OfficeMax Announces Fourth-Quarter and Full-Year 2004 Financial
Results ITASCA, Ill., March 14 /PRNewswire-FirstCall/ --
OfficeMax(R) Incorporated (NYSE:OMX) today reported fourth-quarter
2004 net income of $.7 million, or a loss of $.02 per diluted
share. Before the net impact of the sale of its paper, forest
products, and timberland assets, and related financings, OfficeMax
reported for the fourth quarter of 2004 a net loss of $24.2
million, or $.30 per diluted share. By comparison, in the fourth
quarter of 2003, OfficeMax reported net income of $6.9 million, or
$.05 per diluted share and, before special items, net income of
$15.9 million, or $.18 per share. For full-year 2004, OfficeMax
reported net income of $173.1 million, or $1.77 per diluted share.
Before special items and the net impact of the paper, forest
products, and timberland asset sale, and related financings,
OfficeMax reported 2004 net income of $83.2 million, or $.79 per
diluted share. By comparison, in 2003, OfficeMax reported net
income of $8.3 million or a net loss of $.08 per diluted share and,
before special items, net income of $29.3 million, or $.27 per
diluted share. Financial Highlights ($ in millions, except
per-share amounts) 4Q 4Q 3Q Full-Year 2004 2003 2004 2004 2003
Sales $2,688.5 $2,352.3 $3,650.9 $13,270.2 $8,245.1 Net income $
0.7 $ 6.9 $ 62.2 $ 173.1 $ 8.3 Net income (loss) per diluted share
$ (0.02) $ 0.05 $ 0.64 $ 1.77 $ (0.08) Before special items and net
impact of asset sale Net income (loss) $ (24.2) $ 15.9 $ 62.2 $
83.2 $ 29.3 Net income (loss) per diluted share $ (0.30) $ 0.18 $
0.64 $ 0.79 $ 0.27 Sales in the fourth quarter of 2004 were $2.7
billion, an increase of 14% from the fourth quarter of 2003. Sales
for full-year 2004 were $13.3 billion, an increase of 61% from
2003. The sales increase in the fourth quarter was mostly due to
the acquisition of OfficeMax, Inc. in December 2003 as well as
strong same-location growth for our OfficeMax Contract segment. The
sales increase for the full-year 2004 was mostly due to the
acquisition of OfficeMax, Inc. as well as strong sales in our
OfficeMax Contract and Boise Building Solutions segments. Asset
Sale On October 29, 2004, we completed the sale of our paper,
forest products, and timberland assets for approximately $3.7
billion and recorded a $280.6 million pre-tax gain. Related costs
offsetting the gain included a loss from the write-down of
discontinued operations ($67.8 million), timber notes
securitization expense ($19.0 million), debt retirement expense
($137.1 million), and other expense ($15.9 million). A
reconciliation of the net impact of this asset sale and related
financings on fourth quarter 2004 is presented below and included
in the notes to our consolidated financial statements. Impact of
Paper, Forest Products, and Timberland Asset Sale ($ in millions)
Gain on sale of assets $ 280.6 Write-down of discontinued
operations (67.8) Timber notes securitization expense (19.0) Debt
retirement expense (137.1) Other (15.9) Pre-tax impact from asset
sale $ 40.8 After-tax impact from asset sale $ 24.9 Report of
Operations Combined OfficeMax Contract and Retail Segments ($ in
millions) 4Q 4Q 3Q Full-Year 2004 2003 2004 2004 2003 Sales
$2,271.5 $1,247.8 $2,234.7 $8,852.1 $4,025.1 Operating income $2.9
$40.0 $58.2 $129.7 $115.5 Operating income before special item $2.9
$40.0 $58.2 $129.7 $124.7 Sales for the Contract and Retail
segments totaled $2.3 billion in the fourth quarter of 2004, an
increase of 82% from the fourth quarter of 2003 and an increase of
2% from the third quarter of 2004. Full-year 2004 sales of $8.9
billion more than doubled the year-earlier level. The sales
increases for both the fourth quarter and full-year of 2004 were
primarily driven by the acquisition of the retail business,
OfficeMax, Inc., in December 2003 as well as strong same-location
sales growth in our Contract segment. For the fourth quarter of
2004, the combined OfficeMax Contract and Retail segments reported
operating income of $2.9 million, compared to $40.0 million in the
fourth quarter of 2003 and $58.2 million, after a restatement, in
third quarter 2004. For full-year 2004, combined Contract and
Retail segments reported operating income of $129.7 million,
compared to $124.7 million in 2003 before a special item. OfficeMax
Contract Segment ($ in millions) 4Q 4Q 3Q Full-Year 2004 2003 2004
2004 2003 Sales $1,116.3 $964.7 $1,096.2 $4,370.7 $3,741.9
Operating income $ 19.8 $ 33.9 $ 31.4 $ 107.0 $ 109.4 Operating
income before special item $ 19.8 $ 33.9 $ 31.4 $ 107.0 $ 118.6
Sales for OfficeMax Contract were $1.1 billion in the fourth
quarter of 2004, an increase of 16% from the fourth quarter of 2003
and an increase of 2% from the third quarter of 2004.
Year-over-year same-location sales in the fourth quarter increased
9%. Sales for the full-year of 2004 were $4.4 billion, an increase
of 17% from 2003. OfficeMax Contract reported operating income of
$19.8 million for the fourth quarter of 2004, compared with $33.9
million in the fourth quarter of 2003 and $31.4 million in the
third quarter of 2004. For full-year 2004, OfficeMax Contract
reported operating income of $107.0 million, compared with $118.6
million in 2003 before a special item. Operating margin for the
Contract segment was 1.8% in the fourth quarter of 2004, down from
3.5% in the fourth quarter of 2003, and 2.9% in third-quarter 2004.
Operating margin for the full-year 2004 was 2.4%, compared with
3.2% in 2003 before a special item. The OfficeMax Contract segment
reported operating income declined in the fourth quarter and for
the full-year 2004 compared to the same periods in the prior year
despite strong sales growth. The relatively weak profitability was
due primarily to losses in the former OfficeMax Direct business
acquired with the operations of OfficeMax, Inc. in December 2003.
The former OfficeMax Direct business included field salespeople,
catalogs and a public Internet site, which were added to our
Reliable catalog business. OfficeMax Contract profitability was
also negatively impacted by the phasing in of new account growth,
lags in passing through rising paper costs and weaker-than-expected
Canadian operations. OfficeMax Retail Segment ($ in millions) 4Q 4Q
3Q Full-Year 2004 2003 2004 2004 2003 Sales $1,155.2 $283.2
$1,138.5 $4,481.3 $283.2 Operating income (loss) $ (16.9) $ 6.1 $
26.8 $ 22.7 $ 6.1 Sales for OfficeMax Retail were $1.2 billion in
the fourth quarter of 2004, compared with sales of $283.2 million
for the 17 days in December 2003 that we owned OfficeMax, Inc.
Year-over-year same-location sales in the fourth quarter increased
.4%. Fourth quarter OfficeMax Retail sales were up $16.7 million
from the third quarter of 2004. Full-year 2004 sales were $4.5
billion. For the fourth quarter of 2004, OfficeMax Retail reported
an operating loss of $16.9 million, compared with operating income
of $6.1 million in the fourth quarter of 2003 and $26.8 million,
after a restatement, in the third quarter of 2004. For full-year
2004, OfficeMax Retail reported operating income of $22.7 million,
compared with $6.1 million in 2003. The fourth quarter 2004
operating margin for the Retail segment was (1.5%), compared with
2.2% in the fourth quarter of 2003 and 2.4% in the third quarter of
2004, after a restatement. For the full year 2004, operating margin
was 0.5%, compared with 2.2% in 2003. OfficeMax Retail's low level
of profitability in 2004 was due to weaker-than-expected sales,
especially during the important back-to-school and holiday periods,
which led to reduced margin dollars, lower vendor income, and a
higher expense ratio as a percentage of sales. OfficeMax Retail's
profitability was also negatively impacted by greater promotional
sales at low or no profitability. Other Segments Boise Building
Solutions and Boise Paper Solutions operated until the businesses
they represent were sold in October 2004. Boise Building Solutions
reported operating income of $6.3 million for the fourth quarter of
2004 and $319.2 million for the full year 2004. Boise Paper
Solutions recorded an operating loss of $8.8 million in the fourth
quarter of 2004 and operating income of $38.8 million for the full
year 2004. Share Repurchases OfficeMax intends to proceed with its
previously announced share repurchases of between $775 and $815
million of common shares. The company intends to announce the form
and timing of the repurchase at the end of March 2005. Webcast and
Conference Call OfficeMax will host a webcast and conference call
to discuss the results on Monday, March 14, 2005, at 11:00 a.m.
(ET). An audio webcast of the conference call, and accompanying
slides, can be accessed via the Internet by visiting the Investors
section of the OfficeMax website at http://investor.officemax.com/
and selecting the March 14, 2005 conference call link. To join the
conference call, dial (800) 374-0165 -- international callers
should dial (706) 634-0995 -- 10 minutes before the beginning of
the call. Slides will be posted to the Investors site 30 minutes
prior to the start of the conference. An archive of the webcast and
accompanying slides will be 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.
Forward-Looking Statements This press release contains
forward-looking statements which reflect management's current views
of future plans and events, These statements involve inherent risks
and uncertainties that could cause actual results to differ
materially from those projected. Our industry is highly
competitive, and our business results are subject to risks and
uncertainties both within and outside our control. Some of the
factors that could cause our actual results to differ from the
expectations expressed in this release include: general economic
conditions, particularly levels of unemployment; the actions of our
competitors, some of whom have greater financial resources than do
we; the outcome of several lawsuits that have been filed or
threatened by shareholders in response to our recent investigation
of vendor income accounting; and our ability to attract and retain
key personnel, including a chief executive officer and chief
financial officer. Our financial results are subject to significant
variations because of these and other factors. As a result, our
stock price is also subject to significant fluctuations. For
further information about the factors that may cause actual results
to differ from the expectations in this release, please review the
filings we make with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date of this
release, and you should not rely on them as representing our
performance expectations on any subsequent date. We undertake no
obligation to update the forward-looking statements in this release
in light of new information. About OfficeMax OfficeMax is a leader
in both business-to-business and retail office products
distribution. OfficeMax delivers an unparalleled customer
experience -- in service, in product, in time savings, and in value
- through a relentless focus on its customers. The company provides
office supplies and paper, print and document services, technology
products and solutions, and furniture to large, medium and small
businesses and consumers. OfficeMax customers are served by more
than 41,000 associates through direct sales, catalogs, Internet and
935 superstores. More information can be found at
http://www.officemax.com/. OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited) (thousands, except
per-share amounts) Three Months Ended December 31 September 30,
2004 2003 2004 Sales $2,688,459 $2,352,272 $3,650,929 Costs and
expenses Materials, labor and other operating expenses 2,103,318
1,855,611 2,828,455 Depreciation, amortization and cost of company
timber harvested 59,425 80,870 100,255 Selling and distribution
expenses 467,648 293,768 496,213 General and administrative
expenses 80,287 49,540 77,745 Other (income) expense, net 8,029
21,665 (1,161) 2,718,707 2,301,454 3,501,507 Gain on sale of forest
products assets 280,558 -- -- Equity in net income of affiliates --
4,369 -- Income from operations 250,310 55,187 149,422 Debt
retirement expense (137,137) -- -- Interest expense (30,910)
(37,634) (39,945) Interest income 12,704 533 455 Timber notes
securitization (19,000) -- -- Other, net 728 (119) 1,072 (173,615)
(37,220) (38,418) Income from continuing operations before income
taxes and minority interest 76,695 17,967 111,004 Income tax
provision (28,499) (5,927) (43,556) Income from continuing
operations before minority interest 48,196 12,040 67,448 Minority
interest, net of income tax (633) -- (1,145) Income from continuing
operations 47,563 12,040 66,303 Discontinued operations Operating
loss (8,862) (8,462) (6,764) Write-down of assets (67,841) -- --
Income tax benefit 29,835 3,290 2,630 Loss from discontinued
operations (46,868) (5,172) (4,134) Net income 695 6,868 62,169
Preferred dividends (2,141) (3,317) (3,242) Net income (loss)
applicable to common shareholders $(1,446) $3,551 $58,927 Basic
income (loss) per common share Continuing operations $0.51 $0.13
$0.73 Discontinued operations (0.53) (0.08) (0.05) Basic $(0.02)
$0.05 $0.68 Diluted income (loss) per common share Continuing
operations $0.51 $0.13 $0.69 Discontinued operations (0.53) (0.08)
(0.05) Diluted $(0.02) $0.05 $0.64 SEGMENT INFORMATION Three Months
Ended December 31 September 30, 2004 2003 2004 (unaudited,
thousands) Segment sales OfficeMax, Contract $1,116,338 $964,655
$1,096,192 OfficeMax, Retail 1,155,182 283,153 1,138,461 2,271,520
1,247,808 2,234,653 Boise Building Solutions 299,654 776,278
1,051,240 Boise Paper Solutions 209,607 450,868 531,137
Intersegment eliminations and other (92,322) (122,682) (166,101)
$2,688,459 $2,352,272 $3,650,929 Segment income (loss) OfficeMax,
Contract $19,788 $33,857 $31,442 OfficeMax, Retail (16,859) 6,125
26,797 2,929 39,982 58,239 Boise Building Solutions 6,264 46,092
101,411 Boise Paper Solutions (8,788) (14,408) 20,765 Corporate and
Other 263,337 (16,065) (29,466) 263,742 55,601 150,949 Debt
retirement expense (137,137) -- -- Interest expense (30,910)
(37,634) (39,945) Timber notes securitization (19,000) -- -- Income
from continuing operations before income taxes and minority
interest $76,695 $17,967 $111,004 Before special items Segment
income (loss) OfficeMax, Contract $19,788 $33,857 $31,442
OfficeMax, Retail (16,859) 6,125 26,797 2,929 39,982 58,239 Boise
Building Solutions 6,264 60,791 101,411 Boise Paper Solutions
(8,788) (14,408) 20,765 Corporate and Other (1,326) (16,065)
(29,466) (921) 70,300 150,949 Debt retirement expense -- -- --
Interest expense (30,910) (37,634) (39,945) Timber notes
securitization -- -- -- Income from continuing operations before
income taxes and minority interest $(31,831) $32,666 $111,004
OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
INCOME (unaudited) (thousands, except per-share amounts) Year Ended
December 31 2004 2003 Sales $13,270,196 $8,245,098 Costs and
expenses Materials, labor and other operating expenses 10,361,090
6,624,575 Depreciation, amortization and cost of company timber
harvested 354,982 307,849 Selling and distribution expenses
1,948,106 948,955 General and administrative expenses 304,658
158,786 Other (income) expense, net (83,740) 35,786 12,885,096
8,075,951 Gain on sale of forest products assets 280,558 -- Equity
in net income of affiliates 6,311 8,822 Income from operations
671,969 177,969 Debt retirement expense (137,137) -- Interest
expense (151,939) (132,545) Interest income 14,093 1,186 Timber
notes securitization (19,000) -- Other, net 1,456 2,630 (292,527)
(128,729) Income from continuing operations before income taxes,
minority interest and cumulative effect of accounting changes
379,442 49,240 Income tax provision (142,291) (13,860) Income from
continuing operations before minority interest and cumulative
effect of accounting changes 237,151 35,380 Minority interest, net
of income tax (3,026) -- Income from continuing operations 234,125
35,380 Discontinued operations Operating loss (32,095) (29,943)
Write-down of assets (67,841) -- Income tax benefit 38,869 11,638
Loss from discontinued operations (61,067) (18,305) Income before
cumulative effect of accounting changes 173,058 17,075 Cumulative
effect of accounting changes, net of income tax -- (8,803) Net
income 173,058 8,272 Preferred dividends (11,917) (13,061) Net
income (loss) applicable to common shareholders $161,141 $(4,789)
Basic income (loss) per common share Continuing operations $2.55
$0.37 Discontinued operations (0.70) (0.30) Cumulative effect of
accounting changes, net of income tax -- (0.15) Basic $1.85 $(0.08)
Diluted income (loss) per common share Continuing operations $2.44
$0.37 Discontinued operations (0.67) (0.30) Cumulative effect of
accounting changes, net of income tax -- (0.15) Diluted $1.77
$(0.08) SEGMENT INFORMATION Year Ended December 31 2004 2003
(unaudited, thousands) Segment sales OfficeMax, Contract $4,370,749
$3,741,913 OfficeMax, Retail 4,481,303 283,153 8,852,052 4,025,066
Boise Building Solutions 3,257,665 2,871,860 Boise Paper Solutions
1,670,442 1,852,624 Intersegment eliminations and other (509,963)
(504,452) $13,270,196 $8,245,098 Segment income (loss) OfficeMax,
Contract $107,022 $109,373 OfficeMax, Retail 22,629 6,125 129,651
115,498 Boise Building Solutions 319,225 125,385 Boise Paper
Solutions 38,819 (13,879) Corporate and Other 199,823 (45,219)
687,518 181,785 Debt retirement expense (137,137) -- Interest
expense (151,939) (132,545) Timber notes securitization (19,000) --
Income from continuing operations before income taxes, minority
interest and cumulative effect of accounting changes $379,442
$49,240 Before special items Segment income (loss) OfficeMax,
Contract $107,022 $118,596 OfficeMax, Retail 22,629 6,125 129,651
124,721 Boise Building Solutions 272,727 140,084 Boise Paper
Solutions (21,096) (13,678) Corporate and Other (64,840) (44,529)
316,442 206,598 Debt retirement expense -- -- Interest expense
(151,939) (132,545) Timber notes securitization -- -- Income from
continuing operations before income taxes, minority interest and
cumulative effect of accounting changes $164,503 $74,053 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (1) Financial Information The
Consolidated Statements of Income and Segment Information are
unaudited statements, which do not include all Notes to
Consolidated Financial Statements, and should be read in
conjunction with the company's 2004 Annual Report on Form 10-K. In
all periods presented, net income involved estimates and accruals.
As previously announced, along with our 2004 Annual Report on Form
10-K, the company intends to file amended Quarterly Reports on Form
10-Q for the first three quarters of 2004. We have amended our
Quarterly Reports on Form 10-Q for the first three quarters of 2004
because we determined that certain rebates and other payments from
vendors in 2004 were not recorded in the appropriate accounting
periods. As a result, operating income was overstated by $7.1
million in the first quarter of 2004 and was understated by $1.1
million and $1.7 million in the second and third quarters of 2004,
respectively. (2) Reconciliation of Net Income and Diluted Income
(Loss) Per Share Before Special Items and the Cumulative Effect of
Accounting Changes We evaluate our results of operations both
before and after special gains and losses. We believe our
presentation of financial measures before special items enhances
our investors' overall understanding of our recurring operational
performance. Specifically, we believe the results before special
items provide useful information to both investors and management
by excluding gains and losses that are not indicative of our core
operating results. In the following tables, we reconcile our
financial measures before special items and the cumulative effect
of accounting changes to our reported financial results for the
three months ended December 31, 2004 and 2003, and the years ended
December 31, 2004 and 2003 (see Notes 3-7). There were no special
items during the three months ended September 30, 2004. Three
Months Ended December 31, 2004 December 31, 2003 Before Before As
Special Special As Special Special Reported Items(a) Items Reported
Items(b) Items (millions, except per-share amounts) OfficeMax,
Contract $19.8 $ -- $19.8 $33.9 $ -- $33.9 OfficeMax, Retail (16.9)
-- (16.9) 6.1 -- 6.1 2.9 -- 2.9 40.0 -- 40.0 Boise Building
Solutions 6.3 -- 6.3 46.1 14.7 60.8 Boise Paper Solutions (8.8) --
(8.8) (14.4) -- (14.4) Corporate and Other 263.3 (264.6) (1.3)
(16.1) -- (16.1) 263.7 (264.6) (0.9) 55.6 14.7 70.3 Debt retirement
expense (137.1) 137.1 -- -- -- -- Interest expense (30.9) -- (30.9)
(37.6) -- (37.6) Timber notes securitization (19.0) 19.0 -- -- --
-- Income from continuing operations before income taxes and
minority interest 76.7 (108.5) (31.8) 18.0 14.7 32.7 Income tax
(provision) benefit (28.5) 42.2 13.7 (5.9) (5.7) (11.6) Income
(loss) from continuing operations before minority interest 48.2
(66.3) (18.1) 12.1 9.0 21.1 Minority interest, net of income tax
(0.6) -- (0.6) -- -- -- Income (loss) from continuing operations
47.6 (66.3) (18.7) 12.1 9.0 21.1 Discontinued operations Operating
loss (8.9) -- (8.9) (8.5) -- (8.5) Write-down of assets (67.8) 67.8
-- -- -- -- Income tax (provision) benefit 29.8 (26.4) 3.4 3.3 --
3.3 Loss from discontinued operations (46.9) 41.4 (5.5) (5.2) --
(5.2) Net income (loss) $0.7 $(24.9) $(24.2) $6.9 $9.0 $15.9
Diluted income (loss) per common share (c) Continuing operations
$0.51 $(0.75) $(0.24) $0.13 $0.13 $0.26 Discontinued operations
(0.53) 0.47 (0.06) (0.08) -- (0.08) Diluted $(0.02) $(0.28) $(0.30)
$0.05 $0.13 $0.18 (a) See Notes 3 and 5 for a discussion of these
special items. (b) See Note 6 for a discussion of these special
items. (c) Calculated using 88.2 million and 70.2 million average
diluted shares outstanding for the three months ended December 31,
2004 and 2003 (see note 9). Year Ended December 31 2004 2003 Before
Before As Special Special As Special Special Reported Items (a)
Items Reported Items (b) Items (millions, except per-share amounts)
OfficeMax, Contract $107.0 $-- $107.0 $109.4 $9.2 $118.6 OfficeMax,
Retail 22.7 -- 22.7 6.1 -- 6.1 129.7 -- 129.7 115.5 9.2 124.7 Boise
Building Solutions 319.2 (46.5) 272.7 125.4 14.7 140.1 Boise Paper
Solutions 38.8 (59.9) (21.1) (13.9) 0.2 (13.7) Corporate and Other
199.8 (264.6) (64.8) (45.2) 0.7 (44.5) 687.5 (371.0) 316.5 181.8
24.8 206.6 Debt retirement expense (137.1) 137.1 -- -- -- --
Interest expense (151.9) -- (151.9) (132.5) -- (132.5) Timber notes
securitization (19.0) 19.0 -- -- -- -- Income from continuing
operations before income taxes, minority interest and cumulative
effect of accounting changes 379.5 (214.9) 164.6 49.3 24.8 74.1
Income tax (provision) benefit (142.3) 83.6 (58.7) (13.9) (12.6)
(26.5) Income from continuing operations before minority interest
and cumulative effect of accounting changes 237.2 (131.3) 105.9
35.4 12.2 47.6 Minority interest, net of income tax (3.0) -- (3.0)
-- -- -- Income from continuing operations 234.2 (131.3) 102.9 35.4
12.2 47.6 Discontinued operations Operating loss (32.1) -- (32.1)
(29.9) -- (29.9) Write-down of assets (67.8) 67.8 -- -- -- --
Income tax benefit 38.8 (26.4) 12.4 11.6 -- 11.6 Loss from
discontinued operations (61.1) 41.4 (19.7) (18.3) -- (18.3) Income
(loss) before cumulative effect of accounting changes 173.1 (89.9)
83.2 17.1 12.2 29.3 Cumulative effect of accounting changes, net of
income tax -- -- -- (8.8) 8.8 -- Net income $173.1 $(89.9) $83.2
$8.3 $21.0 $29.3 Diluted income (loss) per common share Continuing
operations $2.44 $(1.44) $1.00 $0.37 $0.20 $0.57 Discontinued
operations (0.67) 0.46 (0.21) (0.30) -- (0.30) Cumulative effect of
accounting changes, net of income tax -- -- -- (0.15) 0.15 --
Diluted $1.77 $(0.98) $0.79 $(0.08) $0.35 $0.27 (a) See Notes 3 and
5 for a discussion of these special items. (b) See Notes 6 and 7
for a discussion of these special items. (c) Calculated using 91.7
million and 60.1 million average diluted shares outstanding for the
years ended December 31, 2004 and 2003 (see Note 9). (3) Sale of
Paper, Forest Products and Timberland Assets On October 29, 2004,
we completed the sale of our paper, forest products and timberland
assets for approximately $3.7 billion to affiliates of Boise
Cascade, L.L.C., a new company formed by Madison Dearborn Partners
LLC. Some assets, such as a wood-polymer building materials
facility that is in a start-up phase, and company-owned life
insurance, are being retained by OfficeMax, as are some liabilities
associated with retiree pension and benefits, litigation,
environmental remediation at selected sites and facilities
previously closed. The sold assets are included in our Boise
Building Solutions and Boise Paper Solutions segments. In
connection with the sale, we recorded a $280.6 million pre-tax gain
in our Corporate and Other segment in our Consolidated Statement of
Income. On October 29, 2004, we invested $175 million in the
securities of affiliates of Boise Cascade, L.L.C. This investment
represents continuing involvement as defined in Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Accordingly, we do not
show the historical results of the sold paper, forest products and
timberland assets as discontinued operations. We realized net cash
proceeds of approximately $3.5 billion from the sale, after
allowing for the $175 million reinvestment and transaction-related
settlements. The consideration for the timberlands portion of the
transaction included $1.635 billion of timber installment notes and
$15 million of cash. We monetized the timber installment notes in
December for proceeds of $1.47 billion, which is included in the
$3.5 billion of total net transaction proceeds noted above. In
October 2004, OfficeMax and one of its subsidiaries each entered
into interest rate swap contracts with J. Aron & Company, an
affiliate of Goldman, Sachs & Co. to hedge the interest rate
risk associated with the issuance of debt securities related to the
timberland installment notes. In December 2004, the contracts were
cash-settled, and we recorded $19.0 million of expense in "Timber
notes securitization" in the Statement of Income for the three and
twelve months ended December 31, 2004. During the fourth quarter of
2004, we repaid $1.8 billion of debt and expensed $137.1 million of
costs related to early retirement of debt. For more information
about the sale, see our 2004 Annual Report on Form 10-K. (4)
Acquisition of OfficeMax, Inc. On December 9, 2003, we acquired
OfficeMax, Inc. We acquired 100% of the voting equity interest. The
results of OfficeMax operations after December 9, 2003, are
included in our OfficeMax, Contract and OfficeMax, Retail segments.
For more information about the acquisition, see our 2004 Annual
Report on Form 10-K. (5) 2004 Special Items First Quarter On March
31, 2004, we sold approximately 79,000 acres of timberland located
in western Louisiana for $84 million. We recorded a $59.9 million
gain in "Other income (expense)" in our Boise Paper Solutions
segment. This item increased net income $36.6 million after taxes
for the year ended December 31, 2004. Second Quarter In May 2004,
we sold our 47% interest in Voyageur Panel to Ainsworth Lumber Co.
Ltd. for $91.2 million of cash. We recorded a $46.5 million gain in
"Other income (expense)" in our Boise Building Solutions segment.
This item increased net income $28.4 million after taxes for the
year ended December 31, 2004. Prior to the sale, we accounted for
the joint venture under the equity method. Accordingly, segment
results do not include the joint venture's sales but do include
$4.3 million of equity in earnings during the three months ended
December 31, 2003. The years ended December 31, 2004 and 2003,
include $6.3 million and $8.7 million of equity in earnings. Third
Quarter None. Fourth Quarter In December 2004, our board of
directors authorized management to pursue the divestiture of our
facility near Elma, Washington, that manufactures integrated
wood-polymer building materials. The board of directors and
management concluded that the facility no longer fits with the
company's strategic direction. We recorded the results of the
facility's operations as discontinued operations in our Statements
of Income (Loss) for the three and twelve months ended December 31,
2004. We tested the recoverability of the long-lived assets in
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, and recorded a $67.8 million pretax
charge for the write-down of impaired assets. We also recorded
$26.4 million of tax benefits associated with the write-down. The
write- down resulted from our review of estimated discounted future
cash flows. In fourth quarter 2004, we recorded $15.9 million of
expense in our Corporate and Other segment for one-time benefit
costs granted to employees. See Note 3 above for a discussion of
the sale of our paper, forest products and timberland assets and
its impact on the three and twelve months ended December 31, 2004.
(6) 2003 Special Items First Quarter In first quarter 2003, we
announced the termination of approximately 550 employees and
recorded a pretax charge of $10.1 million for employee-related
costs in "Other (income) expense, net." We recorded these costs in
accordance with the provisions of SFAS No. 112, Employers'
Accounting for Postemployment Benefits. We recorded $9.2 million in
the OfficeMax, Contract segment; $0.2 million in the Boise Paper
Solutions segment; and $0.7 million in our Corporate and Other
segment. Employee-related costs are primarily for severance
payments, most of which were paid in 2003 with the remainder paid
in 2004. This item decreased our net income $6.1 million for the
year ended December 31, 2003. Second Quarter None. Third Quarter
During third quarter 2003, we recorded a net $2.9 million gain,
which included a one-time tax benefit related to a favorable tax
ruling, net of changes in other tax items. Fourth Quarter In
December 2003, we recorded a $14.7 million pretax charge for the
write-down of impaired assets at our plywood and lumber operations
in Yakima, Washington. We also recorded $5.7 million of tax
benefits associated with the write-down. The write-down resulted
from our internal review of the operations and indications of
current market value. We recorded the write-down in our Boise
Building Solutions segment in "Other (income) expense, net," and
the tax benefits are included in "Income tax (provision) benefit"
in the Consolidated Statements of Income for the three and 12
months ended December 31, 2003. This special item decreased net
income $9.0 million, after taxes, for the three and twelve months
ended December 31, 2003. (7) Cumulative Effect of Accounting
Changes Effective January 1, 2003, we adopted the provisions of
SFAS No. 143, Accounting for Asset Retirement Obligations, which
affects the way we account for landfill closure costs. This
statement requires us to record an asset and a liability
(discounted) for the estimated closure and closed-site monitoring
costs and to depreciate the asset over the landfill's expected
useful life. Previously, we accrued for the closure costs over the
life of the landfill and expensed monitoring costs as incurred.
Effective January 1, 2003, we recorded a one-time after-tax charge
of $4.1 million, or 7 cents per share, as a cumulative-effect
adjustment for the difference between the amounts recognized in our
consolidated financial statements prior to the adoption of this
statement and the amount recognized after adopting the provisions
of SFAS No. 143. Effective January 1, 2003, we adopted an
accounting change for vendor allowances to comply with the
guidelines issued by the Financial Accounting Standards Board's
Emerging Issues Task Force EITF 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received From a
Vendor. Under the new guidance, vendor allowances reside in
inventory with the product and are recognized when the product is
sold, changing the timing of our recognition of these items. This
change resulted in a one-time, noncash, cumulative-effect
adjustment of $4.7 million, or 8 cents per share. (8) Income Taxes
Our estimated effective tax provision rate for the year ended
December 31, 2004, was 37.5%, compared with an effective tax
provision rate of 28.1% for the year ended December 31, 2003.
Before the special items discussed in Notes 3, 5 and 6 above, our
estimated tax provision rate for the years ended December 31, 2004
and 2003, was 35.7%. (9) Net Income (Loss) Per Common Share Net
income (loss) per common share was determined by dividing net
income (loss), as adjusted, by weighted average shares outstanding.
For the three months ended December 31, 2004, and the year ended
December 31, 2003, the computation of diluted income (loss) per
share was antidilutive; therefore, amounts reported for basic and
diluted income (loss) were the same. Three Months Ended December 31
September 30, 2004 2003 2004 (unaudited) (thousands, except
per-share amounts) BASIC Income from continuing operations $47,563
$12,040 $66,303 Preferred dividends (a) (2,141) (3,317) (3,242)
Basic income before discontinued operations 45,422 8,723 63,061
Loss from discontinued operations (46,868) (5,172) (4,134) Basic
income (loss) $(1,446) $3,551 $58,927 Average shares used to
determine basic income (loss) per common share 88,240 65,313 86,864
Basic income (loss) per common share Continuing operations $0.51
$0.13 $0.73 Discontinued operations (0.53) (0.08) (0.05) Basic
income (loss) per common share $(0.02) $0.05 $0.68 DILUTED Basic
income before discontinued operations $45,422 $8,723 $63,061
Preferred dividends eliminated -- 3,317 3,242 Supplemental ESOP
contribution -- (3,007) (2,971) Diluted income before discontinued
operations 45,422 9,033 63,332 Loss from discontinued operations
(46,868) (5,172) (4,134) Diluted income (loss) $(1,446) $3,861
$59,198 Average shares used to determine basic income (loss) per
common share 88,240 65,313 86,864 Restricted stock, stock options
and other -- 1,582 1,982 Series D Convertible Preferred Stock --
3,310 3,170 Average shares used to determine diluted income (loss)
per common share 88,240 70,205 92,016 Diluted income (loss) per
common share Continuing operations $0.51 $0.13 $0.69 Discontinued
operations (0.53) (0.08) (0.05) Diluted income (loss) per common
share $(0.02) $0.05 $0.64 Year Ended December 31 2004 2003
(unaudited) (thousands, except per-share amounts) BASIC Income from
continuing operations $234,125 $35,380 Preferred dividends (a)
(11,917) (13,061) Basic income before discontinued operations and
cumulative effect of accounting changes 222,208 22,319 Loss from
discontinued operations (61,067) (18,305) Cumulative effect of
accounting changes, net of income tax -- (8,803) Basic income
(loss) $161,141 $(4,789) Average shares used to determine basic
income (loss) per common share 86,917 60,093 Basic income (loss)
per common share Continuing operations $2.55 $0.37 Discontinued
operations (0.70) (0.30) Cumulative effect of accounting changes,
net of income tax -- (0.15) Basic income (loss) per common share
$1.85 $(0.08) DILUTED Basic income before discontinued operations
and cumulative effect of accounting changes $222,208 $22,319
Preferred dividends eliminated 11,917 -- Supplemental ESOP
contribution (10,833) -- Diluted income before discontinued
operations and cumulative effect of accounting changes 223,292
22,319 Loss from discontinued operations (61,067) (18,305)
Cumulative effect of accounting changes, net of income tax --
(8,803) Diluted income (loss) $162,225 $(4,789) Average shares used
to determine basic income (loss) per common share 86,917 60,093
Restricted stock, stock options and other 1,857 -- Series D
Convertible Preferred Stock 2,880 -- Average shares used to
determine diluted income (loss) per common share 91,654 60,093
Diluted income (loss) per common share Continuing operations $2.44
$0.37 Discontinued operations (0.67) (0.30) Cumulative effect of
accounting changes, net of income tax -- (0.15) Diluted income
(loss) per common share $1.77 $(0.08) (a) Dividend attributable to
our Series D Convertible Preferred Stock held by our ESOP (employee
stock ownership plan) is net of a tax benefit. OfficeMax Media
Contact OfficeMax Investor Relations Contact Bill Bonner Vince
Hannity 630 438 8584 208 384 6390 DATASOURCE: OfficeMax
Incorporated CONTACT: Bill Bonner, +1-630-438-8584, or Vince
Hannity, +1-208-384-6390, both of OfficeMax Web site:
http://www.officemax.com/
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