UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
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Date of Report: |
May 3, 2007 |
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Date of earliest event reported: |
May 3, 2007 |
OFFICEMAX
INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware |
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1-5057 |
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82-0100960 |
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(State of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
263
Shuman Blvd.
Naperville, Illinois 60563
(Address of principal executive offices) (Zip Code)
(630) 438-7800
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On May 3, 2007, OfficeMax Incorporated (the “Company”) issued an Earnings Release announcing its earnings for the first quarter of 2007. The earnings release is attached hereto as Exhibit 99.1. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference to such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit 99.1 |
OfficeMax Incorporated Earnings Release dated May 3, 2007, announcing its earnings for the first quarter of 2007. |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: May 3, 2007 |
OFFICEMAX INCORPORATED |
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By: |
/s/ Matthew R. Broad |
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Matthew R. Broad |
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Executive Vice President and General Counsel |
3
EXHIBIT INDEX
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Number |
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Description |
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Exhibit 99.1 |
|
OfficeMax Incorporated Earnings Release dated May 3, 2007, announcing its earnings for the first quarter of 2007. |
4
Exhibit 99.1
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OfficeMax |
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News Release |
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Media Contact |
Investor Relations Contact |
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Bill Bonner |
John Jennings |
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630 864 6066 |
630 864 6820 |
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OFFICEMAX REPORTS FIRST QUARTER 2007 FINANCIAL RESULTS
NAPERVILLE, Ill., May 3, 2007 — OfficeMax® Incorporated (NYSE: OMX) today reported results for the first quarter ended March 31, 2007, including net income of $58.6 million, or $.76 per diluted share, compared with a net loss of $25.1 million, or $.37 per diluted share, in the first quarter of 2006.
The first quarter of 2007 included a $1.1 million loss on the sale of our OfficeMax Contract operations in Mexico to our 51% owned Mexico joint venture. A detailed description of special items for this quarter and the same quarter last year and a reconciliation to the company’s GAAP financial results are included in this press release. Excluding special items, net income for the first quarter of 2007 increased 7.2% to $59.7 million from $55.7 million in the first quarter of 2006. Excluding special items, diluted earnings per share were $.77 in both of the first quarters of 2007 and 2006.
“Our results for the first quarter showed moderate improvement,” said Sam Duncan, Chairman and CEO of OfficeMax. “In our Contract segment, we are addressing lower-margin sales which contributed to operating income margin contraction. In our Retail segment, we are pleased with continued gross margin expansion which delivered operating income margin improvement. Overall, we believe that our strategic initiatives support our turnaround plans and our pursuit of generating long-term shareholder value.”
1
OfficeMax Contract segment sales increased 2.7% to $1.3 billion in the first quarter of 2007 compared to the first quarter of 2006, reflecting sales growth in both our U.S. and international contract operations.
Contract segment operating income decreased to $59.9 million in the first quarter of 2007 from $67.0 million in the first quarter last year. Contract segment gross margin decreased to 22.1% in the first quarter of 2007 from 23.2% in the first quarter of 2006, primarily due to the impact of new and renewing accounts with lower gross margin rates. Contract segment operating income in the first quarter of 2007 benefited from targeted expense controls partially offset by increased sales compensation.
OfficeMax Retail segment sales decreased 1.8% to $1.2 billion in the first quarter of 2007 compared to the first quarter of 2006, primarily due to the impact of 109 strategic store closings completed during the first quarter of 2006. Retail segment same-store sales increased 0.5% in the first 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 improved by approximately 2% during the first quarter of 2007.
2
Retail segment operating income increased to $64.6 million in the first quarter of 2007 from $60.6 million, excluding special items, in the first quarter of 2006. Retail segment gross margin increased to 29.3% in the first quarter of 2007 from 28.6% in the first quarter of 2006, primarily due to more effective promotional and marketing strategies and improved vendor funding. Retail segment operating income in the first quarter of 2007 benefited from reduced payroll-related and occupancy costs, offset by increased advertising expense and allocated general and administrative expenses.
During the first quarter of 2007, OfficeMax opened 9 new retail stores, ending the quarter with 915 retail stores compared with 867 stores at the end of the first quarter of 2006.
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. Excluding special items, Corporate and Other segment operating expense decreased by $7.3 million to $14.4 million in the first quarter of 2007 from the first quarter of 2006, primarily due to reduced legacy company costs.
OfficeMax used $80.4 million of cash for operations in the first quarter of 2007, a decrease of $152.3 million from the first quarter of 2006, reflecting changes in working capital and the impact of new stores and prior year strategic store closures. OfficeMax invested $28.1 million for capital expenditures in the first quarter of 2007 compared to $23.3 million in the first quarter of 2006. At March 31, 2007, OfficeMax reported total debt of $384.5 million excluding the timber securitization notes, and cash and cash equivalents of $139.6 million.
3
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 turnaround plans, future events and developments 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.
OfficeMax will host a conference call with investors and analysts to discuss the first 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.
4
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™, 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.
###
5
OFFICEMAX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands)
|
|
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March 31, |
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December 30, |
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2007 |
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2006 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
139,645 |
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$ |
282,070 |
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Receivables, net |
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559,708 |
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562,528 |
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||
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Inventories |
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1,018,035 |
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1,071,486 |
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||
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Other current assets |
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165,227 |
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180,760 |
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||
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Total current assets |
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1,882,615 |
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2,096,844 |
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Property and equipment: |
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||
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Property and equipment |
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1,204,982 |
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1,189,686 |
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||
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Accumulated depreciation |
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(629,562 |
) |
(610,061 |
) |
||
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Property and equipment, net |
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575,420 |
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579,625 |
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||
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||
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Goodwill and intangible assets, net |
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1,419,038 |
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1,417,336 |
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||
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Timber notes receivable |
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1,635,000 |
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1,635,000 |
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Other non-current assets |
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488,508 |
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487,243 |
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Total assets |
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$ |
6,000,581 |
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$ |
6,216,048 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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34,885 |
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25,634 |
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Accounts payable |
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781,030 |
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997,700 |
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Accrued liabilities and other |
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519,343 |
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505,569 |
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Total current liabilities |
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1,335,258 |
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1,528,903 |
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Long-term debt: |
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Long-term debt, less current portion |
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349,622 |
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384,246 |
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Timber notes securitized |
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1,470,000 |
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1,470,000 |
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Total long-term debt |
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1,819,622 |
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1,854,246 |
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Other long-term obligations: |
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Compensation and benefits |
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276,471 |
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287,122 |
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Other long-term liabilities |
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500,630 |
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530,248 |
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Total other long-term liabilities |
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777,101 |
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817,370 |
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Minority interest |
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30,309 |
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29,885 |
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Shareholders’ equity: |
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Preferred stock |
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53,715 |
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54,735 |
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||
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Common stock |
|
188,272 |
|
187,226 |
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||
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Additional paid-in capital |
|
897,640 |
|
893,848 |
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||
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Retained earnings |
|
983,094 |
|
941,830 |
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||
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Accumulated other comprehensive loss |
|
(84,430 |
) |
(91,995 |
) |
||
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Total shareholders’ equity |
|
2,038,291 |
|
1,985,644 |
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||
|
|
|
|
|
|
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||
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Total liabilities and shareholders’ equity |
|
$ |
6,000,581 |
|
$ |
6,216,048 |
|
6
OFFICEMAX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(thousands, except per-share amounts)
|
|
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Quarter Ended |
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||||
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March 31, |
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April 1, |
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||
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2007 |
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2006 |
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||
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|
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Sales |
|
$ |
2,436,253 |
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$ |
2,423,537 |
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Cost of goods sold and occupancy costs |
|
1,813,029 |
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1,796,783 |
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||
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Gross profit |
|
623,224 |
|
626,754 |
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||
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|
|
|
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Operating and other expenses: |
|
|
|
|
|
||
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Operating and selling |
|
420,768 |
|
433,045 |
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||
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General and administrative |
|
93,937 |
|
89,233 |
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||
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Other operating (income) expense, net |
|
(1,576 |
) |
112,840 |
|
||
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Operating income (loss) |
|
110,095 |
|
(8,364 |
) |
||
|
|
|
|
|
|
|
||
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Other income (expense): |
|
|
|
|
|
||
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Interest expense |
|
(30,116 |
) |
(31,503 |
) |
||
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Interest income |
|
23,037 |
|
21,114 |
|
||
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Other expense, net |
|
(3,447 |
) |
(2,166 |
) |
||
|
|
|
(10,526 |
) |
(12,555 |
) |
||
|
|
|
|
|
|
|
||
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Income (loss) from continuing operations before income taxes and minority interest |
|
99,569 |
|
(20,919 |
) |
||
|
Income tax expense |
|
(38,832 |
) |
7,994 |
|
||
|
|
|
|
|
|
|
||
|
Income (loss) from continuing operations before minority interest |
|
60,737 |
|
(12,925 |
) |
||
|
Minority interest, net of income tax |
|
(2,198 |
) |
(1,181 |
) |
||
|
|
|
|
|
|
|
||
|
Income (loss) from continuing operations |
|
58,539 |
|
(14,106 |
) |
||
|
|
|
|
|
|
|
||
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Discontinued operations: |
|
|
|
|
|
||
|
Operating loss |
|
— |
|
(17,972 |
) |
||
|
Income tax benefit |
|
— |
|
6,991 |
|
||
|
|
|
|
|
|
|
||
|
Loss from discontinued operations |
|
— |
|
(10,981 |
) |
||
|
|
|
|
|
|
|
||
|
Net income (loss) |
|
58,539 |
|
(25,087 |
) |
||
|
|
|
|
|
|
|
||
|
Preferred dividends |
|
(1,008 |
) |
(1,009 |
) |
||
|
|
|
|
|
|
|
||
|
Net income (loss) applicable to common shareholders |
|
$ |
57,531 |
|
$ |
(26,096 |
) |
|
|
|
|
|
|
|
||
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Basic income (loss) per common share: |
|
|
|
|
|
||
|
Continuing operations |
|
$ |
0.77 |
|
$ |
(0.21 |
) |
|
Discontinued operations |
|
— |
|
(0.16 |
) |
||
|
Basic income (loss) per common share |
|
$ |
0.77 |
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
||
|
Diluted income (loss) per common share: |
|
|
|
|
|
||
|
Continuing operations |
|
$ |
0.76 |
|
$ |
(0.21 |
) |
|
Discontinued operations |
|
— |
|
(0.16 |
) |
||
|
Diluted income (loss) per common share |
|
$ |
0.76 |
|
$ |
(0.37 |
) |
|
|
|
|
|
|
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||
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Weighted Average Shares |
|
|
|
|
|
||
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Basic |
|
74,992 |
|
70,833 |
|
||
|
Diluted |
|
75,744 |
|
70,833 |
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||
7
OFFICEMAX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(thousands)
|
|
|
Quarter Ended |
|
||||
|
|
|
March 31, |
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April 1, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
|
|
|
|
|
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||
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Cash provided by (used for) operations: |
|
|
|
|
|
||
|
Net income (loss) |
|
$ |
58,539 |
|
$ |
(25,087 |
) |
|
Items in net income (loss) not using (providing) cash: |
|
|
|
|
|
||
|
Depreciation and amortization |
|
32,083 |
|
31,114 |
|
||
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Other |
|
10,832 |
|
23,800 |
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||
|
Changes other than from acquisitions of business: |
|
|
|
|
|
||
|
Receivables and inventory |
|
62,467 |
|
250,307 |
|
||
|
Accounts payable and accrued liabilities |
|
(251,026 |
) |
(214,362 |
) |
||
|
Income taxes and other |
|
6,712 |
|
6,173 |
|
||
|
Cash provided by (used for) operations |
|
(80,393 |
) |
71,945 |
|
||
|
|
|
|
|
|
|
||
|
Cash provided by (used for) investment: |
|
|
|
|
|
||
|
Expenditures for property and equipment |
|
(28,124 |
) |
(23,321 |
) |
||
|
Other |
|
— |
|
596 |
|
||
|
Cash used for investment |
|
(28,124 |
) |
(22,725 |
) |
||
|
|
|
|
|
|
|
||
|
Cash provided by (used for) financing: |
|
|
|
|
|
||
|
Cash dividends paid |
|
(11,235 |
) |
(10,620 |
) |
||
|
Changes in debt, net |
|
(25,681 |
) |
(34,454 |
) |
||
|
Proceeds from exercise of stock options |
|
3,903 |
|
— |
|
||
|
Other |
|
(895 |
) |
300 |
|
||
|
Cash provided used for financing |
|
(33,908 |
) |
(44,774 |
) |
||
|
|
|
|
|
|
|
||
|
Increase (decrease) in cash and cash equivalents |
|
(142,425 |
) |
4,446 |
|
||
|
Cash and cash equivalents at beginning of period |
|
282,070 |
|
72,198 |
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at end of period |
|
$ |
139,645 |
|
$ |
76,644 |
|
8
OFFICEMAX INCORPORATED
AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT INFORMATION
(unaudited)
(millions, except per-share data)
|
|
|
Quarter Ended |
|
||||||||||||||||
|
|
|
March 31 , 2007 |
|
April 1, 2006 |
|
||||||||||||||
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As |
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Special |
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Before |
|
As |
|
Special |
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Before |
|
||||||
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||||||
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Segment Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
1,264.5 |
|
|
|
$ |
1,264.5 |
|
$ |
1,230.7 |
|
|
|
$ |
1,230.7 |
|
||
|
OfficeMax, Retail |
|
1,171.8 |
|
|
|
1,171.8 |
|
1,192.8 |
|
|
|
1,192.8 |
|
||||||
|
|
|
2,436.3 |
|
|
|
2,436.3 |
|
2,423.5 |
|
|
|
2,423.5 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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Segment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
59.9 |
|
$ |
— |
|
$ |
59.9 |
|
$ |
67.0 |
|
$ |
— |
|
$ |
67.0 |
|
|
OfficeMax, Retail |
|
64.6 |
|
— |
|
64.6 |
|
(38.0 |
) |
98.6 |
|
60.6 |
|
||||||
|
Corporate and Other |
|
(14.4 |
) |
— |
|
(14.4 |
) |
(37.4 |
) |
15.7 |
|
(21.7 |
) |
||||||
|
Operating income (loss) |
|
110.1 |
|
— |
|
110.1 |
|
(8.4 |
) |
114.3 |
|
105.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating income margin |
|
4.5 |
% |
|
|
4.5 |
% |
-0.3 |
% |
|
|
4.4 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
(30.1 |
) |
— |
|
(30.1 |
) |
(31.5 |
) |
— |
|
(31.5 |
) |
||||||
|
Interest income and other |
|
19.6 |
|
— |
|
19.6 |
|
19.0 |
|
— |
|
19.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
before income taxes and minority interest |
|
99.6 |
|
— |
|
99.6 |
|
(20.9 |
) |
114.3 |
|
93.4 |
|
||||||
|
Income taxes |
|
(38.8 |
) |
— |
|
(38.8 |
) |
8.0 |
|
(44.5 |
) |
(36.5 |
) |
||||||
|
Income (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
before minority interest |
|
60.8 |
|
— |
|
60.8 |
|
(12.9 |
) |
69.8 |
|
56.9 |
|
||||||
|
Minority interest, net of income tax |
|
(2.2 |
) |
1.1 |
|
(1.1 |
) |
(1.2 |
) |
— |
|
(1.2 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations |
|
58.6 |
|
1.1 |
|
59.7 |
|
(14.1 |
) |
69.8 |
|
55.7 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
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) |
|
$ |
58.6 |
|
$ |
1.1 |
|
$ |
59.7 |
|
$ |
(25.1 |
) |
$ |
80.8 |
|
$ |
55.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Continuing operations |
|
$ |
0.76 |
|
$ |
0.01 |
|
$ |
0.77 |
|
$ |
(0.21 |
) |
$ |
0.98 |
|
$ |
0.77 |
|
|
Discontinued operations |
|
— |
|
— |
|
— |
|
(0.16 |
) |
0.16 |
|
— |
|
||||||
|
Diluted income (loss) per common share |
|
$ |
0.76 |
|
$ |
0.01 |
|
$ |
0.77 |
|
$ |
(0.37 |
) |
$ |
1.14 |
|
$ |
0.77 |
|
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.
9
(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 Meas ures
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 first quarter 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.
10
(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 cease d 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.
11