OMX Officemax Incorporated

- First Quarter Net Income of $13.1 Million, or $0.17 Per Diluted Share NAPERVILLE, Ill., April 30 /PRNewswire-FirstCall/ -- OfficeMax Incorporated (NYSE:OMX) today announced the results for its first quarter ended March 28, 2009. Total sales decreased 17.0% in the first quarter of 2009 to $1,911.7 million compared to the first quarter of 2008. Net income (available to OfficeMax common shareholders) decreased in the first quarter of 2009 to $13.1 million, or $0.17 per diluted share, from $62.4 million, or $0.81 per diluted share in the first quarter of 2008. Sam Duncan, Chairman and CEO of OfficeMax, said, "Although our financial results declined in the first quarter versus the prior year period, we continued to make improvements to our business and to contain costs. We believe the actions we have been taking significantly benefited our company's performance this quarter. We improved Retail segment operating expense as a percentage of sales compared to the first quarter of 2008 as a result of reorganizing our management, more efficient execution, and tighter cost controls. Our efforts to streamline our business are enabling us to operate profitably and preserve cash and liquidity to carry us through this very challenging economic environment." Results for the first quarter of 2009 and 2008 included certain charges and income that are not considered indicative of core operating activities. First quarter 2009 results included a $9.9 million pre-tax charge related to Retail store closures in the U.S. and Mexico, and a pre-tax benefit of $2.5 million recorded as other income related to tax distributions from the company's investment in Boise Cascade, L.L.C. First quarter 2008 results included a pre-tax $20.5 million benefit recorded as other income related to tax distributions from the company's investment in Boise Cascade, L.L.C., which was partly offset by a $4.2 million pre-tax charge related to the consolidation of manufacturing facilities in New Zealand and employee severance for restructuring the Retail field and ImPress print and document services management organization. Excluding the items described above, adjusted net income in the first quarter of 2009 was $17.4 million, or $0.23 per diluted share, compared to adjusted net income of $52.6 million, or $0.68 per diluted share in the first quarter of 2008. The company has calculated adjusted income and earnings per share which are non-GAAP financial measures that exclude the effect of certain charges and income described in footnotes to the accompanying financial statements. A reconciliation to the company's GAAP financial results is included in this press release. Contract Segment Results OfficeMax Contract segment sales decreased 22.4% (15.4% after adjusting for the foreign currency exchange impact) to $927.6 million in the first quarter of 2009 compared to the first quarter of 2008, reflecting a U.S. Contract operations sales decline of 18.9%, and an International Contract operations sales decline of 30.1% in U.S. dollars (a sales decrease of 7.6% in local currencies). U.S. Contract sales in the first quarter reflect weaker sales from existing corporate accounts and our continued discipline in account acquisition. Contract segment gross margin decreased to 21.0% in the first quarter of 2009 from 22.7% in the first quarter of 2008, primarily due to softer market conditions and a sales mix shift to a higher percentage of lower-margin consumable items. Contract segment operating expense as a percentage of sales increased to 18.7% in the first quarter of 2009 from 17.5% in the first quarter of 2008, primarily due to deleveraging of fixed operating expenses from lower sales. Contract segment adjusted operating income decreased to $21.5 million, or 2.3% of sales, in the first quarter of 2009 compared to adjusted operating income of $62.0 million, or 5.2% of sales, in the first quarter of 2008. Retail Segment Results OfficeMax Retail segment sales decreased 11.2% to $984.1 million in the first quarter of 2009 compared to the first quarter of 2008, reflecting a same-store sales decrease of 12.7%, partially offset by sales from new stores. Retail same-store sales for the first quarter of 2009 declined across all major product categories primarily due to weaker small business and consumer spending. Retail segment gross margin decreased to 27.5% in the first quarter of 2009 from 28.5% in the first quarter of 2008, primarily due to deleveraging of fixed occupancy costs from the same-store sales decrease and new stores, and a sales mix shift to a higher percentage of lower-margin technology category sales, partially offset by improved margins on certain products. Retail segment operating expense as a percentage of sales was 24.9% in the first quarter of 2009 compared to 25.7% in the first quarter of 2008, and reflects reduced payroll, targeted cost controls, and reduced depreciation expense as a result of store impairment charges incurred in 2008; partially offset by deleveraging of fixed operating expenses from lower sales. Retail segment adjusted operating income decreased to $25.3 million, or 2.6% of sales, in the first quarter of 2009 from adjusted operating income of $31.2 million, or 2.8% of sales, in the first quarter of 2008. OfficeMax ended the first quarter of 2009 with a total of 1,020 retail stores, consisting of 939 retail stores in the U.S. and 81 retail stores in Mexico. During the first quarter of 2009, OfficeMax opened 6 retail stores in the U.S., and closed 6 stores in the U.S. and 2 in Mexico. For the full year 2009, OfficeMax expects to open up to 12 retail stores, and to close between 15 and 25 retail stores. 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 was $9.4 million in the first quarter of 2009. Balance Sheet and Cash Flow As of March 28, 2009, OfficeMax had total debt of $342.2 million, excluding $1,470.0 million of timber securitization notes, which have recourse limited to the timber installment notes receivable and related guarantees. As of March 28, 2009, OfficeMax had $149.3 million in cash and cash equivalents, and $486 million in available (unused) borrowing capacity under its $700 million revolving credit facility. The company's unused borrowing capacity as of March 28, 2009 reflects an available borrowing base of $551 million, no outstanding borrowings, and $65 million of letters of credit issued under the revolving credit facility. During the first quarter of 2009, OfficeMax generated $3.1 million of cash from operations, a decrease from the first quarter of 2008 primarily due to lower net earnings and the timing and associated decrease of payables and accruals, mitigated by reduced inventory levels. OfficeMax invested $10.9 million for capital expenditures in the first quarter of 2009 compared to $33.3 million in the first quarter of 2008. OfficeMax expects capital expenditures for full year 2009 to be in the range of $50 million to $70 million. Outlook In the near-term, April sales trends, including the negative impact of the timing of the Easter holiday, are more unfavorable compared to the first quarter trends. With respect to the full year, given the projected weak economic outlook, OfficeMax remains cautious in its expectations for 2009. The company expects sales to decline in 2009 on a year-over-year basis as a result of the difficult economic environment. In addition, the company is cycling significant expense reductions completed in 2008. As a result of these factors, and based on the current outlook, OfficeMax expects continued deleveraging of costs and expenses for the remainder of 2009. Mr. Duncan concluded, "We are committed to placing OfficeMax in a stronger position for when the macro economy and industry trends improve. To do this, we are executing important initiatives that are centered on three key areas: growth, differentiation, and productivity. Further, we are strictly managing capital and we remain confident in our ability to generate positive cash flow for the year. We believe that all of our efforts will help us navigate the current environment and strengthen our business for the long-term." 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 future events will not impact the company's access to cash or the funds available under its revolving credit facility, 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 27, 2008, under Item 1A "Risk Factors", and in the company's other filings with the SEC. Conference Call Information OfficeMax will host a webcast and conference call with analysts and investors to review its first quarter 2009 financial results today at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). The live audio webcast of the conference call can be accessed via the Internet by visiting 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(R), technology products and solutions, and furniture to consumers and to large, medium and small businesses. OfficeMax customers are served by over 30,000 associates through direct sales, catalogs, e-commerce and more than 1,000 stores. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more information, visit http://www.officemax.com/. Media Contact Investor Contacts Bill Bonner Mike Steele Tony Giuliano 630 864 6066 630 864 6826 630 864 6820 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (thousands) March 28, December 27, 2009 2008 ---- ---- ASSETS Current assets: Cash and cash equivalents $149,255 $170,779 Receivables, net 573,873 566,846 Inventories 815,612 949,401 Deferred income taxes and receivables 108,609 105,140 Other current assets 65,446 62,850 ------ ------ Total current assets 1,712,795 1,855,016 Property and equipment: Property and equipment 1,279,063 1,289,279 Accumulated depreciation (811,459) (798,551) -------- -------- Property and equipment, net 467,604 490,728 Intangible assets, net 81,378 81,793 Timber notes receivable 899,250 899,250 Deferred income taxes 430,557 436,182 Other non-current assets 403,236 410,614 ------- ------- Total assets $3,994,820 $4,173,583 ========== ========== LIABILITIES AND EQUITY Current liabilities: Current portion of debt $54,088 $64,452 Income taxes payable 15,077 18,288 Accounts payable 586,756 755,797 Accrued liabilities and other 355,301 358,934 ------- ------- Total current liabilities 1,011,222 1,197,471 Long-term debt: Long-term debt, less current portion 288,133 289,922 Timber notes securitized 1,470,000 1,470,000 --------- --------- Total long-term debt 1,758,133 1,759,922 Other long-term obligations: Compensation and benefits 497,862 502,447 Other long-term liabilities 417,919 401,869 ------- ------- Total other long-term liabilities 915,781 904,316 Shareholders' equity: Preferred stock 39,170 42,565 Common stock 190,723 189,943 Additional paid-in capital 921,336 925,328 Accumulated deficit (587,668) (600,095) Accumulated other comprehensive loss (272,029) (267,738) -------- -------- Total shareholders' equity 291,532 290,003 Noncontrolling interest in joint venture 18,152 21,871 ------ ------ Total equity 309,684 311,874 Total liabilities and equity $3,994,820 $4,173,583 ========== ========== OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (thousands, except per-share amounts) Quarter Ended March 28, March 29, 2009 2008 Sales $1,911,724 $2,302,921 Cost of goods sold and occupancy costs 1,446,162 1,715,092 Gross profit 465,562 587,829 Operating expenses: Operating and selling expenses 358,679 424,389 General and administrative expenses 69,444 80,648 Other operating expense (a)(b) 9,940 4,174 Total operating expenses 438,063 509,211 Operating income 27,499 78,618 Other income (expense): Interest expense (19,348) (29,680) Interest income 10,462 21,899 Other income (c) 2,627 20,617 Income before income taxes 21,240 91,454 Income tax expense (8,210) (27,254) Net income attributable to OfficeMax and noncontrolling interest 13,030 64,200 Joint venture earnings attributable to noncontrolling interest (a) 889 (857) Net income attributable to OfficeMax 13,919 63,343 Preferred dividends (772) (975) Net income available to OfficeMax common shareholders $13,147 $62,368 Basic income per common share $ 0.17 $ 0.82 Diluted income per common share $ 0.17 $ 0.81 Weighted Average Shares Basic 76,128 75,646 Diluted 77,141 76,553 (a) First quarter of 2009 includes a charge recorded in our Retail segment of $9.9 million related to first quarter store closures in the U.S. and Mexico and includes income of $0.3 million reflecting our venture partner's share of the charge. The cumulative effect of these items reduced net income by $5.9 million, or $0.08 per diluted share. (b) First quarter of 2008 includes a $2.4 million charge related to the consolidation of the Contract segment's manufacturing facilities in New Zealand, and a $1.8 million charge related to employee severance for restructuring the Retail field and Impress print and document services management organization. The cumulative effect of these two items was a reduction in net income of $2.7 million, or $0.03 per diluted share. (c) Other, net includes income related to the company's investment in Boise Cascade, L.L.C. of $2.5 million and $20.5 million in the first quarter of 2009 and 2008, respectively. The large distribution in 2008 was primarily related to Boise's sale of a majority interest in their paper and packaging and newprint business. These items increased net income $1.6 million, or $0.02 per diluted share in 2009 and $12.5 million, or $0.16 per diluted share in 2008. OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (thousands) Quarter Ended March 28, March 29, 2009 2008 Cash provided by operations: Net income attributable to OfficeMax $13,919 $63,343 Items in net income not using (providing) cash: Depreciation and amortization 29,867 35,254 Other 3,854 1,647 Changes other than from acquisitions of business: Receivables and inventory 117,108 144,169 Accounts payable and accrued liabilities (161,948) (91,160) Income taxes and other 288 (10,827) Cash provided by operations 3,088 142,426 Cash used for investment: Expenditures for property and equipment (10,871) (33,278) Proceeds from sale of assets 348 303 Cash used for investment (10,523) (32,975) Cash used for financing: Cash dividends paid (1,621) (11,499) Changes in debt, net (9,788) (30,451) Other (2,806) (8,380) Cash used for financing (14,215) (50,330) Effect of exchange rates on cash and cash equivalents 126 (399) Increase (decrease) in cash and cash equivalents (21,524) 58,722 Cash and cash equivalents at beginning of period 170,779 152,637 Cash and cash equivalents at end of period $149,255 $211,359 OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (unaudited) (millions, except per-share amounts) Quarter Ended March 28, 2009 March 29, 2008 As Adjust- As As Adjust- As Reported ments Adjusted Reported ments Adjusted Sales $1,911.7 $- $1,911.7 $2,302.9 $- $2,302.9 Cost of goods sold and occupancy costs 1,446.2 - 1,446.2 1,715.1 - 1,715.1 Gross profit 465.5 - 465.5 587.8 - 587.8 Operating expenses: Operating and selling expenses 358.7 - 358.7 424.4 - 424.4 General and Administrative expenses 69.4 - 69.4 80.6 - 80.6 Other Operating expense (a)(b) 9.9 (9.9) - 4.2 (4.2) - Total Operating expenses 438.0 (9.9) 428.1 509.2 (4.2) 505.0 Operating income 27.5 9.9 37.4 78.6 4.2 82.8 Other income (expense): Interest expense (19.4) - (19.4) (29.6) - (29.6) Interest income 10.5 - 10.5 21.9 - 21.9 Other, income (c) 2.6 (2.5) 0.1 20.6 (20.5) 0.1 Income (loss) before income taxes 21.2 7.4 28.6 91.5 (16.3) 75.2 Income Tax (expense) benefit (8.2) (2.8) (11.0) (27.3) 6.5 (20.8) Net Income (loss) attributable to OfficeMax and non- controlling interest 13.0 4.6 17.6 64.2 (9.8) 54.4 Joint venture earnings attributable to non- controlling interest (a) 0.9 (0.3) 0.6 (0.8) - (0.8) Net income (loss) attribu- table to OfficeMax 13.9 4.3 18.2 63.4 (9.8) 53.6 Preferred dividends (0.8) - (0.8) (1.0) - (1.0) Net income (loss) available to OfficeMax common shareholders $13.1 $4.3 $17.4 $62.4 $(9.8) $52.6 Basic income (loss) per common share $0.17 $0.06 $0.23 $0.82 $(0.13) $0.69 Diluted income (loss) per common share $0.17 $0.06 $0.23 $0.81 $(0.13) $0.68 Weighted Average Shares Basic 76,128 76,128 75,646 75,646 Diluted 77,141 77,141 76,553 76,553 (a) First quarter of 2009 includes a charge recorded in our Retail segment of $9.9 million related to first quarter store closures in the U.S. and Mexico and includes income of $0.3 million reflecting our venture partner's share of the charge. The cumulative effect of these items reduced net income by $5.9 million, or $0.08 per diluted share. (b) First quarter of 2008 includes a $2.4 million charge related to the consolidation of the Contract segment's manufacturing facilities in New Zealand, and a $1.8 million charge related to employee severance for restructuring the Retail field and Impress print and document services management organization. The cumulative effect of these two items was a reduction in net income of $2.7 million, or $0.03 per diluted share. (c) Other, net includes income related to the company's investment in Boise Cascade, L.L.C. of $2.5 million and $20.5 million in the first quarter of 2009 and 2008, respectively. The large distribution in 2008 was primarily related to Boise's sale of a majority interest in their paper and packaging and newprint business. These items increased net income $1.6 million, or $0.02 per diluted share in 2009 and $12.5 million, or $0.16 per diluted share in 2008. OFFICEMAX INCORPORATED AND SUBSIDIARIES CONTRACT SEGMENT STATEMENTS OF INCOME (unaudited) (millions, except per-share amounts) Quarter Ended March 28, March 29, 2009 2008 Sales $927.6 $1,195.1 Cost of goods sold and occupancy costs 733.0 923.3 Gross profit 194.6 21.0% 271.8 22.7% Operating expenses: Operating expenses (a) 173.1 18.7% 209.8 17.5% Other operating expense - 0.0% 2.4 0.2% Total operating expenses 173.1 18.7% 212.2 17.7% Operating income $21.5 2.3% $59.6 5.0% Non-GAAP Reconciliation Operating income $21.5 2.3% $59.6 5.0% Other operating expense - 0.0% 2.4 0.2% Adjusted operating income $21.5 2.3% $62.0 5.2% (a) Operating expenses includes operating and selling expenses as well as general and administrative expenses. OFFICEMAX INCORPORATED AND SUBSIDIARIES RETAIL SEGMENT STATEMENTS OF INCOME (unaudited) (millions, except per-share amounts) Quarter Ended March 28, March 29, 2009 2008 Sales $984.1 $1,107.8 Cost of goods sold and occupancy costs 713.1 791.7 Gross profit 271.0 27.5% 316.1 28.5% Operating expenses: Operating expenses (a) 245.7 24.9% 284.9 25.7% Other operating expense 9.9 1.0% 1.8 0.2% Total operating expenses 255.6 25.9% 286.7 25.9% Operating income $15.4 1.6% $29.4 2.6% Non-GAAP Reconciliation Operating income $15.4 1.6% $ 29.4 2.6% Other operating expense 9.9 1.0% 1.8 0.2% Adjusted operating income $25.3 2.6% $ 31.2 2.8% (a) Operating expenses includes operating and selling expenses as well as general and administrative expenses. Reconciliation of non-GAAP Measures to GAAP Measures We evaluate our results of operations before certain costs of store closure and severance related items, and income related to our investment in Boise Cascade, L.L.C., as they 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 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 non-GAAP financial measures to our reported GAAP financial results for the first quarter of both 2009 and 2008. 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. DATASOURCE: OfficeMax CONTACT: Media, Bill Bonner, +1-630-864-6066, or Investors, Mike Steele, +1-630-864-6826, or Tony Giuliano, +1-630-864-6820, all of OfficeMax Web Site: http://www.officemax.com/

Copyright