NAPERVILLE, Ill., Nov. 1 /PRNewswire-FirstCall/ -- OfficeMax(R)
Incorporated (NYSE:OMX) today announced the results for its third
quarter ended September 29, 2007. Total sales increased 3.2% to
$2.3 billion in the third quarter of 2007 compared to $2.2 billion
in the third quarter of 2006. Net income increased to $49.9
million, or $.64 per diluted share, in the third quarter of 2007
from $31.4 million, or $.41 per diluted share, in the third quarter
of 2006. The third quarter of 2006 included items which are not
expected to be ongoing. All financial measures designated in this
release as "adjusted" are non-GAAP financial measures that exclude
the effect of certain special items. A detailed description of
prior quarter special items, and a reconciliation to the company's
GAAP financial results, are included in this press release. Net
income in the third quarter of 2007 increased 16% from adjusted net
income in the third quarter of 2006 of $43.2 million, or $.56 per
diluted share. "Our results for the third quarter showed continued
progress on our turnaround plans, even as we operated in a weaker
economic environment that has had some impact on both our Contract
and Retail operating segments," said Sam Duncan, Chairman and CEO
of OfficeMax. "We are pleased that the actions we took earlier this
year to reorganize and improve performance in our Contract division
are generating positive results. In U.S. Contract, we reduced
operating costs and expanded operating margin in the third quarter
of 2007. In our Retail segment, operating margin declined primarily
due to a category mix shift toward lower margin product sales that
we could not offset with cost controls within the quarter. We
continue to adjust our Retail promotional strategies and pursue
other cost containment measures to improve our Retail operating
margin." Contract Segment Results OfficeMax Contract segment sales
increased 2.4% to $1.2 billion in the third quarter of 2007
compared to the third quarter of 2006, reflecting a U.S. Contract
sales decline of 1.9% offset by International Contract operations
sales growth of 16.2% in U.S. dollars, or 4.3% in local currencies.
U.S. Contract sales declined in the third quarter of 2007 compared
to the prior year period, primarily due to lower sales from
existing customer accounts, and from the company's initiative to be
more disciplined in new account acquisition. Contract segment gross
margin decreased to 22.1% in the third quarter of 2007 from 22.3%
in the third quarter of 2006, primarily due to the continued impact
of new and renewing large corporate accounts with lower gross
margin rates and the impact of paper price increases. Contract
segment operating expense as a percent of sales in the third
quarter of 2007 improved to 17.5% from adjusted operating expense
as a percent of sales of 18.4% in the third quarter of 2006,
primarily due to effective cost management in U.S. Contract, lower
incentive compensation costs, and expense leverage in International
Contract operations. Contract segment operating income in the third
quarter of 2007 increased to $55.0 million, or 4.6% of sales, from
adjusted operating income in the third quarter of 2006 of $45.7
million, or 3.9% of sales. Retail Segment Results OfficeMax Retail
segment sales increased 4.0% to $1.1 billion in the third quarter
of 2007 compared to the third quarter of 2006, reflecting the
impact of new stores and same-store sales increase of 0.8%. Retail
same store sales in the third quarter of 2007 were favorably
impacted by same store sales growth in technology categories and
ImPress, partially offset by same store sales declines in core
office supplies and furniture categories. Third quarter 2007 Retail
sales trends reflected moderate improvement in Back-to-School
season sales and some weakness in consumer and small business
customer purchases. Retail segment gross margin decreased to 28.9%
in the third quarter of 2007 from 30.1% in the third quarter of
2006, primarily due to the impact of a shift in the mix of sales to
a higher percentage of technology category sales at lower gross
margin rates and a lower percentage of core office supplies and
furniture category sales which typically generate higher gross
margin rates. Retail segment operating expense as a percent of
sales improved to 24.9% in the third quarter of 2007 from 25.1% in
the third quarter of 2006, primarily due to lower incentive
compensation costs, partially offset by higher store labor costs.
Retail segment operating income decreased to $45.3 million, or 4.0%
of sales, in the third quarter of 2007 from $54.8 million, or 5.0%
of sales, in the third quarter of 2006. During the third quarter of
2007, OfficeMax opened 9 retail stores in the U.S., closed 1 retail
store in the U.S., and opened 3 retail stores in Mexico. OfficeMax
ended the third quarter of 2007 with 869 retail stores in the U.S.
and 65 retail stores in Mexico for 934 total retail stores,
compared with 884 total retail stores at the end of the third
quarter of 2006. The company continues to expect a total of
approximately 60 new retail store openings in the U.S. for the full
year 2007. Corporate and Other Segment Results The OfficeMax
Corporate and Other segment includes support staff services and
certain other expenses that are not fully allocated to the Retail
and Contract segments. Corporate and Other segment operating
expense in the third quarter of 2007 decreased to $10.0 million
from adjusted operating expense of $18.8 million in the third
quarter of 2006, primarily due to lower incentive compensation
costs and reduced legacy-related costs. As of September 29, 2007,
OfficeMax reported total debt of $384.4 million excluding $1.5
billion of timber securitization notes. OfficeMax used $9.1 million
of cash from operations in the third quarter of 2007, a decrease of
$197.9 million from the third quarter of 2006, primarily due to the
termination of the company's accounts receivable securitization
program in July 2007. OfficeMax invested $41.9 million for capital
expenditures in the third quarter of 2007 compared to $49.8 million
in the third quarter of 2006. The company expects capital
expenditures to total between $140 and $160 million for the full
year 2007. Mr. Duncan concluded, "While we are pleased to have made
progress in our 2007 turnaround initiatives, opportunities remain
across our business for improvement. We are focused on driving
profitable sales, controlling expenses, and increasing operating
margin. In our Contract segment, we continue to instill discipline
in signing on new accounts, enable cost savings to our customers
and better profitability to OfficeMax, and position us for
aggressive middle market sales growth. In our Retail segment, we
remain committed to effective category management and promotional
strategies, controlling and leveraging costs, and implementing our
real estate strategy." Forward-Looking Statements Certain
statements made in this press release and other written or oral
statements made by or on behalf of the company constitute
"forward-looking statements" within the meaning of the federal
securities laws, including statements regarding the company's
future performance, as well as management's expectations, beliefs,
intentions, plans, estimates or projections relating to the future.
Management believes that these forward-looking statements are
reasonable. However, the company cannot guarantee that it will
successfully execute its turnaround plans or that its actual
results will be consistent with the forward-looking statements and
you should not place undue reliance on them. These statements are
based on current expectations and speak only as of the date they
are made. The company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of
future events, new information or otherwise. Important factors
regarding the company which may cause results to differ from
expectations are included in the company's Annual Report on Form
10-K for the year ended December 30, 2006, under Item 1A "Risk
Factors", and in the company's other filings with the SEC.
Conference Call Information OfficeMax will host a conference call
with analysts and investors today to discuss its third quarter 2007
financial results at 9:00 a.m. Eastern Time (8:00 a.m. Central
Time). To participate in the conference call, dial (800) 374-0165;
international callers should dial (706) 634-0995. An audio webcast
of the conference call can be accessed via the Internet by visiting
the Investors section of the OfficeMax website at
http://investor.officemax.com/. The webcast will be archived and
available online for one year following the call and will be posted
on the "Presentations" page located within the Investors section of
the OfficeMax website. About OfficeMax OfficeMax Incorporated
(NYSE:OMX) is a leader in both business-to-business office products
solutions and retail office products. The OfficeMax mission is
simple. We help our customers do their best work. The company
provides office supplies and paper, in-store print and document
services through OfficeMax ImPress(TM), technology products and
solutions, and furniture to consumers and to large, medium and
small businesses. OfficeMax customers are served by over 36,000
associates through direct sales, catalogs, e-commerce and more than
900 stores. To find the nearest OfficeMax, call 1-877-OFFICEMAX.
For more information, visit http://www.officemax.com/. Media
Contact Investor Relations Contact Bill Bonner John Jennings 630
864 6066 630 864 6820 OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (thousands) September 29,
December 30, 2007 2006 ASSETS Current assets: Cash and cash
equivalents $147,351 $282,070 Receivables, net 757,162 562,528
Inventories 997,613 1,071,486 Other current assets 130,293 180,760
Total current assets 2,032,419 2,096,844 Property and equipment:
Property and equipment 1,256,114 1,189,686 Accumulated depreciation
(675,130) (610,061) Property and equipment, net 580,984 579,625
Goodwill and intangible assets, net 1,442,268 1,417,336 Timber
notes receivable 1,635,000 1,635,000 Other non-current assets
418,353 487,243 Total assets $6,109,024 $6,216,048 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings $28
$- Current portion of long-term debt 34,888 25,634 Accounts payable
844,442 997,700 Accrued liabilities and other 505,571 505,569 Total
current liabilities 1,384,929 1,528,903 Long-term debt: Long-term
debt, less current portion 349,517 384,246 Timber notes securitized
1,470,000 1,470,000 Total long-term debt 1,819,517 1,854,246 Other
long-term obligations: Compensation and benefits 266,139 287,122
Other long-term liabilities 450,623 530,248 Total other long-term
liabilities 716,762 817,370 Minority interest 30,997 29,885
Shareholders' equity: Preferred stock 51,249 54,735 Common stock
188,462 187,226 Additional paid-in capital 913,079 893,848 Retained
earnings 1,035,937 941,830 Accumulated other comprehensive loss
(31,908) (91,995) Total shareholders' equity 2,156,819 1,985,644
Total liabilities and shareholders' equity $6,109,024 $6,216,048
OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
INCOME (LOSS) (unaudited) (thousands, except per-share amounts)
Quarter Ended September 29, September 30, 2007 2006 Sales
$2,315,219 $2,244,414 Cost of goods sold and occupancy costs
1,727,161 1,659,603 Gross profit 588,058 584,811 Operating and
other expenses: Operating and selling 419,765 413,185 General and
administrative 79,581 91,479 Other operating (income) expense, net
(1,521) 17,860 Operating income 90,233 62,287 Other income
(expense): Interest expense (31,220) (30,557) Interest income
21,814 22,900 Other income (expense), net (179) (1,401) (9,585)
(9,058) Income from continuing operations before income taxes and
minority interest 80,648 53,229 Income tax expense (29,080)
(20,250) Income from continuing operations before minority interest
51,568 32,979 Minority interest, net of income tax (1,639) (1,604)
Income from continuing operations 49,929 31,375 Net income 49,929
31,375 Preferred dividends (931) (1,009) Net income applicable to
common shareholders $48,998 $30,366 Basic income (loss) per common
share: Continuing operations $0.65 $0.41 Discontinued operations -
- Basic income (loss) per common share $0.65 $0.41 Diluted income
(loss) per common share: Continuing operations $0.64 $0.41
Discontinued operations - - Diluted income (loss) per common share
$0.64 $0.41 Weighted Average Shares Basic 75,376 74,235 Diluted
76,558 74,779 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (LOSS) (unaudited) (thousands, except
per-share amounts) Nine Months Ended September 29, September 30,
2007 2006 Sales $6,883,890 $6,708,902 Cost of goods sold and
occupancy costs 5,136,809 4,978,340 Gross profit 1,747,081
1,730,562 Operating and other expenses: Operating and selling
1,233,114 1,231,529 General and administrative 262,237 267,383
Other operating (income) expense, net (4,543) 131,156 Operating
income 256,273 100,494 Other income (expense): Interest expense
(91,296) (92,274) Interest income 66,628 66,117 Other income
(expense), net (5,858) 3,160 (30,526) (22,997) Income from
continuing operations before income taxes and minority interest
225,747 77,497 Income tax expense (85,669) (29,540) Income from
continuing operations before minority interest 140,078 47,957
Minority interest, net of income tax (4,174) (3,293) Income from
continuing operations 135,904 44,664 Discontinued operations:
Operating loss - (17,972) Income tax benefit - 6,991 Loss from
discontinued operations - (10,981) Net income 135,904 33,683
Preferred dividends (2,947) (3,027) Net income applicable to common
shareholders $132,957 $30,656 Basic income (loss) per common share:
Continuing operations $1.77 $0.57 Discontinued operations - (0.15)
Basic income (loss) per common share $1.77 $0.42 Diluted income
(loss) per common share: Continuing operations $1.74 $0.57
Discontinued operations - (0.15) Diluted income (loss) per common
share $1.74 $0.42 Weighted Average Shares Basic 75,237 72,648
Diluted 76,298 73,251 OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (thousands) Nine
Months Ended September 29, September 30, 2007 2006 Cash provided by
(used for) operations: Net income $135,904 $33,683 Items in net
income not using (providing) cash: Depreciation and amortization
97,512 92,570 Other 29,174 46,821 Changes other than from
acquisitions of business: Receivables and inventory (87,239)
254,862 Accounts payable and accrued liabilities (205,878)
(133,226) Income taxes and other 61,980 45,062 Cash provided by
operations 31,453 339,772 Cash provided by (used for) investment:
Expenditures for property and equipment (101,339) (96,775) Proceeds
from sale of assets 1,200 4,438 Acquisition of businesses (1,948) -
Cash used for investment (102,087) (92,337) Cash provided by (used
for) financing: Cash dividends paid (35,758) (34,376) Changes in
debt, net (25,482) (84,144) Proceeds from exercise of stock options
5,852 112,682 Other (10,022) (34) Cash used for financing (65,410)
(5,872) Effect of exchange rates on cash and cash equivalents 1,325
(7) Increase (decrease) in cash and cash equivalents (134,719)
241,556 Cash and cash equivalents at beginning of period 282,070
72,198 Cash and cash equivalents at end of period $147,351 $313,754
OFFICEMAX INCORPORATED AND SUBSIDIARIES SUPPLEMENTAL SEGMENT
INFORMATION (unaudited) (millions, except per-share data) Quarter
Ended September 29, 2007 September 30, 2006 As As Special As As
Special Adjusted Reported Items Adjusted Reported Items(a) (b)
Segment Sales OfficeMax, Contract $1,185.7 $1,185.7 $1,158.3
$1,158.3 OfficeMax, Retail 1,129.5 1,129.5 1,086.1 1,086.1 2,315.2
2,315.2 2,244.4 2,244.4 Segment income (loss) OfficeMax, Contract
$55.0 $- $55.0 $37.8 $7.9 $45.7 OfficeMax, Retail 45.3 - 45.3 54.8
- 54.8 Corporate and Other (10.0) - (10.0) (30.3) 11.5 (18.8)
Operating income (loss) 90.3 - 90.3 62.3 19.4 81.7 Operating income
margin 3.9% 3.9% 2.8% 3.6% Interest expense (31.2) - (31.2) (30.6)
- (30.6) Interest income and other 21.6 - 21.6 21.5 - 21.5 Income
(loss) from continuing operations before income taxes and minority
interest 80.7 - 80.7 53.2 19.4 72.6 Income taxes (29.1) - (29.1)
(20.2) (7.6) (27.8) Income (loss) from continuing operations before
minority interest 51.6 - 51.6 33.0 11.8 44.8 Minority interest, net
of income tax (1.7) - (1.7) (1.6) - (1.6) Income (loss) from
continuing operations 49.9 - 49.9 31.4 11.8 43.2 Net income $49.9
$- $49.9 $31.4 $11.8 $43.2 Diluted income (loss) per common share
Continuing operations $0.64 $- $0.64 $0.41 $0.15 $0.56 Discontinued
operations - - - - - - Diluted income (loss) per common share $0.64
$- $0.64 $0.41 $0.15 $0.56 Totals may not foot due to rounding. (a)
See Note 3 for a discussion of these special items. (b) For the
purpose of evaluating our results, net of taxes, we have presented
the results before special items using an estimated annual tax
rate. For the purpose of presenting diluted income (loss) per
common share before special items, we calculated diluted income
(loss) per common share before special items without making any
adjustments to the number of shares used in the calculation of
diluted income (loss) per common share as reported. OFFICEMAX
INCORPORATED AND SUBSIDIARIES SUPPLEMENTAL SEGMENT INFORMATION
(unaudited) (millions, except per-share data) Nine Months Ended
September 29, 2007 September 30, 2006 As As Special As As Special
Adjusted Reported Items(a) Adjusted Reported Items(b) (c) Segment
Sales OfficeMax, Contract $3,647.3 $3,647.3 $3,535.8 $3,535.8
OfficeMax, Retail 3,236.6 3,236.6 3,173.1 3,173.1 6,883.9 6,883.9
6,708.9 6,708.9 Segment income (loss) OfficeMax, Contract $155.9 $-
$155.9 $149.3 $7.9 $157.2 OfficeMax, Retail 134.6 - 134.6 44.0 89.5
133.5 Corporate and Other (34.2) - (34.2) (92.8) 38.1 (54.7)
Operating income (loss) 256.3 - 256.3 100.5 135.5 236.0 Operating
income margin 3.7% 3.7% 1.5% 3.5% Interest expense (91.3) - (91.3)
(92.3) - (92.3) Interest income and other 60.8 - 60.8 69.3 (9.2)
60.1 Income (loss) from continuing operations before income taxes
and minority interest 225.8 - 225.8 77.5 126.3 203.8 Income taxes
(85.7) - (85.7) (29.5) (49.2) (78.7) Income (loss) from continuing
operations before minority interest 140.1 - 140.1 48.0 77.1 125.1
Minority interest, net of income tax (4.2) 1.1 (3.1) (3.3) - (3.3)
Income (loss) from continuing operations 135.9 1.1 137.0 44.7 77.1
121.8 Discontinued operations Operating loss - - - (18.0) 18.0 -
Income tax benefit - - - 7.0 (7.0) - Loss from discontinued
operations - - - (11.0) 11.0 - Net income $135.9 $1.1 $137.0 $33.7
$88.1 $121.8 Diluted income (loss) per common share Continuing
operations $1.74 $0.02 $1.76 $0.57 $1.05 $1.62 Discontinued
operations - - - (0.15) 0.15 - Diluted income (loss) per common
share $1.74 $0.02 $1.76 $0.42 $1.20 $1.62 Totals may not foot due
to rounding. (a) See Note 4 for a discussion of these special
items. (b) See Notes 3 and 5 for a discussion of these special
items. (c) For the purpose of evaluating our results, net of taxes,
we have presented the results before special items using an
estimated annual tax rate. For the purpose of presenting diluted
income (loss) per common share before special items, we calculated
diluted income (loss) per common share before special items without
making any adjustments to the number of shares used in the
calculation of diluted income (loss) per common share as reported.
(1) Financial Information The quarterly and annual consolidated
financial statements included in this release are unaudited, and
should be read in conjunction with the audited financial statements
in our 2006 Annual Report on Form 10-K. In all periods presented,
the measurement of net income (loss) involved estimates and
judgments. (2) Reconciliation of non-GAAP Measures to GAAP Measures
We evaluate our results of operations both before and after certain
gains and losses that management believes are not indicative of our
core operating activities. We believe our presentation of financial
measures before, or excluding, these items, which are non-GAAP
measures, enhances our investors' overall understanding of our
recurring operational performance and provides useful information
to both investors and management to evaluate the ongoing operations
and prospects of OfficeMax by providing better comparisons.
Whenever we use non-GAAP financial measures, we designate these
measures, which exclude the effect of certain special items, as
"adjusted" and provide a reconciliation of non-GAAP financial
measures to the most closely applicable GAAP financial measure.
Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial measure.
In the preceding tables, we reconcile our financial measures before
special items to our reported GAAP financial results for the third
quarter and first nine months of both 2007 and 2006. Although we
believe the non-GAAP financial measures enhance an investor's
understanding of our performance, our management does not itself,
nor does it suggest that investors should, consider such non-GAAP
financial measures in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. The
non-GAAP financial measures we use may not be consistent with the
presentation of similar companies in our industry. However, we
present such non-GAAP financial measures in reporting our financial
results to provide investors with an additional tool to evaluate
our operating results in a manner that focuses on what we believe
to be our ongoing business operations. (3) 2006 Special Items First
Quarter 2006 During the first quarter of 2006, we closed 109
underperforming domestic retail stores and recorded a charge of
$98.6 million in our Retail segment primarily for remaining lease
obligations and we incurred $15.7 million of expenses in our
Corporate and Other segment related to our headquarters
consolidation primarily for employee severance and retention.
Second Quarter 2006 During the second quarter of 2006, we recorded
a $9.0 million pre-tax benefit in our Retail segment from an
adjustment to the reserve for closed retail stores, and we incurred
$10.9 million of expenses in our Corporate and Other segment
related to our headquarters consolidation, primarily for employee
severance and retention. Also during the second quarter of 2006, we
recognized a $9.2 million credit from an adjustment to the reserve
for the additional consideration agreement that was entered into in
connection with the October 2004 sale of our paper, forest products
and timberland assets. This adjustment is included in Other, income
(expense) net. Third Quarter 2006 During the third quarter of 2006,
we incurred $11.5 million of expenses in our Corporate and Other
segment related to our headquarters consolidation, and incurred
$7.9 million of expenses in our Contract segment related to our
Contract reorganization primarily for severance. (4) 2007 Special
Items First Quarter 2007 During the first quarter of 2007, we sold
OfficeMax Contract's operations in Mexico to OfficeMax de Mexico,
our 51% owned joint venture, resulting in a net loss of $1.1
million which is included in minority interest, net of income tax
in our Consolidated Statements of Income (Loss) for 2007. (5)
Discontinued Operations In the first quarter of 2006, we ceased
operations at the Company's wood-polymer building materials
facility near Elma, Washington. The costs and expenses related to
this business are reflected as discontinued operations in our
Consolidated Statements of Income (Loss) for 2006 and are included
as special items in our Segment Information tables. DATASOURCE:
OfficeMax Incorporated CONTACT: Media, Bill Bonner,
+1-630-864-6066, or investors, John Jennings, +1-630-864-6820, both
of OfficeMax Incorporated Web site: http://www.officemax.com/
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