-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DYJVwyOqTzu8fQjoGu3+GeMCGTmCcyVszDrTkMZT0rqWeZuvmtv0W/EUtes0anMF qiUiQ1UAp3uo1VfABFBAwg== 0000950152-98-005095.txt : 19980605 0000950152-98-005095.hdr.sgml : 19980605 ACCESSION NUMBER: 0000950152-98-005095 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980425 FILED AS OF DATE: 19980604 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OFFICEMAX INC /OH/ CENTRAL INDEX KEY: 0000929428 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 341573735 STATE OF INCORPORATION: OH FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13380 FILM NUMBER: 98642419 BUSINESS ADDRESS: STREET 1: 3605 WARRENSVILLE CENTER RD CITY: SHAKER HEIGHTS STATE: OH ZIP: 44122 BUSINESS PHONE: 2169216900 MAIL ADDRESS: STREET 1: 3605 WARRENSVILLE CENTER RD CITY: SHAKE HEIGHTS STATE: OH ZIP: 44122 10-Q 1 OFFICEMAX, INC. QUARTERLY REPORT FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 25, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________. Commission file number 1-13380 ------- OFFICEMAX, INC. --------------- (Exact name of registrant as specified in its charter) OHIO 34-1573735 ---- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3605 WARRENSVILLE CENTER ROAD, SHAKER HEIGHTS, OHIO 44122 --------------------------------------------------------- (Address of principal executive offices) (zip code) (216) 921-6900 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Title of Class Shares Outstanding as of -------------- May 15, 1998 Common Shares ------------ (without par value) 124,712,154 2 OFFICEMAX, INC. INDEX
Part I - Financial Information Page - ------------------------------ Item 1. Financial Statements 3-7 Item 2. Management's Discussion and Analysis of Financial 8-10 Condition and Results of Operations Part II - Other Information - --------------------------- Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ---------------------------- OFFICEMAX, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)
April 25, Jan.24, 1998 1998 ASSETS ------------ ------------ Current Assets: Cash and equivalents $ 44,933 $ 66,801 Accounts receivable, net of allowances of $796 and $837, respectively 44,615 38,221 Merchandise inventories 1,113,698 1,086,228 Other current assets 50,400 37,255 ------------ ------------ Total current assets 1,253,646 1,228,505 Property and Equipment: Buildings and land 19,155 19,212 Leasehold improvements 174,803 172,878 Furniture and fixtures 302,804 287,728 ------------ ------------ Total property and equipment 496,762 479,818 Less: Accumulated depreciation and amortization (183,045) (167,965) ------------ ------------ Property and equipment, net 313,717 311,853 Other assets and deferred charges 41,991 41,280 Goodwill, net of accumulated amortization of $53,579 and $51,231, respectively 322,007 324,355 ------------ ------------ $ 1,931,361 $ 1,905,993 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable - trade $ 439,663 $ 442,390 Accrued expenses and other liabilities 142,748 128,674 Accrued salaries and related expenses 34,452 38,669 Taxes other than income taxes 54,283 55,953 Mortgage loan, current portion 1,300 1,300 ------------ ------------ Total current liabilities 672,446 666,986 Mortgage loan 17,400 17,725 Other long-term liabilities 59,670 60,637 ------------ ------------ Total liabilities 749,516 745,348 Commitments and contingencies Shareholders' Equity: Common shares, without par value; 200,000,000 shares authorized; 124,594,551 and 124,370,209 shares issued 864,186 861,991 and outstanding, respectively Deferred stock compensation (375) (306) Retained earnings 319,313 300,239 Less: Treasury stock (1,279) (1,279) ------------ ------------ Total shareholders' equity 1,181,845 1,160,645 ------------ ------------ $ 1,931,361 $ 1,905,993 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 3 4 OFFICEMAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited)
13 Weeks Ended -------------------------------- April 25, 1998 April 26, 1997 -------------- -------------- Sales $ 1,061,074 $ 888,640 Cost of merchandise sold, including buying and occupancy costs 818,736 688,869 -------------- -------------- Gross profit 242,338 199,771 Store operating and selling expenses 183,026 151,483 Pre-opening expenses 1,759 2,237 General and administrative expenses 24,240 19,301 Goodwill amortization 2,346 2,347 -------------- -------------- Total operating expenses 211,371 175,368 Operating income 30,967 24,403 Interest income, net 197 1,299 -------------- -------------- Income before income taxes 31,164 25,702 Income taxes 12,090 9,972 -------------- -------------- Net income $ 19,074 $ 15,730 ============== ============== EARNINGS PER COMMON SHARE DATA: Basic Earnings per common share $ 0.15 $ 0.13 ============== ============== Weighted average number of common shares outstanding 124,472,062 123,093,270 ============== ============== Diluted Earnings per common share $ 0.15 $ 0.13 ============== ============== Weighted average number of common shares outstanding 127,049,856 124,788,296 ============== ==============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 5 OFFICEMAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
13 Weeks Ended -------------------------- April 25, April 26, 1998 1997 ---------- ---------- CASH PROVIDED BY (USED FOR): OPERATIONS Net income $ 19,074 $ 15,730 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 17,445 15,390 Increase (decrease) in deferred income taxes 514 (501) Increase (decrease) in other long-term liabilities (966) 925 Other, net (504) 287 Change in current assets and current liabilities: (Increase) decrease in inventories (27,470) 2,839 Decrease in accounts payable (2,728) (59,366) Increase in accounts receivable (6,394) (19,908) Decrease in accrued liabilities (59,714) (45,849) ---------- ---------- Net cash (used for) operations (60,743) (90,453) ---------- ---------- INVESTING Capital expenditures (28,201) (33,953) Other, net (1,294) (1,636) ---------- ---------- Net cash (used for) investing (29,495) (35,589) ---------- ---------- FINANCING Payments of mortgage principal (325) -- Increase in revolving credit facility 66,500 -- Proceeds from issuance of common stock, net 2,195 1,134 ---------- ---------- Net cash provided by financing 68,370 1,134 ---------- ---------- CASH AND CASH EQUIVALENTS Net (decrease) for the period (21,868) (124,908) Balance, beginning of period 66,801 258,111 ---------- ---------- Balance, end of period $ 44,933 $ 133,203 ========== ========== SUPPLEMENTAL INFORMATION Interest paid on debt $ 422 $ -- ========== ========== Taxes paid on income $ 14,782 $ 16,487 ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 6 OFFICEMAX, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Dollars in thousands) (Unaudited)
Common Shares Deferred ---------------------------- Stock Retained Treasury Shares Amount Compensation Earnings Stock Total ------------- ------------- -------------- ------------- -------------- ------------- Balance at January 24, 1998 124,370,209 $ 861,991 $ (306) $ 300,239 $ (1,279) $ 1,160,645 Issuance of common shares under director plan 364 7 (7) - - - Exercise of stock options 164,203 1,324 - - - 1,324 (including tax benefit) Sale/(forfeiture) of shares under management share 45,572 652 (130) - - 522 purchase plan (including tax benefit) Sale of shares under employee 14,203 212 - - - 212 share purchase plan (including tax benefit) Amortization of deferred - - 68 - - 68 compensation Net income - - - 19,074 - 19,074 ------------- ------------- -------------- ------------- -------------- ------------- Balance at April 25, 1998 124,594,551 $ 864,186 $ (375) $ 319,313 $ (1,279) $ 1,181,845 ============= ============= ============== ============= ============== =============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6 7 OFFICEMAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE 13 WEEKS ENDED APRIL 25, 1998 AND APRIL 26, 1997 Significant Accounting and Reporting Policies - --------------------------------------------- 1. The accompanying consolidated financial statements have been prepared from the financial records of OfficeMax, Inc. and its subsidiaries (the "Company" or "OfficeMax") without audit and reflect all adjustments which are, in the opinion of management, necessary to fairly present the results of the interim periods covered in this report. The results for any interim period are not necessarily indicative of the results to be expected for the full fiscal year. 2. The Company's consolidated financial statements for the 13 weeks ended April 25, 1998 and April 26, 1997 included in this Quarterly Report on Form 10-Q, have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the fiscal year ended January 24, 1998 which were included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (File No.1-13380) on April 21, 1998. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K referred to above. Certain reclassifications have been made to prior year amounts to conform to the current presentation. 3. The Company's fiscal year ends on the Saturday prior to the last Wednesday in January. 4. At April 25, 1998, OfficeMax operated a chain of 733 superstores in over 300 markets, 48 states and Puerto Rico, as well as two national call centers, 17 delivery centers and OfficeMax retail joint ventures in Mexico and Japan. 5. The Company's policy is to expense pre-opening expenses during the first month of each new store's operation. Consequently, pre-opening expense in each period is generally a function of the number of new stores opened during that period. 6. The average common and common equivalent shares utilized in computing diluted earnings per share for the 13 weeks ended April 25, 1998 and April 26, 1997 include 2,479,392 and 907,093 shares, respectively, resulting from the application of the treasury stock method to outstanding stock options. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ----------------------------------------------------------------------- RESULTS OF OPERATIONS - --------------------- RESULTS OF OPERATIONS - --------------------- SALES for the 13 weeks ended April 25, 1998 increased 19% to $1,061,074,000 from $888,640,000 for the comparable period a year earlier. The sales increase was attributable to a full period of sales from the 150 stores opened during fiscal 1997, the additional sales from 20 new superstores opened at various points during the 13-week period and a comparable store sales increase of 2% during the 13-week period. Excluding computers, same-store sales for the 13 weeks increased 7% over last year's first quarter. Comparable store sales were negatively impacted by deflationary prices in computers, printers and fax machines along with the Company's deliberate decision to drastically curtail computer promotions. GROSS PROFIT for the 13 weeks ended April 25, 1998, was 22.8% as compared to 22.5% for the same period a year earlier. The increase in gross profit resulted from the Company's continued focus on increasing margin productivity of its core office supplies and furniture business while at the same time improving the profitability of its computer and electronic sales by modifying the product and promotional offerings. STORE OPERATING AND SELLING EXPENSES, which consist primarily of store payroll, operating and advertising expenses, increased as a percentage of sales to 17.3% for the 13 weeks ended April 25, 1998, from 17.1% of sales for the same period a year earlier. The Company experienced a decrease in leverage of these items primarily due to a greater number of immature stores as the percentage of stores opened less than one year. New stores typically begin to leverage the fixed cost components in their second year of operations. This increase in costs was partially offset by improved leveraging of advertising expenses as the Company opened additional stores in existing markets. PRE-OPENING EXPENSE was $1,759,000 for the 13 weeks ended April 25, 1998, as compared to $2,237,000 for the same period a year earlier, reflecting the opening of 20 superstores during the 13 weeks ended April 25, 1998, compared to 23 superstores for the same period last year. Pre-opening expenses in the first quarter averaged approximately $85,000 per store, as compared to an average of approximately $75,000 per store for the prior year. Pre-opening expenses consist primarily of store payroll, supplies and grand opening advertising. For the 13 weeks ended April 25, 1998, the Company also opened 2 FurnitureMax hubs and 1 CopyMax hub, for which pre-opening expenses averaged approximately $25,000 and $35,000, respectively, per store. GENERAL AND ADMINISTRATIVE EXPENSES were 2.3% of sales for the 13 weeks ended April 25, 1998, as compared to 2.2% of sales for the same period a year ago. This increase reflects the Company's continuing efforts to strengthen and enhance its infrastructure and management team to support the planned growth both in the United States and internationally. GOODWILL AMORTIZATION was $2,346,000 for the 13 weeks ended April 25, 1998, as compared to $2,347,000 for the same period a year earlier. Goodwill is capitalized and amortized over 40 years using the straight-line method. OPERATING INCOME increased to $30,967,000 or 2.9% of sales, for the 13 weeks ended April 25, 1998, as compared to operating income of $24,403,000 or 2.8% of sales, for the same period a year earlier. INTEREST INCOME, NET was $197,000 for the 13 weeks ended April 25, 1998, as compared to $1,299,000 for the same period a year earlier. Interest income decreased due to the Company's continued use of cash and cash equivalents to fund its aggressive expansion plans. The Company expects to incur net interest expense for fiscal 1998, as the line of credit is used periodically during the year to fund seasonal merchandise needs. 8 9 INCOME TAXES were $12,090,000 for the 13 weeks ended April 25, 1998, as compared to $9,972,000 for the same period a year ago. The effective tax rates for both periods are different from the federal statutory income tax rate primarily as a result of goodwill amortization, tax exempt interest, and state and local taxes. NET INCOME as a result of the foregoing factors, was $19,074,000 for the 13 weeks ended April 25, 1998, as compared to $15,730,000 for the same period a year earlier. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Net cash used for operations for the 13 weeks ended April 25, 1998 was $60,743,000. Major uses of working capital included increases in inventory and a decrease in accrued liabilities. The inventory increase was attributable to new store openings and the build-up of merchandise for the Company's new 275,000-square-foot merchandise distribution facility in Las Vegas, Nevada. Net cash used for investing activities was $29,495,000, principally due to capital expenditures for new and remodeled stores as well as the Company's continued investment in systems. Net cash received from financing was $68,370,000, primarily representing borrowings under the Company's $500,000,000 revolving credit facility. During the 13 weeks ending July 25, 1998, the Company plans to open approximately 20 new OfficeMax superstores and remodel 4 existing superstores. The Company also plans to open 2 new CopyMax and 2 new FurnitureMax hubs. These are store-within-a-store modules devoted exclusively to print-for-pay services and office furniture, respectively. Management estimates that the Company's cash requirements for these openings and remodels, exclusive of pre-opening expenses, will be approximately $1,200,000, $140,000, $350,000, and $250,000, respectively, for each additional OfficeMax, FurnitureMax, CopyMax, and store remodel. For an OfficeMax superstore, the requirements include an average of approximately $450,000 for leasehold improvements, fixtures, point-of-sales terminals and other equipment, and approximately $750,000 for the portion of store inventory that is not financed by accounts payable to vendors. Pre-opening expenses are expected to average approximately $85,000 for an OfficeMax superstore, $25,000 for a FurnitureMax module and $35,000 for a CopyMax module. In order to finance its operations and capital requirements, including its expansion strategy, the Company expects to use funds generated from operations as well as its current cash reserves, and, to the extent necessary, seasonal short-term borrowings. The Company has available through June 2002 a $500,000,000 revolving credit facility. As of April 25, 1998, the Company had outstanding borrowings of $66,500,000 under the revolving credit facility. The Company did not acquire any of its shares through open market purchases during the 13 weeks ended April 25, 1998. Depending on the Company's cash position and market conditions, the Company may acquire common shares in the future under the stock repurchase program that was approved by the Board of Directors in November 1997. The Company has undertaken a comprehensive review of its computer-based systems and applications to identify modifications necessitated by the century change for the year 2000 and has implemented a plan to make such modifications. The Company intends to have all critical systems compliant with the century change prior to the end of 1999 at a cost of approximately $1,000,000. The Company's business is somewhat seasonal, with sales and operating income higher in the third and fourth quarters, which include the Back-to-School period and the holiday selling season, respectively, followed by the traditional new year office supply restocking month of January. Sales in the second quarter's summer months are the slowest of the year primarily because of lower office supplies consumption during the summer vacation period. 9 10 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION - ---------------------------------------------------------- Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon management's expectations and beliefs concerning future events and discuss, among other things, expected growth and future business plans. Words and phrases such as "expects", "anticipates", "believes", "intends", "estimates", "will likely result", "will continue", "plans to" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. A discussion of these risks, uncertainties and other factors is included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. 10 11 PART II- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- Exhibits: (a) Exhibits: 27.0 Financial Data Schedule for the period ended April 25, 1998 (b) Reports on Form 8-K: None 11 12 SIGNATURES Pursuant to the requirements 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. OFFICEMAX, INC. Date: June 4, 1998 By: /s/ Jeffrey L. Rutherford -------------------------------------- Jeffrey L. Rutherford Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
12 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-23-1999 JAN-25-1998 APR-25-1998 44,933 0 44,615 796 1,113,698 1,253,646 496,762 183,045 1,931,361 672,446 0 0 0 864,186 317,659 1,931,361 1,061,074 1,061,074 818,736 818,736 0 0 0 31,164 12,090 19,074 0 0 0 19,074 .15 .15
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