NAPERVILLE, Ill., August 1 /PRNewswire-FirstCall/ -- OfficeMax(R)
Incorporated (NYSE: OMX) today reported net income of $27.4 million, or
$.35 per diluted share, for the second quarter ended June 30, 2007 compared
with net income of $27.4 million, or $.35 per diluted share, in the second
quarter of 2006.
Net income and diluted earnings per share increased approximately 20%
in the second quarter of 2007 from net income of $23.0 million, or $.29 per
diluted share in the second quarter of 2006, excluding 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.
"Our results for the second quarter showed progress in many areas, but
aspects of our businesses remain opportunities for improvement," said Sam
Duncan, Chairman and CEO of OfficeMax. "In our Contract segment, operating
margin contracted from lower-margin sales in spite of the benefit of some
expense leverage. In our Retail segment, positive same store sales,
expanded gross margins and cost containment delivered operating income
margin improvement."
Contract Segment
OfficeMax Contract segment sales increased 4.4% to $1.2 billion in the
second quarter of 2007 compared to the second quarter of 2006, reflecting
U.S. Contract sales growth of 2.2% and international contract operations
sales growth of 11.1% in U.S. dollars, or 2.9% in local currencies.
Contract segment operating income decreased to $41.0 million in the
second quarter of 2007 from $44.4 million in the second quarter last year.
Contract segment gross margin decreased to 21.4% in the second quarter of
2007 from 22.1% in the second quarter of 2006, primarily due to the
continued impact of new and renewing accounts with lower gross margin
rates, the impact of higher paper prices, partially offset by improved
vendor funding. Contract segment operating income margin in the second
quarter of 2007 benefited from expense leverage in International Contract
operations and targeted cost controls.
Retail Segment
OfficeMax Retail segment sales increased 4.6% to $935.3 million in the
second quarter of 2007 compared to the second quarter of 2006. Retail
segment same-store sales increased 1.6% in the second quarter of 2007.
Adjusted for the company's initiative to eliminate mail-in rebates and to
provide instant rebates in lieu of national, vendor-sponsored mail-in
rebates, same-store sales increased by 2.7% during the second quarter of
2007.
Retail segment operating income increased to $24.7 million in the
second quarter of 2007 from $18.2 million, excluding special items, in the
second quarter of 2006. Retail segment gross margin increased to 29.9% in
the second quarter of 2007 from 29.7% in the second quarter of 2006,
primarily due to improved vendor funding and more effective promotional
strategies. Retail segment operating income margin in the second quarter of
2007 benefited from lower occupancy costs and reduced advertising expense,
partially offset by increased allocated general and administrative
expenses.
During the second quarter of 2007, OfficeMax opened 9 new retail stores
and closed 1 store, ending the quarter with 923 retail stores in the U.S.
and Mexico compared with 874 stores at the end of the second quarter of
2006.
Corporate and Other Segment
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
decreased to $9.8 million in the second quarter of 2007 from $14.1 million,
excluding special items, in the second quarter of 2006, primarily due to
reduced legacy-related costs.
OfficeMax generated $120.9 million of cash from operations in the
second quarter of 2007, an increase of $41.9 million from the second
quarter of 2006. OfficeMax invested $31.3 million for capital expenditures
in the second quarter of 2007 compared to $23.7 million in the second
quarter of 2006. As of June 30, 2007, OfficeMax reported total debt of
$391.5 million excluding the timber securitization notes, and cash and cash
equivalents of $220.6 million.
Forward-Looking Statements
Some 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 plans to address sales margin, and 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 31, 2006, including under the caption "Cautionary and
Forward-Looking Statements," in Item 1A of that form, and in the company's
other filings with the SEC.
Conference Call Information
OfficeMax will host a conference call with investors and analysts to
discuss the second quarter 2007 results at 9:00 a.m. Eastern Daylight Time
(8:00 a.m. Central Daylight Time) today. 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. To participate in
the conference call, dial (800) 374-0165; international callers should dial
(706) 634-0995. The audio 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 is a leader in both business-to-business and
retail office products distribution. The OfficeMax mission is simple: to
help our customers do their best work. The company provides office
supplies, print and document services through OfficeMax Impress(TM),
technology products and solutions, and furniture to large, medium and small
businesses and consumers. OfficeMax customers are served by approximately
35,000 associates through direct sales, catalogs, e-commerce and more than
900 stores. For more information, visit: http://www.officemax.com.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands)
June 30, December 30,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $220,615 $282,070
Receivables, net 531,689 562,528
Inventories 1,053,769 1,071,486
Other current assets 157,221 180,760
Total current assets 1,963,294 2,096,844
Property and equipment:
Property and equipment 1,227,722 1,189,686
Accumulated depreciation (652,496) (610,061)
Property and equipment, net 575,226 579,625
Goodwill and intangible assets, net 1,437,995 1,417,336
Timber notes receivable 1,635,000 1,635,000
Other non-current assets 413,842 487,243
Total assets $6,025,357 $6,216,048
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $6,985 $-
Current portion of long - term debt 34,886 25,634
Accounts payable 823,093 997,700
Accrued liabilities and other 458,069 505,569
Total current liabilities 1,323,033 1,528,903
Long - term debt:
Long - term debt, less current portion 349,579 384,246
Timber notes securitized 1,470,000 1,470,000
Total long - term debt 1,819,579 1,854,246
Other long - term obligations:
Compensation and benefits 271,243 287,122
Other long - term liabilities 480,293 530,248
Total other long - term liabilities 751,536 817,370
Minority interest 32,005 29,885
Shareholders' equity:
Preferred stock 51,731 54,735
Common stock 188,411 187,226
Additional paid - in capital 905,585 893,848
Retained earnings 999,239 941,830
Accumulated other comprehensive loss (45,762) (91,995)
Total shareholders' equity 2,099,204 1,985,644
Total liabilities and shareholders' equity $6,025,357 $6,216,048
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(thousands, except per-share amounts)
Quarter Ended
June 30, July 1,
2007 2006
Sales $2,132,417 $2,040,951
Cost of goods sold and occupancy costs 1,596,619 1,521,954
Gross profit 535,798 518,997
Operating and other expenses:
Operating and selling 392,581 385,299
General and administrative 88,719 86,671
Other operating (income) expense, net (1,447) 456
Operating income 55,945 46,571
Other income (expense):
Interest expense (29,959) (30,214)
Interest income 21,776 22,103
Other income (expense), net (2,232) 6,727
(10,415) (1,384)
Income from continuing operations before
income taxes and minority interest 45,530 45,187
Income tax expense (17,757) (17,284)
Income from continuing operations
before minority interest 27,773 27,903
Minority interest, net of income tax (337) (508)
Income from continuing operations 27,436 27,395
Net income 27,436 27,395
Preferred dividends (1,008) (1,009)
Net income applicable to common
shareholders $26,428 $26,386
Basic income (loss) per common share:
Continuing operations $0.35 $0.36
Discontinued operations - -
Basic income (loss) per common share $0.35 $0.36
Diluted income (loss) per common share:
Continuing operations $0.35 $0.35
Discontinued operations - -
Diluted income (loss) per common share $0.35 $0.35
Weighted Average Shares
Basic 75,344 72,877
Diluted 76,593 74,924
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(thousands, except per-share amounts)
Six Months Ended
June 30, July 1,
2007 2006
Sales $4,568,671 $4,464,488
Cost of goods sold and occupancy costs 3,409,649 3,318,737
Gross profit 1,159,022 1,145,751
Operating and other expenses:
Operating and selling 813,349 818,344
General and administrative 182,656 175,904
Other operating (income) expense, net (3,023) 113,296
Operating income (loss) 166,040 38,207
Other income (expense):
Interest expense (60,075) (61,717)
Interest income 44,814 43,217
Other income (expense), net (5,680) 4,561
(20,941) (13,939)
Income from continuing operations before
income taxes and minority interest 145,099 24,268
Income tax expense (56,589) (9,290)
Income from continuing operations
before minority interest 88,510 14,978
Minority interest, net of income tax (2,535) (1,689)
Income from continuing operations 85,975 13,289
Discontinued operations:
Operating loss - (17,972)
Income tax benefit - 6,991
Loss from discontinued operations - (10,981)
Net income (loss) 85,975 2,308
Preferred dividends (2,015) (2,018)
Net income applicable to common
shareholders $83,960 $290
Basic income (loss) per common share:
Continuing operations $1.12 $0.15
Discontinued operations - (0.15)
Basic income (loss) per common share $1.12 $-
Diluted income (loss) per common share:
Continuing operations $1.10 $0.15
Discontinued operations - (0.15)
Diluted income (loss) per common share $1.10 $-
Weighted Average Shares
Basic 75,168 71,855
Diluted 76,168 73,510
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(thousands)
Six Months Ended
June 30, July 1,
2007 2006
Cash provided by (used for) operations:
Net income $85,975 $2,308
Items in net income not using (providing) cash:
Depreciation and amortization 65,106 60,316
Other 18,602 30,980
Changes other than from acquisitions of business:
Receivables and inventory 51,245 217,532
Accounts payable and accrued liabilities (253,383) (180,825)
Income taxes and other 72,998 20,669
Cash provided by operations 40,543 150,980
Cash provided by (used for) investment:
Expenditures for property and equipment (59,440) (46,996)
Other (1,948) 596
Cash used for investment (61,388) (46,400)
Cash provided by (used for) financing:
Cash dividends paid (24,453) (23,268)
Changes in debt, net (18,489) (84,144)
Proceeds from exercise of stock options 5,211 104,623
Other (2,879) (33)
Cash used for financing (40,610) (2,822)
Increase (decrease) in cash and
cash equivalents (61,455) 101,758
Cash and cash equivalents at
beginning of period 282,070 72,198
Cash and cash equivalents at end of period $220,615 $173,956
OFFICEMAX INCORPORATED AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT INFORMATION
(unaudited)
(millions, except per-share data)
Quarter Ended
June 30, 2007 July 1, 2006
Before Before
As Special Special As Special Special
Reported Items Items Reported Items (a) Items (b)
Segment Sales
OfficeMax,
Contract $1,197.2 $1,197.2 $1,146.7 $1,146.7
OfficeMax,
Retail 935.3 935.3 894.2 894.2
2,132.5 2,132.5 2,040.9 2,040.9
Segment income
(loss)
OfficeMax,
Contract $41.0 $- $41.0 $44.4 $- $44.4
OfficeMax,
Retail 24.7 - 24.7 27.2 (9.0) 18.2
Corporate and
Other (9.8) - (9.8) (25.0) 10.9 (14.1)
Operating income
(loss) 55.9 - 55.9 46.6 1.9 48.5
Operating income
margin 2.6% 2.6% 2.3% 2.4%
Interest expense (30.0) - (30.0) (30.2) - (30.2)
Interest income
and other 19.6 - 19.6 28.8 (9.2) 19.6
Income (loss) from
continuing
operations
before income
taxes and
minority interest 45.5 - 45.5 45.2 (7.3) 37.9
Income taxes (17.8) - (17.8) (17.3) 2.9 (14.4)
Income (loss) from
continuing
operations
before minority
interest 27.7 - 27.7 27.9 (4.4) 23.5
Minority interest,
net of income tax (0.3) - (0.3) (0.5) - (0.5)
Income (loss)
from continuing
operations 27.4 - 27.4 27.4 (4.4) 23.0
Net income (loss) $27.4 $- $27.4 $27.4 $(4.4) $23.0
Diluted income
(loss) per common
share
Continuing
operations $0.35 $- $0.35 $0.35 $(0.06) $0.29
Discontinued
operations - - - - - -
Diluted income
(loss) per
common share $0.35 $- $0.35 $0.35 $(0.06) $0.29
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)
Six Months Ended
June 30, 2007 July 1, 2006
Before Before
As Special Special As Special Special
Reported Items (a) Items Reported Items (b) Items (c)
Segment Sales
OfficeMax,
Contract $2,461.7 $2,461.7 $2,377.5 $2,377.5
OfficeMax,
Retail 2,107.0 2,107.0 2,087.0 2,087.0
4,568.7 4,568.7 4,464.5 4,464.5
Segment income
(loss)
OfficeMax,
Contract $100.9 $- $100.9 $111.5 $- $111.5
OfficeMax,
Retail 89.3 - 89.3 (10.8) 89.5 78.7
Corporate and
Other (24.1) - (24.1) (62.5) 26.6 (35.9)
Operating income
(loss) 166.1 - 166.1 38.2 116.1 154.3
Operating income
margin 3.6% 3.6% 0.9% 3.5%
Interest expense (60.1) - (60.1) (61.7) - (61.7)
Interest income
and other 39.1 - 39.1 47.8 (9.2) 38.6
Income (loss)
from continuing
operations
before income
taxes and
minority
interest 145.1 - 145.1 24.3 106.9 131.2
Income taxes (56.6) - (56.6) (9.3) (41.6) (50.9)
Income (loss)
from continuing
operations
before minority
interest 88.5 - 88.5 15.0 65.3 80.3
Minority interest,
net of
income tax (2.5) 1.1 (1.4) (1.7) - (1.7)
Income (loss) from
continuing
operations 86.0 1.1 87.1 13.3 65.3 78.6
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
(loss) $86.0 $1.1 $87.1 $2.3 $76.3 $78.6
Diluted income
(loss) per
common share
Continuing
operations $1.10 $0.02 $1.12 $0.15 $0.89 $1.04
Discontinued
operations - - - (0.15) 0.15 -
Diluted income
(loss) per common
share $1.10 $0.02 $1.12 $- $1.04 $1.04
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 special
gains and losses. We believe our presentation of financial measures before
special items, which are non-GAAP measures, enhances our investors' overall
understanding of our recurring operational performance. Specifically, we
believe presenting results before special items provides useful information
to both investors and management by excluding gains, losses and expenses
that are not indicative of our core operating activities. In the preceding
tables, we reconcile our financial measures before special items to our
reported GAAP financial results for the second quarter and first six months
of both 2007 and 2006.
(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.
(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.
Media Contact Investor Relations Contact
Bill Bonner John Jennings
630 864 6066 630 864 6820
SOURCE OfficeMax Incorporated
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Related links:
http://www.officemax.com
CONTACT:
media, Bill Bonner, +1-630-864-6066, or
investor relations, John Jennings, +1-630-864-6820, both of
OfficeMax Incorporated
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