NAPERVILLE, Ill., Oct. 29 /PRNewswire/ -- OfficeMax Incorporated
(NYSE: OMX) today announced the results for its third quarter ended
September 26, 2009. Total sales were $1,831.9 million in the third
quarter of 2009, a decline of 12.6% from the third quarter of 2008.
For the third quarter of 2009, OfficeMax reported net income
available to OfficeMax common shareholders of $5.7 million, or
$0.07 per diluted share. Sam Duncan, Chairman and CEO of OfficeMax,
said, "We are proud of the progress we are making with our business
in this tough economy. While continued lower sales levels strained
our profitability this quarter, we managed to mitigate the impact
by reducing costs and improving our operations. Our relentless
focus on implementing disciplined growth initiatives,
differentiating our business, and increasing our productivity
continue to significantly benefit our performance." Summary
Consolidated Results (in millions, except per-share amounts) 3Q 09
3Q 08 YTD 09 YTD 08 ---------------------- ----- ------ ------
------ Sales $1,831.9 $2,096.3 $5,401.5 $6,383.9 ----- --------
-------- -------- -------- Sales growth (over prior year period)
-12.6% -15.4% ----------------------------- ----- ----- Operating
income (loss) $25.2 $(681.5) $25.2 $(1,505.5)
---------------------- ----- ------- ----- ---------- Adjusted
operating income $26.7 $54.3 $64.9 176.9 -------------------------
----- ----- ----- ----- Adjusted operating income margin 1.5% 2.6%
1.2% 2.8% -------------------------------- --- --- --- --- Adjusted
diluted income per common share $0.08 $0.36 $0.27 $1.29
--------------------------- ----- ----- ----- ----- Cash and cash
equivalents $546.9 $234.5 ------------------------- ------ ------
Available (unused) borrowing capacity $504.9 $602.0
---------------------------- ------ ------ The company has
calculated adjusted income and adjusted diluted income per share
which are non-GAAP financial measures that exclude the effect of
certain charges and items described in the footnotes to the
accompanying financial statements. A reconciliation to the
company's GAAP financial results is included in this press release.
Results for the third quarter of 2009 and 2008 included certain
charges and other items that are not considered indicative of core
operating activities. Third quarter 2009 results included $1.5
million of pre-tax severance and other charges recorded in the
Contract segment related to a reorganization of our customer
service centers. Third quarter 2008 results included a $735.8
million non-cash impairment charge (pre-tax) related to the timber
installment notes receivable from Lehman recorded in the Corporate
and Other segment and $18.2 million of additional net interest
expense related to the timber installment notes receivable and
related securitization notes. Excluding the items described above,
adjusted operating income in the third quarter of 2009 was $26.7
million, or 1.5% of sales, compared to adjusted operating income of
$54.3 million, or 2.6% of sales in the third quarter of 2008.
Adjusted net income available to OfficeMax common shareholders in
the third quarter of 2009 was $6.6 million, or $0.08 per diluted
share, compared to adjusted net income available to OfficeMax
common shareholders of $28.0 million, or $0.36 per diluted share,
in the third quarter of 2008. Contract Segment Results (in
millions) 3Q 09 3Q 08 YTD 09 YTD 08 ------------ ----- ------
------ ------ Sales $899.6 $1,049.1 $2,708.8 $3,356.1 ----- ------
-------- -------- -------- Sales growth (over prior year period)
-14.3% -19.3% ---------------------- ----- ----- Gross profit
margin 20.0% 21.8% 20.5% 22.1% ------------------- ---- ---- ----
---- Adjusted operating income margin 1.1% 3.4% 1.6% 4.3%
-------------------------------- --- --- --- --- OfficeMax Contract
segment sales decreased 14.3% (12.8% after adjusting for the
foreign currency exchange rate impact) to $899.6 million in the
third quarter of 2009 compared to the third quarter of 2008,
reflecting a U.S. Contract operations sales decline of 15.4%, and
an International Contract operations sales decline of 11.6% in U.S.
dollars (a sales decrease of 6.5% in local currencies). The U.S.
Contract sales decline in the third quarter primarily reflects
weaker sales from existing corporate accounts. Both U.S. and
International Contract operations showed modest improvements in the
rates of sales declines compared to the two previous quarters.
Contract segment gross margin decreased to 20.0% in the third
quarter of 2009 from 21.8% in the third quarter of 2008, primarily
due to softer market conditions, a sales mix shift to a higher
percentage of lower-margin consumable items, lower sales of
off-contract items, and higher customer acquisition and retention
expense. Contract segment operating, selling & administrative
expense as a percentage of sales increased to 18.9% in the third
quarter of 2009 from 18.4% in the third quarter of 2008, primarily
due to deleveraging of fixed operating expenses from lower sales
and higher incentive compensation expense. Contract segment
operating income was $8.6 million in the third quarter of 2009.
Contract segment adjusted operating income was $10.1 million, or
1.1% of sales, in the third quarter of 2009 compared to operating
income of $35.5 million, or 3.4% of sales, in the third quarter of
2008. Retail Segment Results (in millions) 3Q 09 3Q 08 YTD 09 YTD
08 ------------ ----- ----- ------ ------ Sales $932.3 $1,047.2
$2,692.7 $3,027.8 ----- ------ -------- -------- --------
Same-store sales growth (over prior year period) -11.5% -12.2%
----------------------------- ----- ----- Gross profit margin 27.4%
28.5% 27.5% 28.3% ------------------- ---- ---- ---- ---- Adjusted
operating income margin 3.0% 2.8% 1.9% 2.0%
-------------------------------- --- --- --- --- OfficeMax Retail
segment sales decreased 11.0% to $932.3 million in the third
quarter of 2009 compared to the third quarter of 2008, reflecting a
same-store sales decrease of 11.5% (a same-store sales decrease of
10.0% in local currencies), partially offset by sales from new
stores. Retail same-store sales for the third quarter of 2009
declined across all major product categories primarily due to
weaker small business and consumer spending, unfavorable Mexican
Peso exchange rates, and the influenza epidemic in Mexico. Retail
segment gross margin decreased to 27.4% in the third quarter of
2009 from 28.5% in the third quarter of 2008, primarily due to
deleveraging of fixed occupancy costs from the same-store sales
decrease. Retail segment operating, selling & administrative
expense as a percentage of sales decreased to 24.4% in the third
quarter of 2009 compared to 25.7% in the third quarter of 2008
primarily due to targeted cost controls, property tax settlements
in the third quarter of 2009, and lower store pre-opening expenses,
partially offset by deleveraging of payroll expenses due to lower
sales and higher incentive compensation expense. Retail segment
operating income was $28.4 million, or 3.0% of sales, in the third
quarter of 2009 compared to operating income of $29.1 million, or
2.8% of sales in the third quarter of 2008. OfficeMax ended the
third quarter of 2009 with a total of 1,010 retail stores,
consisting of 932 retail stores in the U.S. and 78 retail stores in
Mexico. During the third quarter of 2009, OfficeMax closed one
retail store in the U.S. and one in Mexico. For the full year 2009,
OfficeMax expects to open 12 retail stores, and to close up to 25
retail stores, of which, 11 have opened and 23 have closed during
the first nine months of 2009. 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 $11.7 million in the third quarter of 2009
compared to adjusted operating income of $10.3 million in the third
quarter of 2008. The increase was primarily due to higher pension
expense and incentive compensation expense. Balance Sheet and Cash
Flow As of September 26, 2009, OfficeMax had total debt of $332.5
million, excluding $1,470.0 million of timber securitization notes,
which have recourse limited to the timber installment notes
receivable and related guarantees. At the end of the third quarter
of 2009, OfficeMax had $546.9 million in cash and cash equivalents,
and $504.9 million in available (unused) borrowing capacity. The
company's $504.9 million of unused borrowing capacity under both
its primary revolving credit facility and its new Canadian
revolving credit facility reflects a combined available borrowing
base of $569.9 million, zero outstanding borrowings, and $65.0
million of standby letters of credit. During the first nine months
of 2009, OfficeMax generated $369.1 million of cash from operations
which reflected significant reductions in inventory levels and good
working capital management and included $72 million of federal tax
refunds and $46 million from 2009 borrowings on accumulated
earnings held in company-owned life insurance policies. OfficeMax
invested $5.4 million for capital expenditures in the third quarter
of 2009 compared to $36.1 million in the third quarter of 2008.
OfficeMax expects capital expenditures for full year 2009 to be in
the range of $30 million to $40 million. Voluntary Excess
Contribution to Pension Plan OfficeMax also announced its intent to
make a voluntary excess contribution of approximately $100 million
in OfficeMax common stock to its qualified pension plans by the end
of this year. The net effect of the contribution on earnings per
share, including the impact of increased shares outstanding, is
expected to be minimal in 2009 and accretive in 2010. Based on
actuarial assumptions, this excess 2009 contribution is expected to
reduce required pension contributions over the next five years by
approximately $100 million. As of December 27, 2008, the pension
plan was underfunded by $435 million. According to a current
estimate of plan assets (including the impact of the voluntary
contribution of stock) and projected discounted obligations, the
underfunding would be reduced to approximately $300 million.
Outlook Given the projected weak economic climate, OfficeMax
reaffirms that its expectations remain very cautious for the fourth
quarter of 2009. The company expects sales in the fourth quarter of
2009 will decline on a year-over-year basis, but improve
sequentially compared to the third quarter. The company expects a
greater gross margin rate decline on a year-over-year basis in the
fourth quarter of 2009 than it experienced in the third quarter,
along with additional incentive compensation expense accruals
similar to the level accrued in the third quarter. As a result,
OfficeMax expects a fourth quarter of 2009 operating loss. Mr.
Duncan concluded, "Given that we continue to anticipate macro
employment trends will not turn positive until well into 2010, we
are maintaining our prudent approach to managing our business and
building upon our strong capital position. We are confident that we
are pursuing the right strategy and initiatives to ensure we
achieve sustainable benefits and competitive advantages. The goal
of our current actions and plans is to position our business to
return to recent peak profitability levels. We expect to share
these longer term plans during the first part of 2010."
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 return on
the company stock contributed to the pension plan and affect the
future funding obligations we predict, 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 that 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 third quarter 2009 financial results today
at 10:00 a.m. Eastern Time (9:00 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®, 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/. OFFICEMAX INCORPORATED AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (thousands)
September 26, December 27, 2009 2008 ---- ---- ASSETS Current
assets: Cash and cash equivalents $546,946 $170,779 Receivables,
net 534,020 566,846 Inventories 742,765 949,401 Deferred income
taxes and receivables 125,096 105,140 Other current assets 54,090
62,850 ------ ------ Total current assets 2,002,917 1,855,016
Property and equipment: Property and equipment 1,306,502 1,289,279
Accumulated depreciation (857,899) (798,551) -------- --------
Property and equipment, net 448,603 490,728 Intangible assets, net
84,233 81,793 Timber notes receivable 899,250 899,250 Deferred
income taxes 354,528 436,182 Other non-current assets 344,539
410,614 ------- ------- Total assets $4,134,070 $4,173,583
========== ========== LIABILITIES AND EQUITY Current liabilities:
Current portion of debt $39,143 $64,452 Income taxes payable 16,090
18,288 Accounts payable 676,010 755,797 Accrued liabilities and
other 366,316 358,934 ------- ------- Total current liabilities
1,097,559 1,197,471 Long-term debt: Long-term debt, less current
portion 293,342 289,922 Timber notes securitized 1,470,000
1,470,000 --------- --------- Total long-term debt 1,763,342
1,759,922 Other long-term obligations: Compensation and benefits
494,893 502,447 Other long-term liabilities 415,474 401,869 -------
------- Total other long-term liabilities 910,367 904,316
Noncontrolling interest in joint venture 28,264 21,871
Shareholders' equity: Preferred stock 37,685 42,565 Common stock
190,731 189,943 Additional paid-in capital 926,038 925,328
Accumulated deficit (599,625) (600,095) Accumulated other
comprehensive loss (220,291) (267,738) -------- -------- Total
shareholders' equity 334,538 290,003 Total liabilities and equity
$4,134,070 $4,173,583 ========== ========== OFFICEMAX INCORPORATED
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(thousands, except per-share amounts) Quarter Ended ---------------
September 26, September 27, 2009 2008 ---- ---- Sales $1,831,947
$2,096,337 Cost of goods sold and occupancy costs 1,397,215
1,569,870 --------- --------- Gross profit 434,732 526,467
Operating expenses: Operating and selling expenses 339,043 394,590
General and administrative expenses 69,019 77,664 Goodwill and
other asset impairments (a) - 735,750 Other operating expenses (b)
1,473 - ----- --- Total operating expenses 409,535 1,208,004
Operating income (loss) 25,197 (681,537) ------ -------- Other
income (expense): Interest expense (a) (19,289) (29,822) Interest
income (a) 10,873 3,318 Other expense, net (3) (25) -- --- (8,419)
(26,529) ------ ------- Income (loss) before income taxes 16,778
(708,066) Income tax benefit (expense) (9,942) 276,415 ------
------- Net income (loss) attributable to OfficeMax and
noncontrolling interest 6,836 (431,651) Joint venture results
attributable to noncontrolling interest (558) (232) ---- ---- Net
income (loss) attributable to OfficeMax 6,278 (431,883) Preferred
dividends (622) (812) ---- ---- Net income (loss) available to
OfficeMax common shareholders $5,656 $(432,695) ====== =========
Basic income (loss) per common share $0.07 $(5.70) ===== ======
Diluted income (loss) per common share $0.07 $(5.70) ===== ======
Weighted Average Shares Basic 76,285 75,931 Diluted 77,152 75,931
(a) In the third quarter of 2008, a $735.8 million non-cash
impairment- related charge was recorded in the Corporate and Other
segment related to the timber installment notes receivable due from
Lehman ("installment notes"). In addition, we stopped accruing
interest income on the installment notes as of the last interest
payment date (April 29, 2008), while continuing to accrue interest
expense on the Lehman guaranteed securitization notes payable until
the default date (October 29, 2008). This resulted in $18.2 million
of additional net interest expense. The cumulative effect of these
items was a reduction of net income (loss) available to OfficeMax
common shareholders by $460.7 million or $6.06 per diluted share.
(b) The third quarter of 2009 includes a $1.5 million charge in our
Contract segment related to the reorganization of our customer
service centers. This charge reduced net income (loss) available to
OfficeMax common shareholders by $0.9 million, or $0.01 per diluted
share. OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) (thousands, except per-share
amounts) Nine Months Ended ------------------- September 26,
September 27, 2009 2008 ---- ---- Sales $5,401,549 $6,383,899 Cost
of goods sold and occupancy costs 4,106,346 4,786,026 ---------
--------- Gross profit 1,295,203 1,597,873 Operating expenses:
Operating and selling expenses 1,021,343 1,191,688 General and
administrative expenses 208,917 229,305 Goodwill and other asset
impairments (a)(b) - 1,671,090 Other operating expenses (c) 39,710
11,274 ------ ------ Total operating expenses 1,269,970 3,103,357
Operating income (loss) 25,233 (1,505,484) ------ ---------- Other
income (expense): Interest expense (a) (57,956) (89,144) Interest
income (a)(d) 36,449 46,900 Other income, net (e) 2,837 20,679
----- ------ (18,670) (21,565) ------- ------- Income (loss) before
income taxes 6,563 (1,527,049) Income tax benefit (expense) (4,425)
265,481 ------ ------- Net income (loss) attributable to OfficeMax
and noncontrolling interest 2,138 (1,261,568) Joint venture results
attributable to noncontrolling interest 1,111 (1,191) ----- ------
Net income (loss) attributable to OfficeMax 3,249 (1,262,759)
Preferred dividends (2,159) (2,839) ------ ------ Net income (loss)
available to OfficeMax common shareholders $1,090 $(1,265,598)
====== =========== Basic income (loss) per common share $0.01
$(16.69) ===== ======= Diluted income (loss) per common share $0.01
$(16.69) ===== ======= Weighted Average Shares Basic 76,233 75,831
Diluted 76,846 75,831 (a) In the first nine months of 2008, a
$735.8 million non-cash impairment-related charge was recorded in
the Corporate and Other segment related to the timber installment
notes receivable due from Lehman ("installment notes"). In
addition, we stopped accruing interest income on the installment
notes as of the last interest payment date (April 29, 2008), while
continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29,
2008). This resulted in $18.2 million of additional net interest
expense. The cumulative effect of these items was a reduction of
net income (loss) available to OfficeMax common shareholders by
$460.7 million or $6.06 per diluted share. (b) The first nine
months of 2008 includes $935.3 million non-cash charges related to
impairment of goodwill, tradenames and fixed assets. These charges
are recorded by segment in the following manner: Contract $464.0
million and Retail $471.3 million. The charges reduced net income
(loss) available to OfficeMax common shareholders by $909.3 million
or $11.99 per diluted share. (c) The first nine months of 2009
includes $31.2 million of charges in our Retail segment related to
store closures as well as severance and other charges of $8.4
million in our Contract segment, principally related to
reorganizations of our U.S. and Canadian sales forces and customer
service centers. In total, these charges reduced net income (loss)
available to OfficeMax common shareholders by $24.1 million, or
$0.32 per diluted share. The first nine months of 2008 includes
$14.4 million of severance and other charges related to the
reorganization of Retail store and field management and the
consolidation of the Contract segment's manufacturing facilities in
New Zealand. The first nine months of 2008 also includes a $3.1
million gain related to the sold legacy Voyageur Panel business.
These items reduced net income (loss) available to OfficeMax common
shareholders by $7.0 million, or $0.09 per diluted share. (d) The
first nine months of 2009 includes $4.4 million of interest income
related to a tax escrow balance established in a prior period in
connection with our legacy Voyager Panel business sold in 2004.
This item increased net income (loss) available to OfficeMax common
shareholders by $2.7 million, or $0.04 per diluted share. (e) Other
income includes income related to the company's investment in Boise
Cascade, L.L.C. of $2.6 million and $20.5 million in 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 newsprint business. These items increased net income (loss)
available to OfficeMax common shareholders $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) Nine Months Ended
------------------- September 26, September 27, 2009 2008 ---- ----
Cash provided by operations: Net income (loss) attributable to
OfficeMax and noncontrolling interest $2,138 $(1,261,568) Items in
net income (loss) not using (providing) cash: Depreciation and
amortization 88,693 105,235 Non-cash impairment charges - 1,671,090
Non-cash deferred taxes on impairment charges - (319,363) Other
10,002 (6,801) Changes in operating assets and liabilities:
Receivables and inventory 255,219 144,903 Accounts payable and
accrued liabilities (94,038) (19,431) Income taxes and other
107,122 (67,337) ------- ------- Cash provided by operations
369,136 246,728 Cash provided by (used for) investment:
Expenditures for property and equipment (23,946) (112,065) Other
40,816 9,440 ------ ----- Cash provided by (used for) investment
16,870 (102,625) Cash used for financing: Cash dividends paid
(3,052) (34,359) Changes in debt, net (21,810) (26,392) Other 1,453
130 ----- --- Cash used for financing (23,409) (60,621) Effect of
exchange rates on cash and cash equivalents 13,570 (1,608) Increase
in cash and cash equivalents 376,167 81,874 Cash and cash
equivalents at beginning of period 170,779 152,637 ------- -------
Cash and cash equivalents at end of period $546,946 $234,511
======== ======== OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS NON-GAAP RECONCILIATION
(unaudited) (millions, except per-share amounts) Quarter Ended
--------------- September 26, 2009 September 27, 2008
------------------ ------------------ As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted -------- -------
-------- -------- ------- -------- Sales $1,831.9 $- $1,831.9
$2,096.3 $- $2,096.3 Cost of goods sold and occupancy costs 1,397.2
- 1,397.2 1,569.8 - 1,569.8 ------- - ------- ------- - -------
Gross profit 434.7 - 434.7 526.5 - 526.5 Operating expenses:
Operating and selling expenses 339.0 - 339.0 394.5 - 394.5 General
and administrative expenses 69.0 - 69.0 77.7 77.7 Goodwill and
other asset impairments (a) - - - 735.8 (735.8) - Other operating
expenses (b) 1.5 (1.5) - - - - --- ---- --- --- --- --- Total
operating expenses 409.5 (1.5) 408.0 1,208.0 (735.8) 472.2
Operating income (loss) 25.2 1.5 26.7 (681.5) 735.8 54.3 ---- ---
---- ------ ----- ---- Interest, net (a) (8.4) - (8.4) (26.6) 18.2
(8.4) ---- --- ---- ----- ---- ---- Income (loss) before income
taxes 16.8 1.5 18.3 (708.1) 754.0 45.9 Income tax benefit (expense)
(9.9) (0.6) (10.5) 276.4 (293.3) (16.9) ---- ---- ----- -----
------ ----- Net income (loss) attributable to OfficeMax and
noncontrolling interest 6.9 0.9 7.8 (431.7) 460.7 29.0 Joint
venture results attributable to noncontrolling interest (0.6) -
(0.6) (0.2) - (0.2) ---- --- ---- ---- --- ---- Net income (loss)
attributable to OfficeMax 6.3 0.9 7.2 (431.9) 460.7 28.8 Preferred
dividends (0.6) - (0.6) (0.8) - (0.8) ---- --- ---- ---- --- ----
Net income (loss) available to OfficeMax common shareholders $5.7
$0.9 $6.6 $(432.7) $460.7 $28.0 ==== ==== ==== ======= ====== =====
Basic income (loss) per common share $0.07 $0.01 $0.08 $(5.70)
$6.07 $0.37 ===== ===== ===== ====== ===== ===== Diluted income
(loss) per common share $0.07 $0.01 $0.08 $(5.70) $6.06 $0.36 =====
===== ===== ====== ===== ===== Weighted Average Shares Basic 76,285
76,285 75,931 75,931 Diluted 77,152 77,152 75,931 77,114 (a) In the
third quarter of 2008, a $735.8 million non-cash impairment-
related charge was recorded in the Corporate and Other segment
related to the timber installment notes receivable due from Lehman
("installment notes"). In addition, we stopped accruing interest
income on the installment notes as of the last interest payment
date (April 29, 2008), while continuing to accrue interest expense
on the Lehman guaranteed securitization notes payable until the
default date (October 29, 2008). This resulted in $18.2 million of
additional net interest expense. The cumulative effect of these
items was a reduction of net income (loss) available to OfficeMax
common shareholders by $460.7 million or $6.06 per diluted share.
(b) The third quarter of 2009 includes a $1.5 million charge in our
Contract segment related to the reorganization of our customer
service centers. This charge reduced net income (loss) available to
OfficeMax common shareholders by $0.9 million, or $0.01 per diluted
share. OFFICEMAX INCORPORATED AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS NON-GAAP RECONCILIATION (unaudited)
(millions, except per-share amounts) Nine Months Ended
------------------- September 26, 2009 September 27, 2008
------------------ ------------------ As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted -------- -------
-------- -------- ------- -------- Sales $5,401.5 $- $5,401.5
$6,383.9 $- $6,383.9 Cost of goods sold and occupancy costs 4,106.3
- 4,106.3 $4,786.0 - 4,786.0 ------- --- ------- -------- ---
------- Gross profit 1,295.2 - 1,295.2 1,597.9 - 1,597.9 Operating
expenses: Operating and selling expenses 1,021.4 - 1,021.4 1,191.7
- 1,191.7 General and administrative expenses 208.9 - 208.9 229.3
229.3 Goodwill and other asset impairments (a)(b) - - - 1,671.1
(1,671.1) - Other operating expenses (c) 39.7 (39.7) - 11.3 (11.3)
- ---- ----- --- ---- ----- --- Total operating expenses 1,270.0
(39.7) 1,230.3 3,103.4 (1,682.4) 1,421.0 Operating income (loss)
25.2 39.7 64.9 (1,505.5) 1,682.4 176.9 ---- ---- ---- --------
------- ----- Other income (expense): Interest, net (b)(d) (21.4)
(4.4) (25.8) (42.2) 18.2 (24.0) Other income, net (e) 2.8 (2.6) 0.2
20.7 (20.5) 0.2 --- ---- --- ---- ----- --- (18.6) (7.0) (25.6)
(21.5) (2.3) (23.8) ----- ---- ----- ----- ---- ----- Income (loss)
before income taxes 6.6 32.7 39.3 (1,527.0) 1,680.1 153.1 Income
tax benefit (expense) (4.4) (12.4) (16.8) 265.4 (315.6) (50.2) ----
----- ----- ----- ------ ----- Net income (loss) attributable to
OfficeMax and noncontrolling interest 2.2 20.3 22.5 (1,261.6)
1,364.5 102.9 Joint venture results attributable to noncontrolling
interest 1.1 (0.5) 0.6 (1.2) - (1.2) --- ---- --- ---- --- ---- Net
income (loss) attributable to OfficeMax 3.3 19.8 23.1 (1,262.8)
1,364.5 101.7 Preferred dividends (2.2) - (2.2) (2.8) - (2.8) ----
--- ---- ---- --- ---- Net income (loss) available to OfficeMax
common shareholders $1.1 $19.8 $20.9 $(1,265.6) $1,364.5 $98.9 ====
===== ===== ========= ======== ===== Basic income (loss) per common
share $0.01 $0.26 $0.27 $(16.69) $17.99 $1.30 ===== ===== =====
======= ====== ===== Diluted income (loss) per common share $0.01
$0.26 $0.27 $(16.69) $17.98 $1.29 ===== ===== ===== ======= ======
===== Weighted Average Shares Basic 76,233 76,233 75,831 75,831
Diluted 76,846 76,846 75,831 76,915 (a) The first nine months of
2008 includes $935.3 million non-cash charges related to impairment
of goodwill, tradenames and fixed assets. These charges are
recorded by segment in the following manner: Contract $464.0
million and Retail $471.3 million. The charges reduced net income
(loss) available to OfficeMax common shareholders by $909.3 million
or $11.99 per diluted share. (b) In the first nine months of 2008,
a $735.8 million non-cash impairment-related charge was recorded in
the Corporate and Other segment related to the timber installment
notes receivable due from Lehman ("installment notes"). In
addition, we stopped accruing interest income on the installment
notes as of the last interest payment date (April 29, 2008), while
continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29,
2008). This resulted in $18.2 million of additional net interest
expense. The cumulative effect of these items was a reduction of
net income (loss) available to OfficeMax common shareholders by
$460.7 million or $6.06 per diluted share. (c) The first nine
months of 2009 includes $31.2 million of charges in our Retail
segment related to store closures as well as severance and other
charges of $8.4 million in our Contract segment, principally
related to reorganizations of our U.S. and Canadian sales forces
and customer service centers. In total, these charges reduced net
income (loss) available to OfficeMax common shareholders by $24.1
million, or $0.32 per diluted share. The first nine months of 2008
includes $14.4 million of severance and other charges related to
the reorganization of Retail store and field management and the
consolidation of the Contract segment's manufacturing facilities in
New Zealand. The first nine months of 2008 also includes a $3.1
million gain related to the sold legacy Voyageur Panel business.
These items reduced net income (loss) available to OfficeMax common
shareholders by $7.0 million, or $0.09 per diluted share. (d) The
first nine months of 2009 includes $4.4 million of interest income
related to a tax escrow balance established in a prior period in
connection with our legacy Voyager Panel business sold in 2004.
This item increased net income (loss) available to OfficeMax common
shareholders by $2.7 million, or $0.04 per diluted share. (e) Other
income includes income related to the company's investment in Boise
Cascade, L.L.C. of $2.6 million and $20.5 million in 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 newsprint business. These items increased net income (loss)
available to OfficeMax common shareholders $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 OPERATIONS (unaudited) (millions, except
per-share amounts) Quarter Ended --------------- September 26,
September 27, 2009 2008 ---- ---- Sales $899.6 $1,049.1 Cost of
goods sold and occupancy costs 719.9 820.6 ----- ----- Gross profit
179.7 20.0% 228.5 21.8% Operating expenses: Operating expenses (a)
169.6 18.9% 193.0 18.4% Other operating expenses 1.5 0.1% - 0.0%
--- --- --- --- Total operating expenses 171.1 19.0% 193.0 18.4%
Operating income $8.6 1.0% $35.5 3.4% ---- ----- Non-GAAP
Reconciliation ----------------------- Operating income $8.6 1.0%
$35.5 3.4% Other operating expenses 1.5 0.1% - 0.0% --- --- --- ---
Adjusted operating income $10.1 1.1% $35.5 3.4% ----- ----- Nine
Months Ended ------------------- September 26, September 27, 2009
2008 ---- ---- Sales $2,708.8 100.0% $3,356.1 100.0% Cost of goods
sold and occupancy costs 2,153.0 2,614.1 ------- ------- Gross
profit 555.8 20.5% 742.0 22.1% Operating expenses: Operating
expenses (a) 511.8 18.9% 597.3 17.8% Goodwill and other asset
impairments - 0.0% 464.0 13.8% Other operating expenses 8.4 0.3%
2.4 0.1% --- --- --- --- Total operating expenses 520.2 19.2%
1,063.7 31.7% Operating income (loss) $35.6 1.3% $(321.7) -9.6%
----- ------- Non-GAAP Reconciliation -----------------------
Operating income (loss) $35.6 1.3% $(321.7) -9.6% Goodwill and
other asset impairments - 0.0% 464.0 13.8% Other operating expenses
8.4 0.3% 2.4 0.1% --- --- --- --- Adjusted operating income $44.0
1.6% $144.7 4.3% ----- ------ (a) Operating expenses includes
operating and selling expenses as well as general and
administrative expenses. OFFICEMAX INCORPORATED AND SUBSIDIARIES
RETAIL SEGMENT STATEMENTS OF OPERATIONS (unaudited) (millions,
except per-share amounts) Quarter Ended --------------- September
26, September 27, 2009 2008 ---- ---- Sales $932.3 $1,047.2 Cost of
goods sold and occupancy costs 677.2 749.2 ----- ----- Gross profit
255.1 27.4% 298.0 28.5% Operating expenses: Operating expenses (a)
226.7 24.4% 268.9 25.7% Other operating expenses - 0.0% - 0.0% -
--- - --- Total operating expenses 226.7 24.4% 268.9 25.7%
Operating income $28.4 3.0% $29.1 2.8% ----- ----- Non-GAAP
Reconciliation ----------------------- Operating income $28.4 3.0%
$29.1 2.8% Other operating expenses - 0.0% - 0.0% --- --- --- ---
Adjusted operating income $28.4 3.0% $29.1 2.8% ----- ----- Nine
Months Ended ------------------- September 26, September 27, 2009
2008 ---- ---- Sales $2,692.7 100.0% $3,027.8 100.0% Cost of goods
sold and occupancy costs 1,953.3 2,172.0 ------- ------- Gross
profit 739.4 27.5% 855.8 28.3% Operating expenses: Operating
expenses (a) 687.7 25.6% 794.6 26.3% Goodwill and other asset
impairments - 0.0% 471.3 15.6% Other operating expenses 31.2 1.1%
12.0 0.4% ---- --- ---- --- Total operating expenses 718.9 26.7%
1,277.9 42.3% Operating income (loss) $20.5 0.8% $(422.1) -14.0%
----- ------- Non-GAAP Reconciliation -----------------------
Operating income (loss) $20.5 0.8% $(422.1) -14.0% Goodwill and
other asset impairments - 0.0% 471.3 15.6% Other operating expenses
31.2 1.1% 12.0 0.4% ---- --- ---- --- Adjusted operating income
$51.7 1.9% $61.2 2.0% ----- ----- (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 including facility closure, severance related items, asset
impairments, income related to our investment in Boise Cascade,
L.L.C. and interest income related to a tax escrow balance, 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
third quarter and first nine months 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
Incorporated 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 Incorporated Web Site:
http://www.officemax.com/
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