UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

Annual Report Pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934

x                              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2006

OR

o                                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                            

Commission File Number: 1-5057

OFFICEMAX INCORPORATED

(Exact name of registrant as specified in its charter)

(630) 438-7800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. o                .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x  Accelerated filer o  Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes o No x

The aggregate market value of the voting common stock held by nonaffiliates of the registrant, computed by reference to the price at which the common stock was sold as of the close of business on July 1, 2006, was $3,016,166,385. Registrant does not have any nonvoting common equities.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

Document incorporated by reference

Portions of the registrant’s proxy statement relating to its 2007 annual meeting of shareholders to be held on April 25, 2007 (“OfficeMax Incorporated’s proxy statement”) are incorporated by reference into Part III of this Form 10-K.

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ITEM 1.   BUSINESS

As used in this 2006 Annual Report on Form 10-K, the terms “OfficeMax,” the “Company,” and “we” include OfficeMax Incorporated and its consolidated subsidiaries and predecessors. Our Securities and Exchange Commission (“SEC”) filings, which include this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all related amendments, are available free of charge on our website at www.officemax.com and can be found by clicking on “About us,” “Investors” and then “SEC filings.” Our SEC filings are available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Last year, we filed our annual Chief Executive Officer certification dated May 18, 2006, with the New York Stock Exchange. Attached as exhibits to this Form 10-K you will find certifications of our Chief Executive Officer and Chief Financial Officer required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

General Overview

OfficeMax is a leader in both business-to-business and retail office products distribution. We provide office supplies and paper, print and document services, technology products and solutions and furniture to large, medium and small businesses, government offices, and consumers. OfficeMax customers are served by more than 36,000 associates through direct sales, catalogs, the Internet and retail stores. Our common stock trades on the New York Stock Exchange under the ticker symbol OMX, and our corporate headquarters is in Naperville, Illinois.

OfficeMax Incorporated (formerly Boise Cascade Corporation) was organized as Boise Payette Lumber Company, a Delaware corporation, in 1931 as a successor to an Idaho corporation formed in 1913. In 1957, the company’s name was changed to Boise Cascade Corporation. On December 9, 2003, Boise Cascade Corporation acquired 100% of the voting securities of OfficeMax, Inc. That acquisition more than doubled the size of our office products distribution business and expanded that business into the U.S. retail channel. In connection with the sale of our paper, forest products and timberland assets described below, the Company’s name was changed from Boise Cascade Corporation to OfficeMax Incorporated, and the names of our office products segments were changed from Boise Office Solutions, Contract and Boise Office Solutions, Retail to OfficeMax, Contract and OfficeMax, Retail. The Boise Cascade Corporation and Boise Office Solutions names were used in documents furnished to or filed with the SEC prior to the sale of our paper, forest products and timberland assets.

References made to the OfficeMax, Inc. acquisition and the OfficeMax, Inc. integration in this Form 10-K refer to Boise Cascade Corporation’s acquisition of OfficeMax, Inc. in December 2003, and the related integration activities. (For more information about our integration activities, see Note 4, Integration and Facility Closures, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.)

On October 29, 2004, we sold our paper, forest products and timberland assets to affiliates of Boise Cascade, L.L.C., a new company formed by Madison Dearborn Partners LLC (the “Sale”). The Sale did not include our facility near Elma, Washington. (See Note 3, Discontinued Operations, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for more information about the Elma facility.) With the Sale, we completed the Company’s transition, begun in the mid-1990s, from a predominately manufacturing-based company to an independent office products distribution company. On October 29, 2004, as part of the Sale, we invested $175 million in the securities of affiliates of Boise Cascade, L.L.C. This investment represents

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continuing involvement as defined in Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, we do not show the historical results of the sold paper, forest products and timberland assets as discontinued operations. (For more information about the Sale, see Note 2, Sale of Paper, Forest Products and Timberland Assets, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.)

Effective with the first quarter of 2005, we began reporting our results using three reportable segments: OfficeMax, Contract; OfficeMax, Retail; and Corporate and Other. The results of our paper, forest products and timberland assets prior to the Sale were included in the Boise Building Solutions and Boise Paper Solutions segments. We present information pertaining to each of our segments and the geographic areas in which they operate in Note 17, Segment Information, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Change in Fiscal Year End

Effective March 11, 2005, the Company amended its bylaws to make its fiscal year-end the last Saturday in December. Prior to this change, all of the Company’s businesses except for our U.S. retail operations had a December 31 fiscal year-end. The U.S. retail operations maintained a fiscal year that ended on the last Saturday in December. Due primarily to statutory requirements, the Company’s international businesses have maintained their December 31 year-ends. Fiscal year 2005 ended on December 31, 2005 for all reportable segments and businesses, and included 53 weeks for the Retail segment. Fiscal year 2006 ended on December 30, 2006 and included 52 weeks for all reportable segments and businesses.

OfficeMax, Contract

We distribute a broad line of items for the office, including office supplies and paper, technology products and solutions and office furniture through our OfficeMax, Contract segment. OfficeMax, Contract sells directly to large corporate and government offices, as well as to small and medium-sized offices in the United States, Canada, Australia and New Zealand. This segment markets and sells through field salespeople, outbound telesales, catalogs, the Internet and in some foreign markets through office products stores. Substantially all products sold by this segment are purchased from outside manufacturers or from industry wholesalers, except office papers. We purchase office papers primarily from the paper operations of Boise Cascade, L.L.C., under a 12-year paper supply contract entered into at the time of the Sale. (See Note 18, Commitments and Guarantees, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information related to the paper supply contract.)

As of January 27, 2007, OfficeMax Contract operated 52 distribution centers and 6 customer service and outbound telesales centers. OfficeMax, Contract also operated 82 stores in Canada, Hawaii, Australia and New Zealand.

OfficeMax, Contract sales for 2006, 2005 and 2004 were $4.7 billion, $4.6 billion and $4.4 billion, respectively.

OfficeMax, Retail

OfficeMax, Retail is a retail distributor of office supplies and paper, print and document services, technology products and solutions and office furniture. Our retail segment has operations in the United States, Puerto Rico and the U.S. Virgin Islands. Our retail office supply stores feature OfficeMax ImPress, an in-store module devoted to print-for-pay and related services. Our retail segment also

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operates office products stores in Mexico through a 51%-owned joint venture. Substantially all products sold by this segment are purchased from outside manufacturers or from industry wholesalers, except office papers. As described above, we purchase office papers primarily from the paper operations of Boise Cascade, L.L.C., under a 12-year paper supply contract we entered into at the time of the Sale.

As of January 27, 2007, our Retail segment operated 914 stores in the U.S. and Mexico, three large distribution centers in the U.S., and two small distribution centers in Mexico. Each store offers approximately 10,000 stock keeping units (SKUs) of name-brand and OfficeMax private-branded merchandise and a variety of business services targeted at serving the small business customer, including OfficeMax ImPress. As of January 27, 2007, our Retail segment operated six OfficeMax ImPress print on demand facilities with enhanced fulfillment capabilities. These 8,000 square foot operations are located within some of our contract distribution centers, and serve the print and document needs of our large contract customers in addition to supporting our retail stores by providing services that cannot be deployed at every retail store.

OfficeMax, Retail sales for 2006, 2005 and 2004 were $4.3 billion, $4.5 billion and $4.5 billion, respectively.

Boise Building Solutions

Substantially all of the assets of this segment were included in the Sale. Boise Building Solutions was a major producer of plywood, lumber and particleboard. This segment also manufactured engineered wood products, including laminated veneer lumber, wood I-joists and laminated beams. Most of the production was sold to independent wholesalers and dealers or through the segment’s building materials distribution outlets for use in housing, industrial construction and a variety of manufactured products.

Boise Building Solutions operated 28 building materials distribution facilities as of October 28, 2004 that marketed a wide range of building materials. These products were distributed to retail lumber dealers, home centers specializing in the do-it-yourself market and industrial customers. Through October 28, 2004, approximately 25% of the lumber, panels and engineered wood products purchased by the distribution operations were provided by this segment’s manufacturing facilities, with the balance purchased from outside sources. Segment sales for the period from January 1 through October 28, 2004, were $3.3 billion.

Boise Paper Solutions

Substantially all of the assets of this segment were included in the Sale. Boise Paper Solutions manufactured and sold uncoated free sheet papers, containerboard, corrugated containers, newsprint and market pulp. Boise Paper Solutions sales for the period from January 1 through October 28, 2004, were $1.7 billion.

About 46% of this segment’s uncoated free sheet paper, including about 83% of its office papers, was sold through the OfficeMax, Contract and OfficeMax, Retail segments during the period from January 1 through October 28, 2004.

Timber Resources

On October 29, 2004, we sold substantially all of our timberland assets, including approximately 2.3 million acres of timberland in the United States, 35,000 acres of eucalyptus plantation land in Brazil and a 16,000-acre cottonwood fiber farm near Wallula, Washington, to affiliates of Boise Cascade, L.L.C.

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Competition

Domestic and international office products markets are highly and increasingly competitive. Customers have many options when purchasing office supplies and paper, print and document services, technology products and solutions and office furniture. We compete with worldwide contract stationers, office supply superstores, mass merchandisers, wholesale clubs, computer and electronics superstores, Internet merchandisers, direct-mail distributors, discount retailers, drugstores, supermarkets and thousands of local and regional contract stationers. In addition, an increasing number of manufacturers of computer hardware, software and peripherals, including some of our suppliers, have expanded their own direct marketing efforts. The other large office supply superstores have increased their presence in our markets in recent years and are expected to continue to do so in the future. In addition, many of our competitors have expanded their office products assortment, and we expect they will continue to do so. In recent years, two package delivery companies have established retail stores that compete directly with us for copy, printing, packaging and shipping business, and offer a limited assortment of office products and services similar to the ones we offer. We anticipate increasing competition from our two domestic office supply superstore competitors and various other providers, including the two package delivery companies, for print-for-pay and related services. Print-for-pay and related services have historically been a key point of difference for OfficeMax stores and are expected to become an increasingly more important part of our future strategies. Any or all of our competitors may become even more aggressive in the future.

Increased competition in the office products markets, together with increased advertising, has heightened price awareness among end-users. Such heightened price awareness has led to margin pressure on office products and impacted the results of both our Retail and Contract segments. In addition to price, competition is also based on customer service, the quality and breadth of product selection, and convenient locations. Some of our competitors are larger than us and have greater financial resources, which affords them greater purchasing power, increased financial flexibility and more capital resources for expansion and improvement, which may enable them to compete more effectively than we can.

We believe our excellent customer service and the efficiency and convenience for our customers of our combined contract and retail distribution channels gives our OfficeMax, Contract segment a competitive advantage among business-to-business office products distributors. Our ability to network our distribution centers into an integrated system enables us to serve large national accounts that rely on us to deliver consistent products, prices and services to multiple locations as well as medium and small businesses at a competitive cost.

We believe our OfficeMax, Retail segment competes favorably based on the quality of our customer service, our innovative store formats, the breadth and depth of our merchandise offering and our everyday low prices, along with our specialized service offerings, including OfficeMax ImPress.

Inflationary and Seasonal Influences

We believe that neither inflation nor deflation has had a material effect on our financial condition or results of operations; however, there can be no assurance that we will not be affected by inflation or deflation in the future.

The Company’s business is seasonal, with OfficeMax, Retail showing a more pronounced seasonal trend than OfficeMax, Contract. Sales in the second quarter and summer months are historically the slowest of the year. Sales are stronger during the first, third and fourth quarters that include the important new-year office supply restocking month of January, the back-to-school period and the holiday selling season, respectively.

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Environmental Matters

Our discussion of environmental matters is presented under the caption “Environmental” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. In addition, certain environmental matters are discussed under “Item 3. Legal Proceedings” of this Form 10-K.

Capital Investment

Information concerning our capital expenditures is presented under the caption “Investment Activities” and in the table entitled “2006 Capital Investment by Segment” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

Acquisitions and Divestitures

We engage in acquisition and divestiture discussions with other companies and make acquisitions and divestitures from time to time. It is our policy to review our operations periodically and to dispose of assets that do not meet our criteria for return on investment, or cease to warrant retention for other reasons. See Note 2, Sale of Paper, Forest Products and Timberland Assets; and Note 6, Other Operating, Net, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for a description of significant acquisitions, divestitures and asset sales completed during 2006, 2005 and 2004.

Geographic Areas

Our discussion of financial information by geographic area is presented in Note 17, Segment Information, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Identification of Executive Officers

Information with respect to our executive officers is set forth in “Item 10. Directors and Executive Officers of the Registrant” of this Form 10-K.

Employees

On December 30, 2006, we had approximately 36,000 employees, including approximately 11,000 part-time employees.

ITEM 1A.   RISK FACTORS

Cautionary and Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects, are forward-looking statements. You can identify these statements by our use of words such as “may,” “will,” “expect,” “believe,” “should,” “plan,” “anticipate” and other similar expressions. You can find examples of these statements throughout this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations. We cannot guarantee that our actual results will be consistent with the forward-looking statements we make in this report. We have listed below some of the inherent risks and uncertainties that could cause our actual results to differ materially from those we project. We do not assume an obligation to update any forward-looking statement.

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Intense competition in our markets could harm our ability to maintain profitability.   Domestic and international office products markets are highly and increasingly competitive. Customers have many options when purchasing office supplies and paper, print and document services, technology products and solutions and office furniture. We compete with worldwide contract stationers, office supply superstores, mass merchandisers, wholesale clubs, computer and electronics superstores, Internet merchandisers, direct-mail distributors, discount retailers, drugstores, supermarkets and thousands of local and regional contract stationers. In addition, an increasing number of manufacturers of computer hardware, software and peripherals, including some of our suppliers, have expanded their own direct marketing efforts. The other large office supply superstores have increased their presence in our markets in recent years and are expected to continue to do so in the future. In addition, many of our competitors have expanded their office products assortment, and we expect they will continue to do so. In recent years, two package delivery companies have established retail stores that compete directly with us for copy, printing, packaging and shipping business, and offer a limited assortment of office products and services similar to the ones we offer. We anticipate increasing competition from our two domestic office supply superstore competitors and various other providers, including the two package delivery companies, for print-for-pay and related services. Print-for-pay and related services have historically been a key point of difference for OfficeMax stores and are expected to become an increasingly more important part of our future strategies. Any or all of our competitors may become even more aggressive in the future. Increased competition in the office products markets, together with increased advertising, has heightened price awareness among end-users. Such heightened price awareness has led to margin pressure on office products and impacted the results of both our Retail and Contract segments. In addition to price, competition is also based on customer service, the quality and breadth of product selection, and convenient locations. Some of our competitors are larger than us and have greater financial resources, which affords them greater purchasing power, increased financial flexibility and more capital resources for expansion and improvement, which may enable them to compete more effectively than we can.

We may be unable to open and remodel stores successfully.   Our business plans include the opening and remodeling of a significant number of retail stores. For these plans to be successful, we must identify and lease favorable store sites, develop remodeling plans, hire and train associates and adapt management and systems to meet the needs of these operations. These tasks are difficult to manage successfully. If we are not able to open and remodel stores as quickly as we have planned, our future financial performance could be materially and adversely affected. Further, we cannot ensure that the new or remodeled stores will achieve the sales or profit levels that we anticipate. This is particularly true as we introduce different store designs, formats and sizes or enter into new market areas. In particular, the “Advantage” prototype store format we intend to utilize for new and remodeled stores is new and there can be no assurance as to whether or to what extent that format will be successful.

Economic conditions directly influence our operating results.   Economic conditions, both domestically and abroad, directly influence our operating results. Current and future economic conditions, including the level of unemployment, energy costs and the financial condition and growth prospects of our Contract customers may adversely affect our business and the results of our operations.

Our quarterly operating results are subject to fluctuation.   Our quarterly operating results have fluctuated in the past and are likely to do so in the future. Factors that may contribute to these quarter-to-quarter fluctuations could include the effects of seasonality, our level of advertising and marketing, new store openings, changes in product mix and competitors’ pricing. These quarterly fluctuations could have an adverse effect on both our operating results and the price of our common stock.

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We may be unable to attract and retain qualified associates.   We attempt to attract and retain an appropriate level of personnel in both field operations and corporate functions. As a retailer, we face the challenge of filling many positions at wage scales that are low, although appropriate for our industry and in light of competitive factors. As a result, we face many external risks and internal factors in meeting our labor needs, including competition for qualified personnel, overall unemployment levels, prevailing wage rates, as well as rising employee benefit costs, including insurance costs and compensation programs. Changes in any of these factors, including especially a shortage of available workforce in the areas in which we operate, could interfere with our ability to adequately provide services to customers and result in increasing our labor costs, which could have an adverse effect on our business and results of our operations.

We cannot assure that new associates will perform effectively.   In conjunction with our headquarters consolidation, we have hired approximately 600 new employees to replace existing associates who did not relocate to the new headquarters. As a result, we now have a significant number of associates with limited experience with OfficeMax performing key functions. Although we have carefully selected and trained these associates, there is still a risk that institutional knowledge may be lost and operations may be conducted less efficiently or effectively. Also, if we are unable to continue to attract and retain qualified associates for our remaining open positions, as well as train new associates and transition them smoothly into their roles, it could adversely affect our operating results.

Our expanded offering of proprietary branded products may not improve our financial performance and may expose us to product liability claims.   Our product offering includes many proprietary branded products. While we have focused on the quality of our proprietary branded products, we rely on third-party manufacturers for these products. Such third party manufacturers may prove to be unreliable, or the quality of our globally sourced products may not meet our expectations. Furthermore, economic and political conditions in areas of the world where we source such products may adversely affect the availability and cost of such products. In addition, our proprietary branded products compete with other manufacturers’ branded items that we offer. As we continue to increase the number and types of proprietary branded products that we sell, we may adversely affect our relationships with our vendors, who may decide to reduce their product offerings through OfficeMax and increase their product offerings through our competitors. Finally, if any of our customers are harmed by our proprietary branded products, they may bring product liability and other claims against us. Any of these circumstances could have an adverse effect on our business and financial performance.

We are more leveraged than some of our competitors, which could adversely affect our business plans.   A relatively greater portion of our cash flow is used to service debt and other financial obligations including leases. This reduces the funds we have available for working capital, capital expenditures, acquisitions, new stores, store remodels and other purposes. Similarly, our relatively greater leverage increases our vulnerability to, and limits our flexibility in planning for, adverse economic and industry conditions and creates other competitive disadvantages compared with other companies with relatively less leverage.

We cannot ensure new systems and technology will be implemented successfully.   Our acquisition of OfficeMax, Inc., in December 2003, required the integration and coordination of our existing contract stationer systems with the retail systems of the acquired company. Integrating and coordinating these systems has been complex and still requires a number of system enhancements and conversions that, if not done properly, could divert the attention of our workforce during development and implementation and constrain for some time our ability to provide the level of service our customers demand. Also, when implemented, the systems and technology enhancements may not provide the benefits anticipated and could add costs and complications to our ongoing operations. A failure to effectively implement changes to to these systems or to realize the intended efficiencies could have an adverse effect on our business and results of our operations.

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We retained responsibility for certain liabilities of the paper, forest products and timberland businesses we sold.   These obligations include liabilities related to environmental, tax, litigation and employee benefit matters. Some of these retained liabilities could turn out to be significant, which could have an adverse effect on our results of operations. Our exposure to these liabilities could harm our ability to compete with other office products distributors, who would not typically be subject to similar liabilities.

Our business may be adversely affected by the actions of and risks associated with our third-party vendors.   We are a reseller of other manufacturer’s branded items and are thereby dependent on the availability and pricing of key products including ink, toner, paper and technology products. As a reseller, we cannot control the supply, design, function or cost of many of the products we offer for sale. Disruptions in the availability of these products may adversely affect our sales and result in customer dissatisfaction. Further, we cannot control the cost of manufacturer’s products and cost increases must either be passed along to our customers or will result in erosion of our earnings. Failure to identify desirable products and make them available to our customers when desired and at attractive prices could have an adverse effect on our business and results of operations.

Our investment in Boise Cascade, L.L.C. subjects us to the risks associated with the paper and forest products industry.   When we sold our paper, forest products and timberland assets, we purchased an equity interest in affiliates of Boise Cascade, L.L.C. In addition, we have an ongoing obligation to purchase paper from an affiliate of Boise Cascade, L.L.C. These continuing interests subject us to market risks associated with the paper and forest products industry. These industries are subject to cyclical market pressures. Historical prices for products have been volatile, and industry participants have limited influence over the timing and extent of price changes. The relationship between supply and demand in these industries significantly affects product pricing. Demand for building products is driven mainly by factors such as new construction and remodeling rates, interest rates and weather. The supply of paper and building products fluctuates based on manufacturing capacity, and excess capacity, both domestically and abroad, can result in significant variations in product prices. The level of supply and demand for forest products will affect the price we pay for paper. Our ability to realize the carrying value of our equity interest in affiliates of Boise Cascade, L.L.C. is dependent upon many factors, including the operating performance of Boise Cascade, L.L.C. and other market factors that may not be specific to Boise Cascade, L.L.C., due in part to the fact that there is not a liquid market for our equity interest. Our exposure to these risks could decrease our ability to compete effectively with our competitors, who typically are not subject to such risks.

Compromises of customer debit and credit card data in 2004, regardless of the source of the breach, may damage the OfficeMax brand and our reputation.   Compromises of customer debit and credit card data in 2004 were later tied to fraudulent transactions outside the U.S. While we have no knowledge of a security breach at OfficeMax, it is possible that information security compromises that involved OfficeMax customer data, including breaches that occurred at third party processors, may damage our reputation. Such damage to our reputation could adversely affect our operating results.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

The majority of OfficeMax facilities are rented under operating leases. (For more information about our operating leases, see Note 8, Leases, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.) Our properties are in good operating condition and are suitable and adequate for the operations for which they are used.

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Presented below is a list of our facilities by segment. During 2006, we consolidated our corporate headquarters from Itasca, Illinois, and our retail operations from Shaker Heights, Ohio, to a single headquarters facility located in Naperville, Illinois.

OfficeMax, Contract

As of January 27, 2007, OfficeMax, Contract operated 52 distribution centers in 26 states, Puerto Rico, Canada, Australia and New Zealand. The following table sets forth the locations of these facilities.

OfficeMax, Contract also operated 82 office products stores in Hawaii (2), Canada (51), Australia (8) and New Zealand (21) and six customer service and outbound telesales centers in Illinois (2), Ohio, Oklahoma, Virginia and Wyoming.

OfficeMax, Retail

As of January 27, 2007, OfficeMax, Retail operated 914 stores in 48 states, Puerto Rico, the U.S. Virgin Islands and Mexico. The following table sets forth the locations of these facilities.

OfficeMax, Retail also operated three large distribution centers in Alabama, Nevada and Pennsylvania; and two small distribution centers in Mexico through our joint venture.

(a)             Represents the locations operated by our 51%-owned joint venture in Mexico, OfficeMax de Mexico.

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ITEM 3.   LEGAL PROCEEDINGS

OfficeMax Incorporated and certain of its subsidiaries are named as defendants in a number of lawsuits, claims and proceedings arising out of the operation of the paper and forest products assets prior to the closing of the Sale, for which OfficeMax agreed to retain responsibility. Also, as part of the Sale, we agreed to retain responsibility for all pending or threatened proceedings and future proceedings alleging asbestos-related injuries arising out of the operation of the paper and forest products assets prior to the closing of the Sale. We do not believe any of these retained proceedings are material to our business.

We have been notified that we are a “potentially responsible party” under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) or similar federal and state laws, or have received a claim from a private party, with respect to 15 active sites where hazardous substances or other contaminants are or may be located. The number of active sites is now 12. All 12 active sites relate to operations either no longer owned by the Company or unrelated to its ongoing operations. In most cases, we are one of many potentially responsible parties, and our alleged contribution to these sites is relatively minor. For sites where a range of potential liability can be determined, we have established appropriate reserves. We believe we have minimal or no responsibility with regard to several other sites. We cannot predict with certainty the total response and remedial costs, our share of the total costs, the extent to which contributions will be available from other parties or the amount of time necessary to complete the cleanups. Based on our investigations; our experience with respect to cleanup of hazardous substances; the fact that expenditures will, in many cases, be incurred over extended periods of time; and the number of solvent potentially responsible parties, we do not believe that the known actual and potential response costs will, in the aggregate, materially affect our financial position or results of operations.

Over the past several years and continuing into 2006, we have been named a defendant in a number of cases where the plaintiffs allege asbestos-related injuries from exposure to asbestos products or exposure to asbestos while working at job sites. The claims vary widely and often are not specific about the plaintiffs’ contacts with the Company. None of the claimants seeks damages from us individually, and we are generally one of numerous defendants. Many of the cases filed against us have been voluntarily dismissed, although we have settled some cases. The settlements we have paid have been covered mostly by insurance, and we believe any future settlements or judgments in these cases would be similarly covered. To date, no asbestos case against us has gone to trial, and the nature of these cases makes any prediction as to the outcome of pending litigation inherently subjective. At this time, however, we believe our involvement in asbestos litigation is not material to either our financial position or our results of operations.

The Company and several former officers and/or directors of the Company or its predecessor are defendants in a consolidated, putative class action proceeding (Roth v. OfficeMax Inc., et. al, U.S. District Court, Northern District of Illinois) alleging violations of the Securities Exchange Act of 1934. The Complaint alleges, in summary, that the Company failed to disclose (a) that vendor income had been improperly recorded, (b) that the Company lacked internal controls necessary to ensure the proper reporting of revenue and compliance with generally accepted accounting principles, and (c) that the Company’s 2004 and later results would be adversely affected by the Company’s allegedly improper practices. The relief sought includes unspecified compensatory damages, interest and costs, including attorneys’ fees. On September 21, 2005, the defendants filed a motion to dismiss the consolidated amended complaint. On September 12, 2006, the court granted the defendant group’s joint motion to dismiss the consolidated amended complaint. On November 9, 2006, the plaintiffs filed a purported amended complaint. On January 19, 2007, the defendants filed a motion to dismiss the amended complaint, which is pending. The Company believes there are valid factual and legal defenses to these claims and intends to vigorously defend against them.

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In June 2005, the Company announced that the SEC issued a formal order of investigation arising from the Company’s previously announced internal investigation into its accounting for vendor income. The Company launched its internal investigation in December 2004 when the Company received claims by a vendor to its retail business that certain employees acted inappropriately in requesting promotional payments and in falsifying supporting documentation. The internal investigation was conducted under the direction of the Company’s audit committee and was completed in March 2005. The Company cooperated fully with the SEC. The Company has had no communication with the SEC since August 2005.

Putative derivative actions have been filed in the Circuit Courts of Cook County (Homstrom v. Harad, et al.) and DuPage County, Illinois (Bryan v. Anderson, et al.) against a number of current and former officers and/or directors of the Company or its predecessor in connection with alleged misrepresentation of financial results (and, in the case of one former director and officer, for allegedly selling Company common stock while in possession of material, non-public information concerning the Company’s financial position and future prospects). Both derivative actions assert claims for breach of fiduciary duty and unjust enrichment, and the Homstrom complaint also includes claims for alleged abuse of control, mismanagement, and waste of corporate assets. The relief sought from the defendants includes recovery of costs incurred by the Company in its internal investigation and restatement, the disgorgement of compensation and, in the Homstrom case, the attorneys’ fees incurred by the Company in defending the Roth putative class action and the Company’s asserted exposure to a potentially substantial settlement or adverse judgment in the Roth case. The Company is a nominal defendant in the putative derivative actions and no monetary relief is sought from the Company. However, the Company has exposure in such cases for amounts it may be required to advance or incur on behalf of the individual defendants under its indemnification obligations. On February 21, 2007, the Bryan case was dismissed without prejudice.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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ITEM 5.      MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange (the “Exchange”). The Exchange requires each listed company to distribute an annual report to its shareholders. We are distributing this Form 10-K to our shareholders in lieu of a separate annual report. The reported high and low sales prices for our common stock, as well as the frequency and amount of dividends paid on such stock, are included in Note 20, Quarterly Results of Operations (unaudited), of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. We expect to continue the practice of paying regular cash dividends in 2007. Information concerning restrictions on the payment of dividends is included in Note 13, Debt, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” and in Liquidity and Capital Resources in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. The approximate number of common shareholders, based upon actual record holders on February 24, 2007, was 19,899.

We maintain a corporate governance page on our website that includes key information about our corporate governance initiatives. That information includes our Corporate Governance Guidelines, Code of Ethics and charters for our Audit, Executive Compensation and Governance and Nominating Committees, as well as our Committee of Outside Directors. The corporate governance page can be found at www.officemax.com, by clicking on “About us,” “Investors” and then “Corporate Governance.” You also may obtain copies of these policies and codes by contacting our Investor Relations Department, 263 Shuman Boulevard, Naperville, Illinois 60563, or by calling (630) 864-6800.

Information concerning securities authorized for issuance under our equity compensation plans is included in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10-K.

Shareholder Rights Plan

We have had a shareholder rights plan since January 1986. Our current plan, as amended and restated, took effect in December 1998. At that time, the rights under the previous plan expired, and we distributed to our common stockholders one new right for each common share held. The rights become exercisable ten days after a person or group acquires 15% of our outstanding voting securities or ten business days after a person or group commences or announces an intention to commence a tender or exchange offer that could result in the acquisition of 15% of these securities. Each full right, if it becomes exercisable, entitles the holder to purchase one share of common stock at a purchase price of $175 per share, subject to adjustment. Upon payment of the purchase price, the rights may “flip in” and entitle holders to buy common stock or “flip over” and entitle holders to buy common stock in an acquiring entity in such amount that the market value is equal to twice the purchase price. The rights are nonvoting and may be redeemed by the Company for one cent per right at any time prior to the tenth day after an individual or group acquires 15% of our voting stock, unless extended. The rights expire in 2008. On January 18, 2006, the Company announced that the board of directors voted not to seek an extension of the shareholder rights plan when it expires in 2008. Additional details are set forth in the Renewed Rights Agreement which is an exhibit to this Form 10-K.

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Stock Repurchases

Information concerning our stock repurchases during the fourth quarter of 2006 is as follows:

(a)             In September 1995, our board of directors authorized the purchase of up to 4.3 million shares of our common stock. As part of this authorization, we repurchased odd-lot shares (fewer than 100 shares) from shareholders wishing to exit their holdings in our common stock. We retired the shares that we repurchased under this program.

(b)            This program was terminated in the 4th quarter of 2006.

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The following graph compares the five-year cumulative total return (assuming dividend reinvestment) for the Standard & Poor’s 500 Index, the Standard & Poor’s 500 Specialty Stores Index, the Standard & Poor’s 500 Specialty Retail Index and OfficeMax. In 2005, we provided a comparison only to the Standard & Poor’s 500 Specialty Stores Index and not to the Standard & Poor’s 500 Specialty Retail Index. The group of companies now included in the Specialty Stores Index is small, while the group of companies now included in the Specialty Retail Index approximates the group of companies included in previous years in the Specialty Stores Index. We believe that adding the Specialty Retail Index results in a comparison that is consistent with our presentations in previous years.

ANNUAL RETURN PERCENTAGE
Years Ending

INDEXED RETURNS
Years Ending

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ITEM 6.   SELECTED FINANCIAL DATA

The following table sets forth our selected financial data for the years indicated and should be read in conjunction with the disclosures in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

See notes on following page.

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(a)             2006 included the following pre-tax charges:

·        $89.5 million related to the closing of 109 underperforming domestic retail stores.

·        $46.4 million related to the relocation and consolidation of our corporate headquarters.

·        $10.3 million primarily related to the reorganization in our Contract segment.

·        $18.0 million primarily for contract termination and other costs related to the closure of our Elma, Washington manufacturing facility, which is accounted for as a discontinued operation.

2006 also included $48.0 million of pre-tax income from adjustments to the estimated fair value of the Additional Consideration Agreement we entered into in connection with the Sale.

(b)            2005 included the following pre-tax charges:

·        $25.0 million related to the relocation and consolidation of our corporate headquarters.

·        $31.9 million primarily for one-time severance payments, professional fees and asset write-downs.

·        $17.9 million related to the write-down of impaired assets, primarily related to retail store closures.

·        $5.4 million related to the restructuring of our international operations.

·        $9.8 million for a legal settlement with the Department of Justice in our Contract segment.

·        $14.4 million related to our early retirement of debt.

·        $28.2 million for the write-down of impaired assets at our Elma, Washington manufacturing facility, which is accounted for as a discontinued operation.

2005 included 53 weeks for our OfficeMax, Retail segment.

(c)             2004 included a $67.8 million pre-tax charge for the write-down of impaired assets at our Elma, Washington, manufacturing facility, which is accounted for as a discontinued operation.

2004 included the results of our Boise Building Solutions and Boise Paper Solutions segments through October 28, 2004. On October 29, 2004, we completed the sale of our paper, forest products and timberland assets to affiliates of Boise Cascade, L.L.C., a new company formed by Madison Dearborn Partners LLC, and recorded a $280.6 million pre-tax gain. Part of the consideration we received in connection with the Sale consisted of timber installment notes receivable. We securitized the timber installment notes receivable for proceeds of $1.5 billion in December 2004. At the same time we entered into interest rate swap contracts to hedge the interest rate risk associated with the issuance of debt securities by special-purpose entities formed by the Company, and in December 2004 recorded $19.0 million of related expense in “Timber notes securitization.”

2004 included $137.1 million of costs related to our early retirement of debt.

2004 included a pre-tax gain of $59.9 million on the sale of approximately 79,000 acres of timberland located in western Louisiana.

2004 included a pre-tax gain of $46.5 million on the sale of our 47% interest in Voyageur Panel.

2004 included $15.9 million of expense in our Corporate and Other segment for the costs of certain one-time benefits granted to employees.

(d)            2003 included a pre-tax charge of $10.1 million for employee-related costs incurred in connection with the 2003 cost-reduction program.

2003 included a net $2.9 million one-time tax benefit related to a favorable tax ruling, net of changes in other tax items.

2003 included a $14.7 million pre-tax charge for the write-down of impaired assets at our plywood and lumber operations in Yakima, Washington.

2003 included income from the OfficeMax, Inc. operations for the period from December 10, 2003 through December 27, 2003, and costs, including incremental interest expense, directly related to the acquisition. The net effect of these items reduced income by $4.1 million before taxes, or $2.5 million after taxes.

(e)             2002 included a pre-tax charge of $23.6 million related to the sale of all of the stock of our wholly owned subsidiary that held our investment in IdentityNow. We also recorded $27.6 million of tax benefits associated with this sale and the 2001 write-down of our equity investment.

(f)                The computation of diluted income (loss) per common share was antidilutive in the years 2005, 2003 and 2002; therefore, the amounts reported for basic and diluted income (loss) per common share are the same.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains statements about our future financial performance. These statements are only predictions. Our actual results may differ materially from these predictions. In evaluating these statements, you should review “Item 1A, Risk Factors” of this Form 10-K, including “Cautionary and Forward-Looking Statements.”

Executive Summary

Sales for 2006 were $9.0 billion, compared to $9.2 billion for 2005 and $13.3 billion for 2004. Net income for 2006 was $91.7 million, or $1.19 per diluted share, compared to a net loss of $73.8 million, or $(0.99) per diluted share, for 2005 and net income of $173.1 million, or $1.77 per diluted share, for 2004.

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, such as the items described below. 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.

Results for the years of 2006, 2005 and 2004 include various items related to our transition from a predominately manufacturing-based company to an independent office products distribution company and our previously announced restructuring activities that are not expected to be ongoing. Many of these items have been included in our integration activities and facility closures reserve. For more information about these reserves, see the discussion of “Integration Activities and Facility Closures” below. Some of the more significant effects of these actions on our results include:

·       In 2006, we recorded pre-tax charges of $89.5 million related to the closing of 109 underperforming, domestic retail stores, $10.3 million primarily related to the reorganization of our contract segment and $46.4 million primarily related to the consolidation of our corporate headquarters. These charges were included in other operating, net in the Consolidated Statements of Income (Loss) and were reflected in the Retail segment (store closures), Contract segment (reorganization) and Corporate and Other segment (headquarters consolidation), respectively. During 2006, we reduced the liability related to the Additional Consideration Agreement that was entered into in connection with the sale of the paper, forest products and timberland assets, which resulted in a credit to Other Income (Expense), net (non-operating) of $48.0 million. We also recorded an $18.0 million pre-tax charge for the closure of our Elma, Washington manufacturing facility which was reflected in Discontinued Operations in the Consolidated Statements of Income (Loss).

·       In 2005, we recorded pre-tax charges of $25.0 million related to the consolidation and relocation of our corporate headquarters, $17.9 million related to the write-down of impaired assets, primarily as a result of retail store closures, $5.4 million related to the restructuring of our international operations, and $31.9 million for one-time severance payments, professional fees and asset write-downs. These charges were reflected in the Retail segment (retail store impairment), Contract segment (international restructuring) and Corporate and Other segment (headquarters consolidation, severance, professional fees and asset write-downs), respectively. In addition, we recognized a $9.8 million pre-tax charge in the Contract segment for a legal settlement with the Department of Justice related to allegations that the company submitted false claims when it sold office supply products manufactured in countries not permitted by the Trade Agreements Act to U.S. government agencies. We incurred $14.4 million of costs related to our early retirement of debt, and recorded a $28.2 million pre-tax charge for the write-down of impaired assets at our Elma, Washington manufacturing facility, which is accounted for as a discontinued operation.

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·       In 2004, we completed the sale of our paper, forest products and timberland assets (the “Sale”) and recorded a $280.6 million pre-tax gain. We monetized the timber installment notes we received in exchange for our timberlands for proceeds of $1.5 billion in December 2004, and recognized $19 million in expenses related to the change in the fair value of interest rate swaps we entered into in anticipation of the securitization transaction. We used a portion of the proceeds from the Sale to reduce our debt, and recorded $137.1 million of costs related to the early retirement of debt. Our results for 2004 also include a pre-tax gain of $59.9 million on the sale of approximately 79,000 acres of timberland located in western Louisiana, and a pre-tax gain of $46.5 million on the sale of our 47% interest in Voyageur Panel, as well as a $67.8 million pre-tax charge for the write-down of impaired assets at our Elma, Washington, manufacturing facility.

Results of Operations, Consolidated

($ in millions, except per share amounts)

Operating Results

2006 Compared with 2005

Sales for 2006 decreased 2.1% to $8,965.7 million from $9,157.7 million for 2005. The year-over-year sales decrease was primarily due to the impact of 109 strategic store closings in the first quarter of 2006 and the 53rd week included in the 2005 Retail segment results. Comparable-store sales increased 1.0% year-over-year primarily as a result of higher sales in our Contract segment. For more information about our segment results, see the discussion of segment results below.

Gross profit margin improved 1.8% of sales to 25.8% of sales in 2006 compared to 24.0% of sales in the previous year. The gross profit margin increase was driven by gross margin improvement initiatives in both the Contract and Retail segments.

Operating and selling expenses decreased by 1.0% of sales to 18.3% of sales in 2006 from 19.3% of sales a year earlier. The improvement in operating and selling expenses as a percent of sales was the result of targeted cost reduction programs, including lower promotion and marketing costs,

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payroll and integration expenses in the Contract segment, and reduced store labor and marketing costs in the Retail segment.

General and administrative expenses were 4.0% of sales for 2006 and 2005. General and administrative expenses in 2005 included $24.2 million of expenses for one-time severance payments and other expenses, primarily professional service fees, which are not expected to be ongoing. Excluding the severance and other expenses, general and administrative expenses were 3.6% of sales for 2005. The year-over-year increase in general and administrative expenses, excluding the severance and other expenses, was due to increased payroll costs, primarily increased incentive compensation expense.

In 2006, we reported $140.3 million of expense in Other operating, net which included $89.5 million related to the 109 domestic store closures, $46.4 million primarily related to the headquarters consolidation and $10.3 million primarily related to the Contract segment reorganization. In 2005, we reported $54.0 million of expense in Other operating, net. Other operating, net for 2005 included a $9.8 million charge for a legal settlement with the Department of Justice and $25.0 million related to the corporate headquarters consolidation. 2005 also included $23.2 million of expenses for the write-down of impaired assets at underperforming retail stores and the restructuring of our Canadian operations. Other operating, net also includes dividends earned on our investment in affiliates of Boise Cascade, L.L.C., which were $5.9 million for 2006 and $5.5 million for 2005, respectively. See Note 6, Other Operating, Net, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information related to the components of Other Operating, net.

During 2005, we incurred costs related to the early retirement of debt of approximately $14.4 million primarily as a result of purchasing and cancelling $87.3 million of 7% senior notes originally due in 2013.

Interest expense was $123.1 million in 2006 versus $128.5 million in 2005. The year-over-year decrease in interest expense was a result of lower average borrowings. Interest expense included interest related to the timber securitization notes of approximately $80.5 million for 2006 and 2005. The interest expense associated with the timber securitization notes is offset by interest income earned on the timber notes receivable of approximately $82.5 million for both 2006 and 2005. The interest income on the timber notes receivable is included in interest income and is not netted against the related interest expense in our Consolidated Statements of Income (Loss).

Excluding the interest income earned on the timber notes receivable, interest income was $7.1 million and $15.0 million for the years ended December 30, 2006 and December 31, 2005, respectively. The additional interest income in 2005 included interest earned on the cash and short-term investments we held following the Sale. Approximately $800 million of the Sale proceeds were used to repurchase 23.5 million shares of our common stock during the second quarter of 2005.

Other income (expense), net was $39.3 million of income in 2006 compared to $1.7 million of expense in 2005. In 2006, we reduced the liability related to the Additional Consideration Agreement that was entered into in connection with the Sale. The reduction in the liability reflects the effect of changes in our expectations regarding paper prices over the remaining term of the agreement, and resulted in the recognition of $48.0 million of other non-operating income in 2006. See Note 14, Financial Instruments, Derivatives and Hedging Activities, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of the Form 10-K for additional information related to the Additional Consideration Agreement.

Our effective tax rate attributable to continuing operations for 2006 was 40.0%. In 2005, we reported $1.2 million of income tax expense on a pre-tax loss of $37.6 million. Income taxes for both periods were affected by the impact of state income taxes and non-deductible expenses and the mix

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of domestic and foreign sources of income. Income tax expense in 2005 was also impacted by an increase in the valuation allowance for certain state net operating losses.

As a result of the foregoing factors, we reported income from continuing operations of $99.1 million, or $1.29 per diluted share, for 2006, compared to a loss from continuing operations of $41.2 million, or $(0.58) per diluted share, for 2005. Including the loss from discontinued operations, the net income for 2006 was $91.7 million, or $1.19 diluted share compared with a net loss of $73.8 million, or $0.99 per diluted share in 2005. Excluding the effect of the Additional Consideration Agreement adjustment, the charges for store closures, contract segment reorganization and our headquarters consolidation, income from continuing operations was $159.2 million, or $2.10 per diluted share, for 2006. Excluding the charges for the write-down of impaired assets of certain retail stores, our legal settlement with the Department of Justice, severance and professional fees, international restructuring and our headquarters consolidation, we recognized income from continuing operations of $23.6 million, or $0.24 per diluted share, for 2005.

2005 Compared with 2004

In 2005, sales were $9,157.7 million, compared with $13,270.2 million in 2004. The sales decline in 2005 was primarily due to the sale of our Boise Building Solutions and Boise Paper Solutions segments that were included in 2004 but not in 2005. Substantially all of the assets of these segments, along with our timberland assets, were included in the Sale.

Gross profit margin improved 3.8% of sales to 24.0% of sales for 2005 compared to 20.2% of sales for the previous year. The year-over-year variance was largely attributable to the Sale. The Contract and Retail segments operate with higher gross margins than did the Boise Building Solutions and Boise Paper Solutions segments.

Operating and selling expenses increased by 4.1% of sales to 19.3% of sales in 2005 from 15.2% of sales for the same period a year earlier. The year-over-year variance was largely attributable to the Sale. The Contract and Retail segments operate with higher operating and selling expenses than the Boise Building Solutions and Boise Paper Solutions segments.

General and administrative expenses as a percent of sales increased to 4.0% in 2005 from 2.8% in 2004. General and administrative expenses in 2005 included $24.2 million of expenses for one-time severance payments and other expenses, primarily professional service fees, which are not expected to be ongoing. Excluding the severance and other expenses, general and administrative expenses were 3.6% of sales for 2005.

In 2005, we reported $54.0 million of expense in Other operating, net, including $25.0 million of expenses related to the relocation and consolidation of our corporate headquarters, $23.2 million of expenses for the write-down of impaired assets at underperforming retail stores and the restructuring of our Canadian operations and a $9.8 million charge related to a legal settlement with the Department of Justice. In 2004, we reported $370.6 million of income in Other operating, net, including a $280.6 million gain on the Sale, a $46.5 million pre-tax gain on the sale of Voyageur Panel, a $75.0 million pre-tax gain on the sale of timberlands, offset by approximately $18.9 million of costs related to the Sale, $8.9 million of integration and facility closure costs, and $7.1 million of costs related to the sale of our Yakima, Washington plywood and lumber facilities. Other operating, net includes dividends received on our investment in affiliates of Boise Cascade L.L.C. and equity in net income of affiliates which were $5.5 million in 2005 and $6.3 million in 2004 including equity in the earnings of Voyageur Panel. We sold our interest in Voyageur Panel in May 2004. (See Note 6, Other Operating, Net, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information related to the components of Other Operating, net.) An additional $180 million gain on the Sale was deferred as a result of our

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continuing involvement with Boise Cascade, L.L.C. We expect to recognize this gain as we reduce our investment in affiliates of Boise Cascade, L.L.C.

During 2005 and 2004, we incurred costs related to the early retirement of debt of approximately $14.4 million and $137.1 million, respectively.

Interest expense was $128.5 million and $151.9 million for the years ended December 31, 2005 and 2004, respectively. The decrease in interest expense was due to reduced debt levels in 2005, which were a result of debt repurchases and retirements funded with proceeds from the Sale. In 2005, interest expense included interest related to the timber securitization notes of approximately $80.5 million. The interest expense associated with the timber securitization notes is offset by interest income of approximately $82.5 million earned on the timber notes receivable. The interest income on the timber notes receivable is included in interest income and is not netted against the related interest expense in our Consolidated Statements of Income (Loss).

Excluding the interest income earned on the timber notes receivable, interest income was $15.0 million in 2005 compared with $14.1 million in 2004. The increase in interest income is due to the increase in cash and short-term investments following the Sale.

In 2005, we reported an income tax expense of $1.2 million on a pre-tax loss of $37.6 million. Our effective tax rate attributable to continuing operations for 2004 was 37.5%. The difference between the statutory and the effective tax rates was due to the sensitivity of the rates to changing income levels and the mix of domestic and foreign sources of income as well as the increase in the valuation allowance for certain state net operating losses and the non-deductible nature of certain severance costs and the legal settlement recorded during 2005.

As a result of the foregoing factors, we reported a loss from continuing operations of $41.2 million, or $0.58 per diluted share, for 2005, compared to income from continuing operations of $234.1 million, or $2.44 per diluted share, for 2004. Including the loss from discontinued operations, the net loss for 2005 was $73.8 million, or $0.99 per diluted share, compared with net income of $173.1 million, or $1.77 per diluted share in 2004. In 2005, net loss included a $28.2 million pre-tax charge for the write-down of impaired assets at our Elma, Washington manufacturing facility, which is accounted for as a discontinued operation. In 2004, net income included a $67.8 million pre-tax charge for the write-down of our Elma, Washington, manufacturing facility.

Excluding the charges for the write-down of impaired assets of certain retail stores, our legal settlement with the Department of Justice, severance and professional fees, international restructuring and our headquarters consolidation, we recognized income from continuing operations of $23.6 million, or $0.24 per diluted share, for 2005. Excluding the gain on the Sale, costs related to the early repayment of debt and the gains on the sales of our interest in Voyageur Panel and timberland property, income from continuing operations was $102.8 million, or $1.00 per diluted share, for 2004.

Segment Discussion

Effective with the first quarter of 2005, we began reporting our results using three reportable segments: OfficeMax, Contract; OfficeMax, Retail; and Corporate and Other. The Boise Building Solutions and Boise Paper Solutions segments include the results of our sold paper, forest products and timberland assets prior to the Sale.

OfficeMax, Contract distributes a broad line of items for the office, including office supplies and paper, technology products and solutions and office furniture. OfficeMax, Contract sells directly to large corporate and government offices, as well as to small and medium-sized offices in the United States, Canada, Australia and New Zealand. This segment markets and sells through field

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salespeople, outbound telesales, catalogs, the Internet and in some markets, including Canada, Hawaii, Australia and New Zealand, through office products stores.

OfficeMax, Retail is a retail distributor of office supplies and paper, print and document services, technology products and solutions and office furniture. Our retail segment has operations in the United States, Puerto Rico and the U.S. Virgin Islands. Our retail segment’s office supply stores feature OfficeMax ImPress, an in-store module devoted to print-for-pay and related services. Our retail segment also operates office products stores in Mexico through a 51%-owned joint venture.

Corporate and Other includes support staff services and the related assets and liabilities as well as certain other expenses not fully allocated to the segments.

Management evaluates the segments based on operating profit before interest expense, income taxes and minority interest, extraordinary items and cumulative effect of accounting changes. The income and expense related to certain assets and liabilities that are reported in the Corporate and Other segment have been allocated to the Contract and Retail segments. However, certain expenses that management considers unusual or non-recurring are not allocated to the Contract and Retail segments.

OfficeMax, Contract

($ in millions)

2006 Compared With 2005

For 2006, Contract segment sales were $4,714.5 million, up 1.9% from $4,628.6 million in 2005. Year-over-year same-location sales increased 2%.

Contract segment gross profit margin increased 0.6% of sales to 22.5% of sales for 2006. The year-over-year increase resulted from a continued focus on the middle-market and other higher margin sales opportunities.

Operating expenses for the Contract segment were 18.3% of sales for 2006, down from 19.7% of sales for 2005. Fiscal year 2006 includes $10.3 million of costs related to the Contract segment

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reorganization. Fiscal year 2005 includes a $9.8 million pre-tax charge for a legal settlement with the Department of Justice and a $5.4 million pre-tax charge related to the restructuring of international operations. Excluding the impact of these charges, operating expenses were 18.2% and 19.4% of sales for 2006 and 2005, respectively. The year-over-year improvement in operating expenses as a percentage of sales is due to lower promotion and marketing costs as well as reduced payroll and integration expenses.

Contract segment income increased $97.4 million to $197.7 million for 2006, or 4.2% of sales, compared to $100.3 million, or 2.2% of sales, for 2005. Excluding the $10.3 million of costs related to the Contract segment reorganization, Contract segment income was $208.0 million, or 4.4% of sales, for 2006. Excluding the $9.8 million legal settlement with the Department of Justice and the $5.4 million of international restructuring charges, Contract segment income was $115.4 million, or 2.5% of sales, for 2005.

2005 Compared With 2004

In 2005, our Contract segment had sales of $4,628.6 million, up 6% from $4,370.8 million in 2004. Year-over-year same-location sales increased 5%.

Our Contract segment gross profit margin for 2005 was 21.9% of sales, a decrease of 1.7% of sales compared with 2004. The decrease in gross profit margin resulted from higher delivery costs and changes to product mix as our Contract segment sales shifted more towards technology and paper products which have lower gross margins than office supplies. The lower gross profit margin in our Contract segment also reflected a more competitive pricing environment for large U.S. contract customers and weaker gross profit margins in our international operations.

In 2005, operating expenses as a percentage of sales decreased 1.5% of sales to 19.7% of sales. Included in operating expenses for 2005 is the impact of a $9.8 million legal settlement with the Department of Justice and a $5.4 million charge related to the restructuring of international operations. Excluding the impact of these charges, operating expenses improved as a percentage of sales due to lower promotion and marketing costs, as well as reduced payroll and integration expenses due in part to the consolidation of our delivery center network. These savings were partially offset by our investment to expand our middle market sales force.

Contract segment operating income was $100.3 million, or 2.2% of sales, in 2005, down from $107.0 million, or 2.4% of sales, in 2004. Excluding the $9.8 million charge related to our settlement with the Department of Justice and the $5.4 million charge related to the restructuring of international operations, segment income increased $8.5 million from the prior year. The increase was attributable to higher sales, lower promotion and marketing costs, and reduced payroll and integration expenses, partially offset by weaker results in Canada, lower gross margins in the U.S. and the impact of our investment to expand our middle market sales force.

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OfficeMax, Retail

($ in millions)

(a)             Includes our operations in the United States, Puerto Rico and the U.S. Virgin Islands.

2006 Compared With 2005

Retail segment sales were $4,251.2 million for 2006 compared to $4,529.1 million for 2005. Retail segment sales were lower due to the impact of the 109 strategic store closings during the first quarter of 2006 and the 53rd week included in 2005 results. Retail segment same-location sales increased 0.1% year-over-year during 2006. During 2006, we opened 44 new retail stores in the U.S., ending the period with 859 retail stores in the U.S. Our majority owned joint-venture in Mexico opened 12 stores during 2006, ending the year with 55 stores.

Retail segment gross margin increased 3.1% of sales to 29.3% of sales for 2006, from 26.2% of sales for 2005. The gross margin improvement was primarily due to the segment’s improved promotional and advertising strategies and reduced inventory shrinkage and inventory clearance, year-over-year.

Retail segment operating expenses were 27.3% of sales for 2006 compared to 25.6% for 2005. During 2006, the Retail segment incurred pre-tax charges of $89.5 million related to the closure of 109 underperforming retail stores. In 2005, the Retail segment incurred asset impairment charges of $17.9 million primarily related to the store closures. Excluding the impact of these charges, Retail segment operating expenses were 25.2% of sales for both 2006 and 2005. Operating expenses for 2006 benefited from targeted cost reductions, including reduced store labor and marketing costs. These improvements were offset by an increase in allocated general and administrative expenses during 2006.

For 2006, the Retail segment reported operating income of $86.3 million, or 2.0% of sales, compared to operating income of $27.9 million, or 0.6% of sales, in 2005. Excluding the impact of the store closing related charges for both years, Retail segment operating income for 2006 was $175.8 million, or 4.1% of sales, compared to $45.8 million, or 1.0% of sales for 2005.

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2005 Compared With 2004

In 2005, Retail segment sales were $4,529.1 million, up 1.1% from sales of $4,481.3 million for 2004. During 2005, Retail segment sales decreased 1.0% year-over-year on a same-location basis. Retail segment sales in 2005 benefited from a 53rd week, which increased sales by approximately $75 million. Excluding this impact, Retail segment sales decreased as a result of reduced promotional activity and advertising placements, primarily during the first half of 2005, a strategy used to reduce costs and shift marketing focus toward our small business customer, partially offset by an increase in the average dollar amount per customer transaction. During 2005, our Retail segment opened 33 stores in the U.S. and 6 stores in Mexico and closed 9 stores in the U.S.

Our Retail segment gross profit margin for 2005 was 26.2% of sales, compared to 25.6% of sales in 2004. The increase in gross profit margin was primarily due to a shift in mix to higher margin products and services, a direct result of our new promotional and advertising strategy.

Retail segment operating expenses were 25.6% of sales in 2005 compared to 25.1% in 2004. In 2005, we recorded $17.9 million in asset impairment charges primarily related to the retail store closures. Excluding these charges, operating expenses were 25.2% of sales in 2005.

For 2005, the Retail segment had operating income of $27.9 million, compared to $22.7 million in 2004. Operating margin for our Retail segment was 0.6% of sales in 2005, compared with 0.5% of sales in 2004. In 2005, we recorded $17.9 million in asset impairment charges primarily related to the retail store closures. Excluding these charges, operating margin in 2005 was 1.0% of sales. This increase in operating margin is a result of increased sales due to the additional selling week and improved gross profit margin due to a shift in mix to higher margin products and services.

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Corporate and Other

Corporate and Other expenses were $118.1 million for 2006. We recorded expenses largely related to the headquarters consolidation in the Corporate and Other segment totaling $46.4 million during 2006. Corporate and Other expenses were $118.5 million for 2005. During 2005 we recorded $56.9 million of expenses in the Corporate and Other segment for headquarters consolidation, one-time severance payments and other expenses, primarily professional service fees, which are not expected to be ongoing. Excluding the expenses related to headquarters consolidation, one-time severance payments and other expenses, the year-over-year increase in our Corporate and Other expenses were primarily due to increased incentive compensation expense. In 2004, our Corporate and Other segment realized income of $184.3 million, which included a $280.6 million gain from the Sale and $15.9 million of costs for one-time benefits granted to employees. Excluding these items, Corporate and Other expenses were $80.4 million in 2004.

Boise Building Solutions

Operating Results

For the period from January 1 to October 28, 2004, sales and operating income for Boise Building Solutions was $3,257.7 million and $319.2 million, respectively. On October 29, 2004, we completed the Sale.

Boise Paper Solutions

Operating Results

For the period from January 1 to October 28, 2004, sales and operating income for Boise Paper Solutions was $1,670.4 million and $38.8 million, respectively. On October 29, 2004, we completed the Sale.

Sale of Paper, Forest Products and Timberland Assets

On October 29, 2004, we completed the sale of our paper, forest products and timberland assets to affiliates of Boise Cascade, L.L.C., a new company formed by Madison Dearborn Partners LLC. The assets that we sold were included in our Boise Building Solutions and Boise Paper Solutions segments. The Sale completed the company’s transition, begun in the mid-1990s, from a predominantly manufacturing-based company to an independent office products distribution company. Some assets of the businesses we sold, such as the facility near Elma, Washington and Company-owned life insurance, were retained by OfficeMax, as were some liabilities including those associated with retiree pension and benefits, litigation and environmental remediation at selected sites and facilities previously closed.

In connection with the Sale, we recorded a $280.6 million gain in our Corporate and Other segment. On October 29, 2004, we invested $175 million in securities of affiliates of Boise Cascade, L.L.C. This investment represents continuing involvement as defined in Statement of Financial Accounting Standards (“SFAS”) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, we do not show the historical results of the paper, forest products and timberland assets as discontinued operations. An additional $180 million of gain on the Sale was deferred as a result of our continuing involvement with Boise Cascade, L.L.C. We expect to recognize this gain as we reduce our investment in affiliates of Boise Cascade, L.L.C.

The consideration for the timberlands portion of the Sale included $1.6 billion of timber installment notes. We monetized the timber installment notes in December 2004 for proceeds of $1.5 billion. We realized net cash proceeds from the Sale of $3.3 billion in 2004 after allowing for the

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$175 million reinvestment, transaction-related expenses and the monetization of the timber installment notes. See Note 12, Timber Notes Receivable, and Note 13, Debt, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information related to the timber notes.

Using a portion of the Sale proceeds, we reduced our debt by $1.8 billion during the fourth quarter of 2004, incurred and paid $137.1 million of costs related to the early retirement of debt, and made a $45.8 million contribution to the pension plans on behalf of active employees who became employees of Boise Cascade, L.L.C.

During 2004, we also announced plans to return between $800 million and $1 billion of the Sale proceeds to shareholders via common or preferred stock buybacks, cash dividends or a combination of these alternatives. As part of this commitment to return cash to equity holders, we redeemed $110 million of our Series D preferred stock and paid related accrued dividends of $3 million in the fourth quarter of 2004. In May 2005, we used substantially all of the remaining proceeds from the Sale to repurchase 23.5 million shares of our common stock and associated common stock purchase rights through a modified Dutch auction tender offer at a purchase price of approximately $775.5 million, or $33.00 per share, plus transaction costs.

Discontinued Operations

In December 2004, our board of directors authorized management to pursue the divestiture of a facility near Elma, Washington that manufactured integrated wood-polymer building materials. The board of directors and management concluded that the operations of the facility were no longer consistent with the Company’s strategic direction. As a result of that decision, the Company recorded the facility’s assets as held for sale on the Consolidated Balance Sheets and reported the results of its operations as discontinued operations.

During 2005, the Company experienced unexpected difficulties in achieving anticipated levels of production at the facility. These issues delayed the process of identifying and qualifying a buyer for the business. While management made substantial progress in addressing the manufacturing issues that caused production to fall below plan, during the fourth quarter of 2005, we concluded that we would be unable to attract a buyer in the near term and elected to cease operations at the facility during the first quarter of 2006.

In accordance with SFAS No. 144, we recorded pre-tax charges of $67.8 million in the fourth quarter of 2004 and $28.2 million in the fourth quarter of 2005 to reduce the carrying value of the long-lived assets of the Elma, Washington facility to their estimated fair value. During the first quarter of 2006, we ceased operations at the facility and recorded pre-tax expenses of $18.0 million for contract termination and other closure costs. These charges and expenses were reflected within discontinued operations in the Consolidated Statements of Income (Loss).

See Note 3, Discontinued Operations, of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information related to the discontinued operation.

Integration Activities and Facility Closures

Increased scale as a result of the OfficeMax, Inc. acquisition has allowed management to evaluate the Company’s combined office products business and to identify opportunities for consolidating operations. Costs associated with the planned closure and consolidation of acquired OfficeMax, Inc. facilities were accounted for under EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination,” and recognized as liabilities in connection with the acquisition and charged to goodwill.

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Prior to its acquisition by Boise Cascade Corporation, OfficeMax, Inc. had identified and closed underperforming facilities. As part of our purchase price allocation, we recorded $58.7 million of reserves for the estimated fair value of future liabilities associated with these closures. These reserves related primarily to future lease termination costs, net of estimated sublease income. Most of the expenditures for these facilities will be made over the remaining lives of the operating leases. In addition to these store closures, at December 31, 2003, we identified and closed 45 OfficeMax, Retail facilities that were no longer strategically and economically viable and recorded a $69.4 million liability in the Consolidated Balance Sheet. During 2004, we identified and closed an additional 11 stores. These charges were accounted for as exit activities in connection with the acquisition and were not recorded as a charge to income.

Since the OfficeMax, Inc. acquisition, we have closed 18 of our U.S. distribution centers and 2 customer service centers. In connection with these closures we recorded a charge to income in our Consolidated Statement of Income (Loss) of $29.7 million during 2004.

In September 2005, the board of directors approved a plan to relocate and consolidate our retail headquarters in Shaker Heights, Ohio and existing corporate headquarters in Itasca, Illinois into a new facility in Naperville, Illinois. We began the consolidation and relocation process in the latter half of 2005. As of December 30, 2006, we have expensed approximately $70.9 million of costs related to the headquarters consolidation in our Corporate and Other segment, including $45.9 million recognized during 2006 and $25.0 million recognized during the second half of 2005. The consolidation and relocation process was completed during the second half of 2006 and we do not expect to incur any additional charges.

Also in 2005, we recorded charges to income of $23.2 million for the write-down of impaired assets related to underperforming retail stores and the restructuring of our Canadian operations.

During 2006, we announced the reorganization of our Contract segment and recorded a pre-tax charge of $7.3 million for employee severance related to the reorganization. The Contract segment also recorded an additional $3.0 million of costs during 2006, primarily related to a facility closure and employee severance.

During 2006, we closed 109 underperforming, domestic retail stores and recorded a pre-tax charge of $89.5 million, comprised of $11.3 million for employee severance, asset write-off and impairment and other closure costs and $78.2 million of estimated future lease obligations.

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The Company conducts regular reviews of its real estate portfolio to identify underperforming facilities, and closes those facilities that are no longer strategically or economically viable. The Company records a liability for the cost associated with a facility closure at its fair value in the period in which the liability is incurred, which is either the date the lease termination is communicated to the lessor or the location’s cease-use date. Upon closure, unrecoverable costs are included in facility closure reserves on the Consolidated Balance Sheets and include provisions for the present value of future lease obligations, less contractual or estimated sublease income. Accretion expense is recognized over the life of the payments. Integration and facility closure reserve account activity during 2006, 2005 and 2004, including activity related to the reorganization of our Contract segment, retail store closures and headquarters consolidation, was as follows: