OMX Officemax Incorporated

ITASCA, Ill., Oct. 26 /PRNewswire-FirstCall/ -- OfficeMax(R) Incorporated (NYSE:OMX) today reported a net loss of $3.9 million, or $.07 per diluted share, compared with net income of $62.2 million, or $.64 per diluted share, in the third quarter of 2004. Financial results in the 2004 quarter included the results of the company's paper, forest products, and timberland assets, reported as the Boise Building Solutions and Boise Paper Solutions segments, which were sold in October 2004. Results for the third quarter of 2005 include various special items, including a loss from discontinued operations and certain expenses in the Corporate and Other segment, primarily related to the consolidation of the OfficeMax headquarters facilities, which are not expected to be ongoing. Excluding the special items and sold businesses, OfficeMax reported sales of $2.3 billion, an increase of $53.0 million in the third quarter of 2005 compared to the third quarter of 2004 primarily due to sales growth in the Contract segment. Excluding special items and sold business segments, operating income increased $6.9 million in the third quarter of 2005 compared to the third quarter of 2004 primarily due to reduced Corporate and Other segment expenses, and an increase in operating income in the Contract segment, offset by a decrease in operating income in the Retail segment. A full description of the special items included in each period and a reconciliation of the special items to the company's reported GAAP financial results is included in the notes to the financial tables contained in this press release. "Our third quarter results underperformed our expectations primarily due to weakness in our Retail segment," said Sam Duncan, Chairman and Chief Executive Officer of OfficeMax. "That said, our Contract segment continued to show operating margin improvement and our Retail segment did show areas of strength in key geographic regions and in certain product categories." Contract segment sales increased 4.4% in the third quarter of 2005 compared to the third quarter of 2004 primarily due to 1.4% sales growth in U.S. Contract operations and 16% growth in international Contract operations aided by favorable foreign exchange rate change and the impact of acquisitions during 2005. U.S. Contract sales in the third quarter of 2005 were affected by a change in the fiscal quarter end to conform to our Retail segment fiscal reporting period. As a result, our Contract segment had one less selling day in the third quarter of 2005 compared to the third quarter of 2004. Adjusted for the difference in selling days, U.S. Contract sales increased 3% in the third quarter of 2005 compared to the third quarter of 2004. Contract segment gross margin declined in the third quarter of 2005 primarily due to higher delivery costs from increased energy prices and a more competitive pricing environment in the large U.S. customer segment. Contract segment operating income increased $2.5 million in the third quarter of 2005 primarily due to lower operating expenses from effective cost controls in U.S. Contract operations, offset partially by an operating income decline in our International Contract operations. Retail segment sales increased less than 1% in the third quarter of 2005 compared to the third quarter of 2004. Same-location sales in the third quarter of 2005 for the Retail segment were slightly negative as compared to the same quarter last year. Third quarter 2005 Retail sales were impacted by varying Back-to-School sales performance in geographic regions and flat same- location sales growth in most product categories, partially offset by strong sales in Print and Document Services. Retail sales were also impacted by Hurricane Katrina which caused the closure of 24 stores at its peak, all of which have now reopened. Retail segment gross margin in the third quarter of 2005 was nearly identical to the third quarter of 2004, despite the impact of higher energy prices in the third quarter of 2005. OfficeMax Retail operating income declined $10.7 million in the third quarter of 2005 primarily due to higher energy prices and employee benefit costs as well as losses from new stores as they grow sales, partially offset by decreased advertising spending. During the third quarter of 2005, OfficeMax opened 9 new retail stores, closed 1 store and ended the third quarter of 2005 with 957 retail stores compared to 933 stores at the end of the third quarter of 2004. OfficeMax Corporate and Other segment includes support staff services and other expenses. Consistent with OfficeMax's prior year presentation, these expenses are not fully allocated to the Retail and Contract segments. Corporate and Other segment expenses totaled $31.7 million in third quarter of 2005 with special items totaling $16.8 million. Special items in the third quarter of 2005 included expenses for our previously announced headquarters consolidation of $10.4 million and other items totaling $6.4 million with the most significant portion a $2.9 million write-off related to software. Excluding special items, Corporate and Other expenses decreased $15.1 million in the third quarter of 2005 partially due to third quarter 2004 expenses associated with, but not allocated to, the Boise Building Solutions and Boise Paper Solutions segments that were sold in October 2004. Corporate and Other expenses in the third quarter of 2005, excluding special items, continued to include costs for employee retirement benefits and retention programs, as well as expenses related to the transition of support staff services from Boise Cascade, LLC that are expected to continue to decrease in 2006. "OfficeMax has undertaken a number of key initiatives aimed at improving operating performance across both the Retail and Contract businesses, and at the corporate level. As these initiatives continue to move forward, the company is guided by its commitment to enhance execution of our strategy and increased accountability at all levels of the organization and across business segments," said Duncan. Webcast and Conference Call OfficeMax will host a webcast and conference call to discuss the results on Wednesday, October 26, 2005, at 10:00 a.m. (ET). Slides accompanying the conference call and 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/ and selecting the October 26, 2005 conference call link. To join the conference call, dial (800) 374-0165 -- or (706) 634- 0995 for international callers -- 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 conference call 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. About OfficeMax OfficeMax(R) Incorporated is a leader in both business-to-business office products solutions and retail office products. 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 consumers and to large, medium and small businesses. OfficeMax customers are served by approximately 40,000 associates through direct sales, catalogs, the Internet and approximately 950 superstores. OfficeMax trades on the New York Stock Exchange under the symbol OMX. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more information, visit http://www.officemax.com/ . Forward-Looking Statements Certain statements made in this press release and other written or oral statements made by or on behalf of the Company may constitute "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. 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 31, 2004, including those discussed under the caption "Cautionary and Forward-Looking Statements", and in other filings with the SEC. OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (thousands, except share data) September 24, December 31, 2005 2004 (unaudited) ASSETS Current Cash and equivalents $ 78,440 $1,242,542 Receivables, net 597,837 643,273 Merchandise inventories 980,858 1,138,167 Other current assets 259,845 234,780 1,916,980 3,258,762 Property Property and equipment 1,063,815 958,794 Accumulated depreciation (505,021) (417,342) 558,794 541,452 Goodwill and intangible assets, net 1,424,185 1,375,274 Timber notes receivable 1,635,000 1,635,000 Other long-term assets 605,970 732,511 Total assets $6,140,929 $7,542,999 LIABILITIES AND SHAREHOLDERS' EQUITY Current Short-term borrowings - 10,309 Current portion of long-term debt 47,564 97,738 Accounts payable 875,548 1,118,021 Accrued liabilities and other 540,482 630,902 1,463,594 1,856,970 Debt Long-term debt, less current portion 432,685 585,082 Timber securitization notes 1,470,000 1,470,000 1,902,685 2,055,082 Compensation and benefits 551,715 557,488 Other long-term liabilities 411,220 439,518 Minority interest 27,052 23,463 Shareholders' Equity Preferred stock 56,884 61,964 Common stock 176,849 232,269 Additional paid-in capital 742,698 1,441,265 Retained earnings 952,069 1,019,679 Accumulated other comprehensive loss (143,837) (144,699) 1,784,663 2,610,478 Total liabilities and shareholders' equity $6,140,929 $7,542,999 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (thousands, except per-share amounts) Three Months Ended September 24, September 30, 2005 2004 Sales $2,287,695 $3,650,929 Costs and expenses Materials, labor and other operating expenses 1,725,015 2,828,455 Depreciation, amortization and cost of company timber harvested 37,937 100,255 Selling and distribution expenses 430,507 496,213 General and administrative expenses 66,563 77,745 Other (income) expense, net 13,030 (1,161) 2,273,052 3,501,507 Equity in net income of affiliate 1,403 - Income from operations 16,046 149,422 Interest expense (31,658) (39,945) Interest income 20,737 455 Other, net 2,326 1,072 (8,595) (38,418) Income from continuing operations before income taxes and minority interest 7,451 111,004 Income tax provision (6,653) (43,556) Income from continuing operations before minority interest 798 67,448 Minority interest, net of income taxes (1,178) (1,145) Income (loss) from continuing operations (380) 66,303 Discontinued operations Operating loss (5,717) (6,764) Income tax benefit 2,224 2,630 Loss from discontinued operations (3,493) (4,134) Net income (loss) (3,873) 62,169 Preferred dividends (1,093) (3,242) Net income (loss) applicable to common shareholders $(4,966) $58,927 Basic income (loss) per common share Continuing operations $(0.02) $0.73 Discontinued operations (0.05) (0.05) Basic income (loss) per common share $(0.07) $0.68 Diluted income (loss) per common share Continuing operations $(0.02) $0.69 Discontinued operations (0.05) (0.05) Diluted income (loss) per common share $(0.07) $0.64 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (thousands, except per-share amounts) Nine Months Ended September 24, September 30, 2005 2004 Sales $6,702,299 $10,581,737 Costs and expenses Materials, labor and other operating expenses 5,061,614 8,257,772 Depreciation, amortization and cost of company timber harvested 111,170 295,557 Selling and distribution expenses 1,280,063 1,480,458 General and administrative expenses 216,804 224,371 Other (income) expense, net 26,352 (91,769) 6,696,003 10,166,389 Equity in net income of affiliate 4,057 6,311 Income from operations 10,353 421,659 Debt retirement expenses (14,391) - Interest expense (96,330) (121,029) Interest income 76,090 1,389 Other, net 3,083 728 (31,548) (118,912) Income (loss) from continuing operations before income taxes and minority interest (21,195) 302,747 Income tax benefit (provision) 5,097 (113,792) Income (loss) from continuing operations before minority interest (16,098) 188,955 Minority interest, net of income taxes (2,541) (2,393) Income (loss) from continuing operations (18,639) 186,562 Discontinued operations Operating loss (19,745) (23,233) Income tax benefit 7,681 9,034 Loss from discontinued operations (12,064) (14,199) Net income (loss) (30,703) 172,363 Preferred dividends (3,354) (9,776) Net income (loss) applicable to common shareholders $(34,057) $162,587 Basic income (loss) per common share Continuing operations $(0.27) $2.04 Discontinued operations (0.15) (0.16) Basic income (loss) per common share $(0.42) $1.88 Diluted income (loss) per common share Continuing operations $(0.27) $1.94 Discontinued operations (0.15) (0.16) Diluted income (loss) per common share $(0.42) $1.78 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands, except share data) September 24, September 30, 2005 2004 (unaudited) Cash provided by (used for) operations Net income (loss) $(30,704) $172,363 Items in net income (loss) not using (providing cash) Depreciation, amortization and the cost of company timber harvested 111,170 301,172 Gain on sale of assets (925) (106,660) Other 35,339 163,526 Changes other than from acquisitions of businesses Receivables and inventory 216,218 (329,470) Accounts payable and accrued liabilities (224,145) (22,111) Income taxes and other (207,982) (298,158) Cash used for operations (101,029) (119,338) Cash provided by (used for) investment Expenditures for property and equipment (109,269) (228,141) Proceeds from sale of assets 93,119 186,946 Acquisition of businesses (33,028) - Other 1,503 7,400 Cash provided by (used for) investment (47,675) (33,795) Cash provided by (used for) financing Cash dividends paid (40,893) (45,641) Short-term borrowings (10,277) 447,241 Long-term debt, net (202,654) (226,642) Purchase of common shares (780,407) Other 18,833 21,602 Cash provided by (used for) financing (1,015,398) 196,560 Increase (decrease) in cash and cash equivalents (1,164,102) 43,427 Cash and equivalents at beginning of period 1,242,542 124,879 Cash and equivalents at end of period $78,440 $168,306 OFFICEMAX INCORPORATED AND SUBSIDIARIES SEGMENT INFORMATION (unaudited) (thousands) Three Months Ended September 24, September 30, 2005 2004 Segment Sales OfficeMax, Contract $1,144,500 $1,096,192 OfficeMax, Retail 1,143,195 1,138,461 2,287,695 2,234,653 Boise Building Solutions - 1,051,239 Boise Paper Solutions - 531,137 Intersegment eliminations and other - (166,100) $2,287,695 $3,650,929 Segment income (loss) OfficeMax, Contract $33,952 $31,442 OfficeMax, Retail 16,073 26,797 Corporate and Other (31,653) (29,921) 18,372 28,318 Boise Building Solutions - 101,411 Boise Paper Solutions - 20,765 18,372 150,494 Interest expense (31,658) (39,945) Interest income 20,737 455 Income from continuing operations before income taxes and minority interest $7,451 $111,004 Before special items Segment income (loss) OfficeMax, Contract $33,952 $31,442 OfficeMax, Retail 16,073 26,797 Corporate and Other (14,814) (29,921) 35,211 28,318 Boise Building Solutions - 101,411 Boise Paper Solutions - 20,765 35,211 150,494 Interest expense (31,658) (39,945) Interest income 20,737 455 Income from continuing operations before income taxes, minority interest and special items $24,290 $111,004 OFFICEMAX INCORPORATED AND SUBSIDIARIES SEGMENT INFORMATION (unaudited) (thousands) Nine Months Ended September 24, September 30, 2005 2004 Segment Sales OfficeMax, Contract $3,407,114 $3,254,411 OfficeMax, Retail 3,295,185 3,326,121 6,702,299 6,580,532 Boise Building Solutions - 2,958,010 Boise Paper Solutions - 1,500,835 Intersegment eliminations and other - (457,640) $6,702,299 $10,581,737 Segment income (loss) OfficeMax, Contract $76,035 $87,234 OfficeMax, Retail 23,410 39,488 Corporate and Other (86,009) (64,903) 13,436 61,819 Boise Building Solutions - 312,961 Boise Paper Solutions - 47,607 13,436 422,387 Debt retirement expenses (14,391) - Interest expense (96,330) (121,029) Interest income 76,090 1,389 Income (loss) from continuing operations before income taxes and minority interest $(21,195) $302,747 Before special items Segment income (loss) OfficeMax, Contract $85,835 $87,234 OfficeMax, Retail 23,410 39,488 Corporate and Other (51,041) (64,903) 58,204 61,819 Boise Building Solutions - 266,463 Boise Paper Solutions - (12,308) 58,204 315,974 Interest expense (96,330) (121,029) Interest income 76,090 1,389 Income from continuing operations before income taxes, minority interest and special items $37,964 $196,334 (1) Financial Information The interim period consolidated financial statements included in this release are unaudited statements, and should be read in conjunction with the company's 2004 Annual Report on Form 10-K. In all periods presented, net income (loss) involved estimates and accruals. Effective March 11, 2005 we amended our bylaws to make the year-end for OfficeMax Incorporated the last Saturday in December. Prior to this amendment, all of our segments except OfficeMax, Retail had a December 31 year-end. Our international businesses will maintain the December 31 year- end. We will consolidate the calendar year-end results of our international businesses with OfficeMax fiscal-year results. The third fiscal quarter of 2005 ended on September 24, 2005. The third fiscal quarter of 2004 ended on September 30, 2004. As a result of the change in our fiscal year-end, the domestic operations of our OfficeMax Contract segment had one fewer selling day in the third fiscal quarter and five fewer selling days in the first three quarters of 2005 than in the comparable prior year periods. Year-over-year comparisons of same-location sales are calculated based on an equal number of selling days in each year. (2) Reconciliation of Net Income and Diluted Income (Loss) Per Share Before Special Items 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 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 to our reported financial results for the three and nine month periods ended September 24, 2005 and September 30, 2004. OFFICEMAX INCORPORATED AND SUBSIDIARIES SEGMENT INFORMATION (unaudited) (millions, except per-share data) Three Months Ended September 24, 2005 September 30, 2004 Before Before As Special Special As Special Special Reported Items(a) Items(c) Reported Items(b) Items(c) Segment income (loss) OfficeMax, Contract $34.0 $ - $34.0 $31.4 $ - $31.4 OfficeMax, Retail 16.1 - 16.1 26.8 - 26.8 Corporate and Other (31.7) 16.8 (14.8) (29.9) - (29.9) 18.4 16.8 35.2 28.3 - 28.3 Boise Building Solutions - - - 101.4 - 101.4 Boise Paper Solutions - - - 20.8 - 20.8 18.4 16.8 35.2 150.5 - 150.5 Interest expense (31.7) - (31.7) (39.9) - (39.9) Interest income 20.7 - 20.7 0.5 - 0.5 Income from continuing operations before income taxes and minority interest 7.5 16.8 24.3 111.0 - 111.0 Income tax provision (6.7) (5.8) (12.4) (43.6) - (43.6) Income from continuing operations before minority interest 0.8 11.1 11.9 67.4 - 67.4 Minority interest, net of income tax (1.2) - (1.2) (1.1) - (1.1) Income (loss) from continuing operations (0.4) 11.1 10.7 66.3 - 66.3 Discontinued operations Operating loss (5.7) 5.7 - (6.8) 6.8 - Income tax benefit 2.2 (2.2) - 2.6 (2.6) - Loss from discontinued operations (3.5) 3.5 - (4.1) 4.1 - Net income (loss) $(3.9) $14.6 $10.7 $62.2 $4.1 $66.3 Diluted income (loss) per common share Continuing operations $(0.02) $0.16 $0.14 $0.69 $ - $0.69 Discontinued operations (0.05) 0.05 - (0.05) 0.05 - Diluted income (loss) per common share $(0.07) $0.21 $0.14 $0.64 $0.05 $0.69 Totals may not foot due to rounding. (a) See Notes 5 and 6 for a discussion of these special items. (b) See Notes 4 and 6 for a discussion of these special items. (c) For purpose of evaluating our results, net of taxes, both before and after special items, we have presented the results before special items using an estimated annual tax rate excluding special items. The actual tax benefits for the special items may be less than presented. For purpose of presenting diluted income (loss) per common share before special items, we excluded the special items from the calculation of diluted income (loss) per common share without adjustments for potential dilution which is consistent with the calculation of as reported diluted income (loss) per common share. If adjustments for potential dilution are included, outstanding shares would have increased by approximately 1.1 million shares. OFFICEMAX INCORPORATED AND SUBSIDIARIES SEGMENT INFORMATION (unaudited) (millions, except per-share data) Nine Months Ended September 24, 2005 September 30, 2004 Before Before As Special Special As Special Special Reported Items(a) Items(c) Reported Items(b) Items(c) Segment income (loss) OfficeMax, Contract $76.0 $9.8 $85.8 $87.2 $ - $87.2 OfficeMax, Retail 23.4 - 23.4 39.5 - 39.5 Corporate and Other (86.0) 35.0 (51.0) (64.9) - (64.9) 13.4 44.8 58.2 61.8 - 61.8 Boise Building Solutions - - - 313.0 (46.5) 266.5 Boise Paper Solutions - - - 47.6 (59.9) (12.3) 13.4 44.8 58.2 422.4 (106.4) 316.0 Debt retirement expenses (14.4) 14.4 - - - - Interest expense (96.3) - (96.3) (121.0) - (121.0) Interest income 76.1 - 76.1 1.4 - 1.4 Income (loss) from continuing operations before income taxes and minority interest (21.2) 59.2 38.0 302.7 (106.4) 196.3 Income tax (provision) benefit 5.1 (22.9) (17.8) (113.8) 41.4 (72.4) Income (loss) from continuing operations before minority interest (16.1) 36.3 20.2 189.0 (65.0) 123.9 Minority interest, net of income tax (2.5) - (2.5) (2.4) - (2.4) Income (loss) from continuing operations (18.6) 36.3 17.6 186.6 (65.0) 121.5 Discontinued operations Operating loss (19.7) 19.7 - (23.2) 23.2 - Income tax benefit 7.7 (7.7) - 9.0 (9.0) - Loss from discontinued operations (12.1) 12.1 - (14.2) 14.2 - Net income (loss) $(30.7) $48.3 $17.6 $172.4 $(50.8) $121.5 Diluted income (loss) per common share Continuing operations $(0.27) $0.44 $0.17 $1.94 $(0.71) $1.23 Discontinued operations (0.15) 0.15 - (0.16) 0.16 - Diluted income (loss) per common share $(0.42) $0.59 $0.17 $1.78 $(0.55) $1.23 Totals may not foot due to rounding. (a) See Notes 5 and 6 for a discussion of these special items. (b) See Notes 4 and 6 for a discussion of these special items. (c) For purpose of evaluating our results, net of taxes, both before and after special items, we have presented the results before special items using an estimated annual tax rate excluding special items. The actual tax benefits for the special items may be less than presented. For purpose of presenting diluted income (loss) per common share before special items, we excluded the special items from the calculation of diluted income (loss) per common share without adjustments for potential dilution which is consistent with the calculation of as reported diluted income (loss) per common share. If adjustments for potential dilution are included, outstanding shares would have increased by approximately 1.2 million shares. (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, LLC a new company formed by Madison Dearborn Partners LLC. Some assets, such as a wood-polymer building materials business that is in preproduction testing and company-owned life insurance, were retained by OfficeMax, as were some liabilities associated with retiree pensions and other post-retirement benefits, litigation, environmental remediation at selected sites and facilities previously closed. The assets that we sold were included in our Boise Building Solutions and Boise Paper Solutions segments. On October 29, 2004, we invested $175 million in securities of affiliates of Boise Cascade, LLC. 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 note and cash proceeds of approximately $3.5 billion from the sale, after allowing for the $175 million reinvestment and transaction-related expenses. The consideration for the timberlands portion of the transaction included $1.6 billion of timber installment notes receivable. We securitized the timber installment notes in December and received cash of $1.5 billion. For more information about the sale of our paper, forest products and timberland assets, and the securitization of the timber installment notes, see our 2004 Annual Report on Form 10-K. (4) 2004 Special Items First Quarter 2004 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. Second Quarter 2004 In May 2004, we sold our 47% interest in Voyageur Panel to Ainsworth Lumber Co. Ltd. for $96.5 million of cash. We recorded a $46.5 million gain in "Other income (expense)" in our Boise Building Solutions segment. (5) 2005 Special Items First Quarter 2005 During the quarter ended March 26, 2005, results of our Corporate and Other segment included expenses for severance which were partially offset by a settlement gain from a previous asset sale, together netting $8.7 million. We also recorded a $9.8 million legal reserve in our Contract segment related to a settlement with the Department of Justice. During the quarter ended March 26, 2005, we incurred costs related to the early buyback of debt of $12.2 million. Second Quarter 2005 During the quarter ended June 25, 2005, we incurred net expenses of $9.4 million including expenses for severance of approximately $5.5 million and other expenses, primarily professional service fees, which were included in our Corporate and Other segment and are not expected to be ongoing. During the quarter ended June 25, 2005, we incurred costs related to the early buyback of debt of $2.2 million. Third Quarter 2005 During the quarter ended September 24, 2005, we incurred expenses related to the previously announced headquarters consolidation, primarily for employee severance and retention of approximately $10.4 million. Also during the quarter, we incurred other expenses for severance unrelated to the headquarters consolidation and asset write-offs of approximately $6.4 million, which are not expected to be ongoing. (6) Discontinued Operations 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 all periods presented in this release. During the three and nine months ended September 24, 2005, this facility had operating losses, net of taxes, of $3.5 million and $12.1 million, respectively. During the three and nine months ended September 30, 2004, this facility had operating losses, net of taxes, of $4.1 million and $14.2 million, respectively. (7) Income Taxes Our estimated effective tax benefit rate applicable to continuing operations for the nine months ended September 24, 2005, was 24.0%, compared with an effective tax provision rate applicable to continuing operations of 37.6% for the nine months ended September 30, 2004. The difference between the estimated tax rates is primarily due to the impact of non-deductible special items as well as the sensitivity of the rate to changing income levels and the mix of domestic and foreign sources of income. (8) 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 and nine months ended September 24, 2005, the computation of diluted income (loss) per share was antidilutive; therefore, amounts reported for basic and diluted income (loss) were the same. OFFICEMAX INCORPORATED AND SUBSIDIARIES NET INCOME (LOSS) PER SHARE (unaudited) (thousands, except per-share amounts) Three Months Ended September 24, September 30, 2005 2004 BASIC Income (loss) from continuing operations $ (380) $66,303 Preferred dividends (1,093) (3,242) Basic income before discontinued operations (1,473) 63,061 Loss from discontinued operations (3,493) (4,134) Basic income (loss) $(4,966) $58,927 Average shares used to determine basic income (loss) per common share 70,711 86,864 Basic income (loss) per common share Continuing operations $(0.02) $0.73 Discontinued operations (0.05) (0.05) Basic income (loss) per common share $(0.07) $0.68 DILUTED Basic income before discontinued operations $(1,473) $63,061 Preferred dividends eliminated - 3,242 Supplemental ESOP contribution - (2,971) Diluted income before discontinued operations (1,473) 63,332 Loss from discontinued operations (3,493) (4,134) Diluted income (loss) (a) $(4,966) $59,198 Average shares used to determine basic income (loss) per common share 70,711 86,864 Restricted stock, stock options and other - 1,982 Series D Convertible Preferred Stock - 3,170 Average shares used to determine diluted income (loss) per common share 70,711 92,016 Diluted income (loss) per common share Continuing operations $(0.02) $0.69 Discontinued operations (0.05) (0.05) Diluted income (loss) per common share $(0.07) $0.64 (a) Adjustments totaling $0.6 million for the quarter ending September 24, 2005 were not included in the computation of diluted income (loss) per common share because the impact would have been anti-dilutive due to the net loss recognized in the third quarter of 2005. OFFICEMAX INCORPORATED AND SUBSIDIARIES NET INCOME (LOSS) PER SHARE (unaudited) (thousands, except per-share amounts) Nine Months Ended September 24, September 30, 2005 2004 BASIC Income from continuing operations $(18,639) $186,562 Preferred dividends (a) (3,354) (9,776) Basic income before discontinued operations (21,993) 176,786 Loss from discontinued operations (12,064) (14,199) Basic income (loss) $(34,057) $162,587 Average shares used to determine basic income (loss) per common share 81,667 86,472 Basic income (loss) per common share Continuing operations $(0.27) $2.04 Discontinued operations (0.15) (0.16) Basic income (loss) per common share $(0.42) $1.88 DILUTED Basic income before discontinued operations $(21,993) $176,786 Preferred dividends eliminated - 9,776 Supplemental ESOP contribution - (8,903) Diluted income before discontinued operations (21,993) 177,659 Loss from discontinued operations (12,064) (14,199) Diluted income (loss) (b) $(34,057) $163,460 Average shares used to determine basic income (loss) per common share 81,667 86,472 Restricted stock, stock options and other - 1,947 Series D Convertible Preferred Stock - 3,244 Average shares used to determine diluted income (loss) per common share 81,667 91,663 Diluted income (loss) per common share Continuing operations $(0.27) $1.94 Discontinued operations (0.15) (0.16) Diluted income (loss) per common share $(0.42) $1.78 (a) The September 30, 2004 dividend attributable to the company's Series D Convertible Preferred Stock held by the company's ESOP (employee stock ownership plan) is net of a tax benefit. (b) Adjustments totaling $1.8 million for the quarter ending September 24, 2005 were not included in the computation of diluted income (loss) per common share because the impact would have been anti-dilutive due to the net loss recognized in the nine months ended September 24, 2005. Media Contact Investor Contact Bill Bonner John Jennings 630-438-8584 630-438-8760 DATASOURCE: OfficeMax(R) Incorporated CONTACT: Media: Bill Bonner, +1-630-438-8584, or Investors: John Jennings, +1-630-438-8760, both of OfficeMax Web site: http://www.officemax.com/

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