.25

)

$

2.41

 

$

1.19

 

$

0.91

 

$

2.10

 

 

Totals may not foot due to rounding.

(a) See Note 4 for a discussion of these special items.

(b) See Notes 3 and 5 for a discussion of these special items.

(c) For the purpose of evaluating our results, net of taxes, we have presented the special items using an estimated effective annual tax rate.

 

12


 

(1)  Financial Information

 

The quarterly and annual consolidated financial statements included in this release are unaudited, and should be read in conjunction with the audited financial statements in our 2006 Annual Report on Form 10-K.  In all periods presented, the measurement of net income (loss) involved estimates and judgments.

 

(2)           Reconciliation of non-GAAP Measures to GAAP Measures

 

We evaluate our results of operations both before and after certain gains and losses that management believes are not indicative of our core operating activities.  We believe our presentation of financial measures before, or excluding, these items, which are non-GAAP measures, enhances our investors’ overall understanding of our recurring operational performance and provides useful information to both investors and management to evaluate the ongoing operations and prospects of OfficeMax by providing better comparisons. Whenever we use non-GAAP financial measures, we designate these measures, which exclude the effect of certain special items, as “adjusted” and provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.  In the preceding tables, we reconcile our financial measures before special items to our reported GAAP financial results for the fourth quarter and full year of both 2007 and 2006.

 

Although we believe the non-GAAP financial measures enhance an investor’s understanding of our performance, our management does not itself, nor does it suggest

 

13


 

that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The non-GAAP financial measures we use may not be consistent with the presentation of similar companies in our industry. However, we present such non-GAAP financial measures in reporting our financial results to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what we believe to be our ongoing business operations.

 

(3)  2006 Special Items

 

First Quarter 2006

 

During the first quarter of 2006, we closed 109 underperforming domestic retail stores and recorded a charge of $98.6 million in our Retail segment primarily for remaining lease obligations and we incurred $15.7 million of expenses in our Corporate and Other segment related to our headquarters consolidation primarily for employee severance and retention.

 

Second Quarter 2006

 

During the second quarter of 2006, we recorded a $9.0 million pre-tax benefit in our Retail segment from an adjustment to the reserve for closed retail stores, and we incurred $10.9 million of expenses in our Corporate and Other segment related to our headquarters consolidation, primarily for employee severance and retention.   Also during the second quarter of 2006, we recognized a $9.2 million credit from an adjustment to the reserve for the additional consideration agreement that was entered into in connection with the October 2004 sale of our paper, forest products and timberland assets. This adjustment is included in Other, income (expense) net.

 

14


 

Third Quarter 2006

 

During the third quarter of 2006, we incurred $11.5 million of expenses in our Corporate and Other segment related to our headquarters consolidation, and incurred $7.9 million of expenses in our Contract segment related to our Contract reorganization primarily for severance.

 

Fourth Quarter 2006

 

During the fourth quarter of 2006, we incurred $8.3 million of expenses in our Corporate and Other segment primarily related to our headquarters consolidation, and we incurred $2.4 million of expenses in our Contract segment related to a facility closure and severance.  Also during the fourth quarter of 2006, we recognized a $38.8 million credit from an adjustment to the reserve for the additional consideration agreement that was entered into in connection with the October 2004 sale of our paper, forest products, and timberland assets.  This adjustment is included in Other, net income (expense).

 

(4)  2007 Special Items

 

First Quarter 2007

 

During the first quarter of 2007, we sold OfficeMax Contract’s operations in Mexico to OfficeMax de Mexico, our 51% owned joint venture, resulting in a net loss of $1.1 million which is included in minority interest, net of income tax in our Consolidated Statements of Income (Loss) for 2007.

 

Fourth Quarter 2007

 

During the fourth quarter of 2007, we recognized income of $32.5 million from the additional consideration agreement that was entered into in connection with the October 2004 sale of our paper, forest products, and timberland assets.  This income is included in Other, net income (expense).

 

15


 

(5)  Discontinued Operations

 

In the first quarter of 2006, we ceased operations at the Company’s wood-polymer building materials facility near Elma, Washington. The costs and expenses related to this business are reflected as discontinued operations in our Consolidated Statements of Income (Loss) for 2006 and are included as special items in our Segment Information tables.

 

 

16