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: |
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August 1, 2007 |
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Date of earliest event reported: |
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July 26, 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.) |
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263 Shuman Blvd. |
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Naperville, Illinois 60563 |
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(Address of principal executive offices) (Zip Code) |
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(630) 438-7800 |
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(Registrant’s telephone number, including area code) |
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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 August 1, 2007, OfficeMax Incorporated (the “Company”) issued an Earnings Release announcing its earnings for the second 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 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Election of Director
On July 26, 2007, William J. Montgoris was elected to the Company’s board of directors. Mr. Montgoris was appointed to the Company’s Executive Compensation Committee and its Audit Committee. Additional information about Mr. Montgoris is included in the OfficeMax News Release issued on July 26, 2007 that is attached as Exhibit 99.2 to this report and incorporated by reference herein.
Annual Equity Grant to Directors
Through the OfficeMax Incentive and Performance Plan (the “Plan”) each non-employee director annually receives a form of long-term equity compensation. On July 26, 2007, the Executive Compensation Committee of the board of directors determined that the form of equity grant to be received by the directors in 2007 is restricted stock units. In connection with the grant, each director will enter into a 2007 Director Restricted Stock Unit Award Agreement dated July 26, 2007 (an “Agreement”), in the form attached hereto as Exhibit 99.3.
The Agreement states that the award is subject to the terms of the Plan. The Agreement further states that the award will vest six months following the date of grant and that it will be payable in shares of Company common stock six months following the date of a director’s termination of service from the board due to retirement or resignation (or immediately upon termination of service due to death or disability). Unless otherwise approved by the board, if a director leaves the board before the award vests, other than as a result of death or disability, the award will be forfeited. The award is not transferable. Holders of units have no voting rights but do receive notional dividends, which are accumulated and paid in cash at the time the award is paid.
This summary does not purport to be complete and is subject to and qualified in its entirety by reference to the text of the form of Agreement, included as Exhibit 99.3 to this filing. Exhibit 99.3 is incorporated by reference into this Item 5.02.
2
Item 8.01. Other Events.
On July 26, 2007, the Executive Compensation Committee of the Company’s board of directors approved a policy (the “Policy”) that provides that the board shall take such action as it deems necessary against any officer with a title of executive vice president or higher (an “Executive Officer”) whose misconduct contributes to a financial restatement. The board may (a) require reimbursement of any bonus or incentive compensation awarded to an Executive Officer after July 26, 2007, (b) cancel any stock awards granted to the Executive Officer after July 26, 2007, and/or (c) require the repayment of stock proceeds.
This summary does not purport to be complete and is subject to and qualified in its entirety by reference to the text of the Policy, included as Exhibit 99.4 to this filing. Exhibit 99.4 is incorporated by reference into this Item 8.01.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit 99.1 |
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OfficeMax Incorporated Earnings Release dated August 1, 2007, announcing its earnings for the second quarter of 2007. |
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Exhibit 99.2 |
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OfficeMax Incorporated News Release dated July 26, 2007 |
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Exhibit 99.3 |
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Form of 2007 Restricted Stock Unit Award Agreement |
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Exhibit 99.4 |
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Restatement Clawback Policy |
3
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.
Dated: August 1, 2007
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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 |
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General Counsel |
EXHIBIT INDEX
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Number |
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Description |
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99.1 |
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OfficeMax
Incorporated Earnings Release dated August 1, 2007, announcing its earnings |
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99.2 |
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OfficeMax Incorporated News Release dated July 26, 2007 |
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99.3 |
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Form of 2007 Restricted Stock Unit Award Agreement |
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99.4 |
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Restatement Clawback Policy |
Exhibit 99.1
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OfficeMax |
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263 Shuman Blvd |
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Naperville, IL 60563 |
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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 |
OFFICEMAX REPORTS SECOND QUARTER 2007 FINANCIAL RESULTS
NAPERVILLE, Ill., August 1, 2007 – OfficeMaxÒ Incorporated (NYSE: OMX) today reported net income of $27.4 million, or $.35 per diluted share, for the second quarter ended June 30, 2007 compared with net income of $27.4 million, or $.35 per diluted share, in the second quarter of 2006.
Net income and diluted earnings per share increased approximately 20% in the second quarter of 2007 from net income of $23.0 million, or $.29 per diluted share in the second quarter of 2006, excluding special items. A detailed description of prior quarter special items, and a reconciliation to the company’s GAAP financial results, are included in this press release.
“Our results for the second quarter showed progress in many areas, but aspects of our businesses remain opportunities for improvement,” said Sam Duncan, Chairman and CEO of OfficeMax. “In our Contract segment, operating margin contracted from lower-margin sales in spite of the benefit of some expense leverage. In our Retail segment, positive same store sales, expanded gross margins and cost containment delivered operating income margin improvement.”
1
Contract Segment
OfficeMax Contract segment sales increased 4.4% to $1.2 billion in the second quarter of 2007 compared to the second quarter of 2006, reflecting U.S. Contract sales growth of 2.2% and international contract operations sales growth of 11.1% in U.S. dollars, or 2.9% in local currencies.
Contract segment operating income decreased to $41.0 million in the second quarter of 2007 from $44.4 million in the second quarter last year. Contract segment gross margin decreased to 21.4% in the second quarter of 2007 from 22.1% in the second quarter of 2006, primarily due to the continued impact of new and renewing accounts with lower gross margin rates, the impact of higher paper prices, partially offset by improved vendor funding. Contract segment operating income margin in the second quarter of 2007 benefited from expense leverage in International Contract operations and targeted cost controls.
Retail Segment
OfficeMax Retail segment sales increased 4.6% to $935.3 million in the second quarter of 2007 compared to the second quarter of 2006. Retail segment same-store sales increased 1.6% in the second quarter of 2007. Adjusted for the company’s initiative to eliminate mail-in rebates and to provide instant rebates in lieu of national, vendor-sponsored mail-in rebates, same-store sales increased by 2.7% during the second quarter of 2007.
Retail segment operating income increased to $24.7 million in the second quarter of 2007 from $18.2 million, excluding special items, in the second quarter of 2006. Retail segment gross margin increased to 29.9% in the second quarter of 2007 from 29.7% in the second quarter of 2006, primarily due to improved vendor funding and more effective promotional strategies.
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Retail segment operating income margin in the second quarter of 2007 benefited from lower occupancy costs and reduced advertising expense, partially offset by increased allocated general and administrative expenses.
During the second quarter of 2007, OfficeMax opened 9 new retail stores and closed 1 store, ending the quarter with 923 retail stores in the U.S. and Mexico compared with 874 stores at the end of the second quarter of 2006.
Corporate and Other Segment
The OfficeMax Corporate and Other segment includes support staff services and certain other expenses that are not fully allocated to the Retail and Contract segments. Corporate and Other segment operating expense decreased to $9.8 million in the second quarter of 2007 from $14.1 million, excluding special items, in the second quarter of 2006, primarily due to reduced legacy-related costs.
OfficeMax generated $120.9 million of cash from operations in the second quarter of 2007, an increase of $41.9 million from the second quarter of 2006. OfficeMax invested $31.3 million for capital expenditures in the second quarter of 2007 compared to $23.7 million in the second quarter of 2006. As of June 30, 2007, OfficeMax reported total debt of $391.5 million excluding the timber securitization notes, and cash and cash equivalents of $220.6 million.
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Forward-Looking Statements
Some statements made in this press release and other written or oral statements made by or on behalf of the company constitute “forward-looking statements” within the meaning of the federal securities laws, including statements regarding the company’s plans to address sales margin, and the company’s future performance, as well as management’s expectations, beliefs, intentions, plans, estimates or projections relating to the future. Management believes that these forward-looking statements are reasonable. However, the company cannot guarantee that it will successfully execute its turnaround plans or that its actual results will be consistent with the forward-looking statements and you should not place undue reliance on them. These statements are based on current expectations and speak only as of the date they are made. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Important factors regarding the company which may cause results to differ from expectations are included in the company’s Annual Report on Form 10-K for the year ended December 31, 2006, including under the caption “Cautionary and Forward-Looking Statements,” in Item 1A of that form, and in the company’s other filings with the SEC.
Conference Call Information
OfficeMax will host a conference call with investors and analysts to discuss the second quarter 2007 results at 9:00 a.m. Eastern Daylight Time (8:00 a.m. Central Daylight Time) today. An audio webcast of the conference call can be accessed via the Internet by visiting the Investors section of the OfficeMax website at http://investor.officemax.com. To participate in the conference call, dial (800) 374-0165; international callers should dial (706) 634-0995. The audio webcast will be archived and available online for one year following the call and will be posted on the “Presentations” page located within the Investors section of the OfficeMax website.
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About OfficeMax
OfficeMax Incorporated is a leader in both business-to-business and retail office products distribution. The OfficeMax mission is simple: to help our customers do their best work. The company provides office supplies, print and document services through OfficeMax Impress™, 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.
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5
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands)
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June 30, |
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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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$ |
220,615 |
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$ |
282,070 |
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Receivables, net |
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531,689 |
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562,528 |
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Inventories |
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1,053,769 |
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1,071,486 |
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Other current assets |
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157,221 |
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180,760 |
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Total current assets |
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1,963,294 |
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2,096,844 |
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Property and equipment: |
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Property and equipment |
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1,227,722 |
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1,189,686 |
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Accumulated depreciation |
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(652,496 |
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(610,061 |
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Property and equipment, net |
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575,226 |
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579,625 |
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Goodwill and intangible assets, net |
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1,437,995 |
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1,417,336 |
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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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413,842 |
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487,243 |
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Total assets |
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$ |
6,025,357 |
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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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Short-term borrowings |
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$ |
6,985 |
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$ |
— |
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Current portion of long-term debt |
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34,886 |
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25,634 |
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Accounts payable |
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823,093 |
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997,700 |
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Accrued liabilities and other |
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458,069 |
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505,569 |
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Total current liabilities |
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1,323,033 |
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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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349,579 |
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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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1,819,579 |
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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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271,243 |
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287,122 |
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Other long-term liabilities |
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480,293 |
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530,248 |
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Total other long-term liabilities |
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751,536 |
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817,370 |
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Minority interest |
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32,005 |
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29,885 |
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Shareholders’ equity: |
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Preferred stock |
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51,731 |
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54,735 |
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Common stock |
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188,411 |
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187,226 |
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Additional paid-in capital |
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905,585 |
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893,848 |
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Retained earnings |
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999,239 |
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941,830 |
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Accumulated other comprehensive loss |
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(45,762 |
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(91,995 |
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Total shareholders’ equity |
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2,099,204 |
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1,985,644 |
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Total liabilities and shareholders’ equity |
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$ |
6,025,357 |
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$ |
6,216,048 |
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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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June 30, |
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July 1, |
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2007 |
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2006 |
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Sales |
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$ |
2,132,417 |
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$ |
2,040,951 |
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Cost of goods sold and occupancy costs |
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1,596,619 |
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1,521,954 |
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Gross profit |
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535,798 |
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518,997 |
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Operating and other expenses: |
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Operating and selling |
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392,581 |
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385,299 |
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General and administrative |
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88,719 |
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86,671 |
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Other operating (income) expense, net |
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(1,447 |
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456 |
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Operating income |
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55,945 |
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46,571 |
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Other income (expense): |
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Interest expense |
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(29,959 |
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(30,214 |
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Interest income |
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21,776 |
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22,103 |
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Other income (expense), net |
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(2,232 |
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6,727 |
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(10,415 |
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(1,384 |
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Income from continuing operations before income taxes and minority interest |
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45,530 |
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45,187 |
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Income tax expense |
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(17,757 |
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(17,284 |
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Income from continuing operations before minority interest |
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27,773 |
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27,903 |
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Minority interest, net of income tax |
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(337 |
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(508 |
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Income from continuing operations |
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27,436 |
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27,395 |
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Net income |
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27,436 |
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27,395 |
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Preferred dividends |
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(1,008 |
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(1,009 |
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Net income applicable to common shareholders |
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$ |
26,428 |
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$ |
26,386 |
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Basic income (loss) per common share: |
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Continuing operations |
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$ |
0.35 |
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$ |
0.36 |
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Discontinued operations |
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— |
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— |
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Basic income (loss) per common share |
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$ |
0.35 |
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$ |
0.36 |
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Diluted income (loss) per common share: |
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Continuing operations |
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$ |
0.35 |
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$ |
0.35 |
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Discontinued operations |
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— |
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— |
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Diluted income (loss) per common share |
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$ |
0.35 |
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$ |
0.35 |
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Weighted Average Shares |
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Basic |
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75,344 |
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72,877 |
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Diluted |
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76,593 |
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74,924 |
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7
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(thousands, except per-share amounts)
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Six Months Ended |
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June 30, |
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July 1, |
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2007 |
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2006 |
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Sales |
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$ |
4,568,671 |
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$ |
4,464,488 |
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Cost of goods sold and occupancy costs |
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3,409,649 |
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3,318,737 |
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Gross profit |
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1,159,022 |
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1,145,751 |
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Operating and other expenses: |
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Operating and selling |
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813,349 |
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818,344 |
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General and administrative |
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182,656 |
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175,904 |
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Other operating (income) expense, net |
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(3,023 |
) |
113,296 |
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Operating income (loss) |
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166,040 |
|
38,207 |
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Other income (expense): |
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Interest expense |
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(60,075 |
) |
(61,717 |
) |
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Interest income |
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44,814 |
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43,217 |
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Other income (expense), net |
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(5,680 |
) |
4,561 |
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(20,941 |
) |
(13,939 |
) |
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Income from continuing operations before income taxes and minority interest |
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145,099 |
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24,268 |
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Income tax expense |
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(56,589 |
) |
(9,290 |
) |
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Income from continuing operations before minority interest |
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88,510 |
|
14,978 |
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Minority interest, net of income tax |
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(2,535 |
) |
(1,689 |
) |
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Income from continuing operations |
|
85,975 |
|
13,289 |
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|
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Discontinued operations: |
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Operating loss |
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— |
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(17,972 |
) |
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Income tax benefit |
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— |
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6,991 |
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Loss from discontinued operations |
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— |
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(10,981 |
) |
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Net income (loss) |
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85,975 |
|
2,308 |
|
||
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|
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Preferred dividends |
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(2,015 |
) |
(2,018 |
) |
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|
|
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Net income applicable to common shareholders |
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$ |
83,960 |
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$ |
290 |
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|
|
|
|
|
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Basic income (loss) per common share: |
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|
|
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|
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Continuing operations |
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$ |
1.12 |
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$ |
0.15 |
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Discontinued operations |
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— |
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(0.15 |
) |
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Basic income (loss) per common share |
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$ |
1.12 |
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$ |
— |
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|
||
|
Diluted income (loss) per common share: |
|
|
|
|
|
||
|
Continuing operations |
|
$ |
1.10 |
|
$ |
0.15 |
|
|
Discontinued operations |
|
— |
|
(0.15 |
) |
||
|
Diluted income (loss) per common share |
|
$ |
1.10 |
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
Weighted Average Shares |
|
|
|
|
|
||
|
Basic |
|
75,168 |
|
71,855 |
|
||
|
Diluted |
|
76,168 |
|
73,510 |
|
||
8
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(thousands)
|
|
|
Six Months Ended |
|
||||
|
|
|
June 30, |
|
July 1, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
|
|
|
|
|
|
||
|
Cash provided by (used for) operations: |
|
|
|
|
|
||
|
Net income |
|
$ |
85,975 |
|
$ |
2,308 |
|
|
Items in net income not using (providing) cash: |
|
|
|
|
|
||
|
Depreciation and amortization |
|
65,106 |
|
60,316 |
|
||
|
Other |
|
18,602 |
|
30,980 |
|
||
|
Changes other than from acquisitions of business: |
|
|
|
|
|
||
|
Receivables and inventory |
|
51,245 |
|
217,532 |
|
||
|
Accounts payable and accrued liabilities |
|
(253,383 |
) |
(180,825 |
) |
||
|
Income taxes and other |
|
72,998 |
|
20,669 |
|
||
|
Cash provided by operations |
|
40,543 |
|
150,980 |
|
||
|
|
|
|
|
|
|
||
|
Cash provided by (used for) investment: |
|
|
|
|
|
||
|
Expenditures for property and equipment |
|
(59,440 |
) |
(46,996 |
) |
||
|
Other |
|
(1,948 |
) |
596 |
|
||
|
Cash used for investment |
|
(61,388 |
) |
(46,400 |
) |
||
|
|
|
|
|
|
|
||
|
Cash provided by (used for) financing: |
|
|
|
|
|
||
|
Cash dividends paid |
|
(24,453 |
) |
(23,268 |
) |
||
|
Changes in debt, net |
|
(18,489 |
) |
(84,144 |
) |
||
|
Proceeds from exercise of stock options |
|
5,211 |
|
104,623 |
|
||
|
Other |
|
(2,879 |
) |
(33 |
) |
||
|
Cash used for financing |
|
(40,610 |
) |
(2,822 |
) |
||
|
|
|
|
|
|
|
||
|
Increase (decrease) in cash and cash equivalents |
|
(61,455 |
) |
101,758 |
|
||
|
Cash and cash equivalents at beginning of period |
|
282,070 |
|
72,198 |
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at end of period |
|
$ |
220,615 |
|
$ |
173,956 |
|
9
OFFICEMAX INCORPORATED AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT INFORMATION
(unaudited)
(millions, except per-share data)
|
|
|
Quarter Ended |
|
||||||||||||||||
|
|
|
June 30, 2007 |
|
July 1, 2006 |
|
||||||||||||||
|
|
|
As |
|
Special |
|
Before |
|
As |
|
Special |
|
Before |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Segment Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
1,197.2 |
|
|
|
$ |
1,197.2 |
|
$ |
1,146.7 |
|
|
|
$ |
1,146.7 |
|
||
|
OfficeMax, Retail |
|
935.3 |
|
|
|
935.3 |
|
894.2 |
|
|
|
894.2 |
|
||||||
|
|
|
2,132.5 |
|
|
|
2,132.5 |
|
2,040.9 |
|
|
|
2,040.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Segment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
41.0 |
|
$ |
— |
|
$ |
41.0 |
|
$ |
44.4 |
|
$ |
— |
|
$ |
44.4 |
|
|
OfficeMax, Retail |
|
24.7 |
|
— |
|
24.7 |
|
27.2 |
|
(9.0 |
) |
18.2 |
|
||||||
|
Corporate and Other |
|
(9.8 |
) |
— |
|
(9.8 |
) |
(25.0 |
) |
10.9 |
|
(14.1 |
) |
||||||
|
Operating income (loss) |
|
55.9 |
|
— |
|
55.9 |
|
46.6 |
|
1.9 |
|
48.5 |
|
||||||
|
Operating income margin |
|
2.6 |
% |
|
|
2.6 |
% |
2.3 |
% |
|
|
2.4 |
% |
||||||
|
Interest expense |
|
(30.0 |
) |
— |
|
(30.0 |
) |
(30.2 |
) |
— |
|
(30.2 |
) |
||||||
|
Interest income and other |
|
19.6 |
|
— |
|
19.6 |
|
28.8 |
|
(9.2 |
) |
19.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations before income taxes and minority interest |
|
45.5 |
|
— |
|
45.5 |
|
45.2 |
|
(7.3 |
) |
37.9 |
|
||||||
|
Income taxes |
|
(17.8 |
) |
— |
|
(17.8 |
) |
(17.3 |
) |
2.9 |
|
(14.4 |
) |
||||||
|
Income (loss) from continuing operations before minority interest |
|
27.7 |
|
— |
|
27.7 |
|
27.9 |
|
(4.4 |
) |
23.5 |
|
||||||
|
Minority interest, net of income tax |
|
(0.3 |
) |
— |
|
(0.3 |
) |
(0.5 |
) |
— |
|
(0.5 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations |
|
27.4 |
|
— |
|
27.4 |
|
27.4 |
|
(4.4 |
) |
23.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income (loss) |
|
$ |
27.4 |
|
$ |
— |
|
$ |
27.4 |
|
$ |
27.4 |
|
$ |
(4.4 |
) |
$ |
23.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Continuing operations |
|
$ |
0.35 |
|
$ |
— |
|
$ |
0.35 |
|
$ |
0.35 |
|
$ |
(0.06 |
) |
$ |
0.29 |
|
|
Discontinued operations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
||||||
|
Diluted income (loss) per common share |
|
$ |
0.35 |
|
$ |
— |
|
$ |
0.35 |
|
$ |
0.35 |
|
$ |
(0.06 |
) |
$ |
0.29 |
|
Totals may not foot due to rounding.
(a) See Note 3 for a discussion of these special items.
(b) For the purpose of evaluating our results, net of taxes, we have presented the results before special items using an estimated annual tax rate. For the purpose of presenting diluted income (loss) per common share before special items, we calculated diluted income (loss) per common share before special items without making any adjustments to the number of shares used in the calculation of diluted income (loss) per common share as reported.
10
OFFICEMAX INCORPORATED AND SUBSIDIARIES
SUPPLEMENTAL SEGMENT INFORMATION
(unaudited)
(millions, except per-share data)
|
|
|
Six Months Ended |
|
||||||||||||||||
|
|
|
June 30, 2007 |
|
July 1, 2006 |
|
||||||||||||||
|
|
|
As |
|
Special |
|
Before |
|
As Reported |
|
Special |
|
Before |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Segment Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
2,461.7 |
|
|
|
$ |
2,461.7 |
|
$ |
2,377.5 |
|
|
|
$ |
2,377.5 |
|
||
|
OfficeMax, Retail |
|
2,107.0 |
|
|
|
2,107.0 |
|
2,087.0 |
|
|
|
2,087.0 |
|
||||||
|
|
|
4,568.7 |
|
|
|
4,568.7 |
|
4,464.5 |
|
|
|
4,464.5 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Segment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
OfficeMax, Contract |
|
$ |
100.9 |
|
$ |
— |
|
$ |
100.9 |
|
$ |
111.5 |
|
$ |
— |
|
$ |
111.5 |
|
|
OfficeMax, Retail |
|
89.3 |
|
— |
|
89.3 |
|
(10.8 |
) |
89.5 |
|
78.7 |
|
||||||
|
Corporate and Other |
|
(24.1 |
) |
— |
|
(24.1 |
) |
(62.5 |
) |
26.6 |
|
(35.9 |
) |
||||||
|
Operating income (loss) |
|
166.1 |
|
— |
|
166.1 |
|
38.2 |
|
116.1 |
|
154.3 |
|
||||||
|
Operating income margin |
|
3.6 |
% |
|
|
3.6 |
% |
0.9 |
% |
|
|
3.5 |
% |
||||||
|
Interest expense |
|
(60.1 |
) |
— |
|
(60.1 |
) |
(61.7 |
) |
— |
|
(61.7 |
) |
||||||
|
Interest income and other |
|
39.1 |
|
— |
|
39.1 |
|
47.8 |
|
(9.2 |
) |
38.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations before income taxes and minority interest |
|
145.1 |
|
— |
|
145.1 |
|
24.3 |
|
106.9 |
|
131.2 |
|
||||||
|
Income taxes |
|
(56.6 |
) |
— |
|
(56.6 |
) |
(9.3 |
) |
(41.6 |
) |
(50.9 |
) |
||||||
|
Income (loss) from continuing operations before minority interest |
|
88.5 |
|
— |
|
88.5 |
|
15.0 |
|
65.3 |
|
80.3 |
|
||||||
|
Minority interest, net of income tax |
|
(2.5 |
) |
1.1 |
|
(1.4 |
) |
(1.7 |
) |
— |
|
(1.7 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income (loss) from continuing operations |
|
86.0 |
|
1.1 |
|
87.1 |
|
13.3 |
|
65.3 |
|
78.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating loss |
|
— |
|
— |
|
— |
|
(18.0 |
) |
18.0 |
|
— |
|
||||||
|
Income tax benefit |
|
— |
|
— |
|
— |
|
7.0 |
|
(7.0 |
) |
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loss from discontinued operations |
|
— |
|
— |
|
— |
|
(11.0 |
) |
11.0 |
|
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income (loss) |
|
$ |
86.0 |
|
$ |
1.1 |
|
$ |
87.1 |
|
$ |
2.3 |
|
$ |
76.3 |
|
$ |
78.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Continuing operations |
|
$ |
1.10 |
|
$ |
0.02 |
|
$ |
1.12 |
|
$ |
0.15 |
|
$ |
0.89 |
|
$ |
1.04 |
|
|
Discontinued operations |
|
— |
|
— |
|
— |
|
(0.15 |
) |
0.15 |
|
— |
|
||||||
|
Diluted income (loss) per common share |
|
$ |
1.10 |
|
$ |
0.02 |
|
$ |
1.12 |
|
$ |
— |
|
$ |
1.04 |
|
$ |
1.04 |
|
Totals may not foot due to rounding.
(a) See Note 4 for a discussion of these special items.
(b) See Notes 3 and 5 for a discussion of these special items.
(c) For the purpose of evaluating our results, net of taxes, we have presented the results before special items using an estimated annual tax rate. For the purpose of presenting diluted income (loss) per common share before special items, we calculated diluted income (loss) per common share before special items without making any adjustments to the number of shares used in the calculation of diluted income (loss) per common share as reported.
11
(1) Financial Information
The quarterly and annual consolidated financial statements included in this release are unaudited, and should be read in conjunction with the audited financial statements in our 2006 Annual Report on Form 10-K. In all periods presented, the measurement of net income (loss) involved estimates and judgments.
(2) Reconciliation of non-GAAP Measures to GAAP Measures
We evaluate our results of operations both before and after special gains and losses. We believe our presentation of financial measures before special items, which are non-GAAP measures, enhances our investors’ overall understanding of our recurring operational performance. Specifically, we believe presenting results before special items provides useful information to both investors and management by excluding gains, losses and expenses that are not indicative of our core operating activities. In the preceding tables, we reconcile our financial measures before special items to our reported GAAP financial results for the second quarter and first six months of both 2007 and 2006.
(3) 2006 Special Items
First Quarter 2006
During the first quarter of 2006, we closed 109 underperforming domestic retail stores and recorded a charge of $98.6 million in our Retail segment primarily for remaining lease obligations and we incurred $15.7 million of expenses in our Corporate and Other segment related to our headquarters consolidation primarily for employee severance and retention.
Second Quarter 2006
During the second quarter of 2006, we recorded a $9.0 million pre-tax benefit in our Retail segment from an adjustment to the reserve for closed retail stores, and we incurred $10.9
12
million of expenses in our Corporate and Other segment related to our headquarters consolidation, primarily for employee severance and retention. Also during the second quarter of 2006, we recognized a $9.2 million credit from an adjustment to the reserve for the additional consideration agreement that was entered into in connection with the October 2004 sale of our paper, forest products and timberland assets. This adjustment is included in Other, income (expense) net.
(4) 2007 Special Items
First Quarter 2007
During the first quar ter of 2007, we sold OfficeMax Contract’s operations in Mexico to OfficeMax de Mexico, our 51% owned joint venture, resulting in a net loss of $1.1 million which is included in minority interest, net of income tax in our Consolidated Statements of Income (Loss) for 2007.
(5) Discontinued Operations
In the first quarter of 2006, we ceased operations at the Company’s wood-polymer building materials facility near Elma, Washington. The costs and expenses related to this business are reflected as discontinued operations in our Consolidated Statements of Income (Loss) for 2006 and are included as special items in our Segment Information tables.
13
Exhibit 99.2
OfficeMax Incorporated
263 Shuman Boulevard Naperville, IL 60563
|
|
|
|
||
|
|
|
|
|
|
|
News Release |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OfficeMax Media Contacts |
|
OfficeMax Investor Contact |
|
|
|
Bill Bonner |
Jennifer Rook |
|
John Jennings |
|
|
630 864 6066 |
630 864 6057 |
|
630 864 6820 |
|
|
|
|
|
|
|
For Immediate Release: July 26, 2007
OFFICEMAX ELECTS WILLIAM J. MONTGORIS TO BOARD OF DIRECTORS
NAPERVILLE, Ill., July 26, 2007 — OfficeMaxÒ Incorporated (NYSE: OMX) a leader in office products and services, announced today that William J. Montgoris has been elected to serve on the company’s board of directors.
“We welcome the financial and operational experience that Bill brings to the board”, said Sam Duncan, Chairman and Chief Executive Officer of OfficeMax. “I am confident that we will benefit greatly from his counsel.”
Mr. Montgoris has been a member of the board of directors of Stage Stores, Inc. since 2004 and is also a Trustee of five funds within The Reserve Funds family of money market mutual funds. After 20 years of service, Mr. Montgoris retired from The Bear Stearns Companies Inc., a leading global investment banking, securities trading and brokerage firm where he had held several top management positions, including Chief Operating Officer and Chief Financial Officer. Mr. Montgoris began his career with the public accounting firm now known as Pricewaterhouse Coopers.
Mr. Montgoris will serve on the audit and executive compensation committees for OfficeMax.
About OfficeMax
OfficeMax Incorporated (NYSE: OMX) is a leader in both business-to-business office products solutions and retail office products. The OfficeMax mission is simple. We help our customers do their best work. The company provides office supplies and paper, in-store print and document services through OfficeMax ImPressTM, technology products and solutions, and furniture to consumers and to large, medium and small businesses. OfficeMax customers are served by approximately 35,000 associates through direct sales, catalogs, e-commerce
and more than 900 stores. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more information, visit www.officemax.com.
Exhibit 99.3
OFFICEMAX
INCORPORATED
2007 Director Restricted Stock Unit Award Agreement
This Restricted Stock Unit Award (the “Award”), is granted on July 26, 2007 (the “Award Date”), by OfficeMax Incorporated (“OfficeMax”) to (“Director” or “you”) pursuant to the 2003 OfficeMax Incentive and Performance Plan (the “Plan”) and pursuant to the following terms:
1. The Award is subject to all the terms and conditions of the Plan. All capitalized terms not defined in this Agreement shall have the meaning stated in the Plan.
2. You are awarded ___________ restricted stock units, at no cost to you, subject to the restrictions set forth in the Plan and this Agreement.
3. Your Award is subject to a six-month restriction period. The units will vest six months following the date of grant, on January 26, 2008, if you are then still an OfficeMax Director. Vested units will be payable six months following the date of your termination of service as a director due to your retirement or resignation from the Board (or immediately upon a termination of service due to death or disability).
4. Unless otherwise approved by the Board of Directors, if you terminate service as a director prior to January 26, 2008 for a reason other than death or disability, your Award will be forfeited.
5. In the event of a Change in Control (as defined in the Plan) prior to the end of the restriction period pursuant to paragraph 3, the continuing entity may either continue this Award or replace this Award with an award of at least equal value with terms and conditions not less favorable than the terms and conditions provided in this Award Agreement, in which case the Award will vest and become payable according to the terms of the applicable Award Agreement. If the continuing entity does not so continue or replace this Award, the restriction period will lapse with respect to all units not vested at the time of the Change in Control or your termination, and all units will be payable according to paragraph 3 above. In the event of a Change in Control, payment of the Award will be made in the common stock of the continuing entity when due according to this Agreement.
6. The units awarded pursuant to this Agreement cannot be sold, assigned, pledged, hypothecated, transferred, or otherwise encumbered prior to payment.
7. You will receive notional dividend units on the awarded units equal to the amount of dividends paid on OfficeMax’s common stock. Notional dividends paid on your restricted stock units will be accumulated in a bookkeeping account without interest until the restrictions on the respective restricted stock units have lapsed, and payment of the underlying restricted stock units is made. Dividend units paid on forfeited restricted stock units will be forfeited.
8. With respect to the awarded units, you are not a shareholder and do not have any voting rights.
9. Vested restricted stock units will be paid to you in whole shares of OfficeMax common stock. Partial units, if any, and dividend units will be paid in cash.
10. It is the intention of OfficeMax that this Award not result in any additional taxation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and guidance promulgated thereunder. Notwithstanding anything to the contrary herein, to the extent that any provision of this Award would otherwise result in taxation under Section 409A of the Code, such provision shall be deemed null and void. By accepting this Award, you agree that in the event that amendment of this Award is required in order to comply with Section 409A of the Code, you shall negotiate in good faith with OfficeMax with respect to amending the Award, provided that
OfficeMax shall not be required to assume any increased economic burden in connection with any such amendment.
You must sign this Agreement and return it to OfficeMax’s Compensation Department on or before August 31, 2007, or the Award will be forfeited. Return your executed Agreement to: Pam Delaney, OfficeMax, 263 Shuman Boulevard, Naperville, IL 60563, or fax your signed form to 630-XXX-XXXX.
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OfficeMax Incorporated |
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Perry Zukowski |
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Executive Vice President |
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Human Resources |
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Exhibit 99.4
Restatement Clawback Policy
If the Board learns of any misconduct by an Executive Officer that contributed to the Company having to prepare a restatement of previously issued financial statements due to the material noncompliance by the Company with any financial reporting requirement under applicable securities laws or regulations, it shall take such action as it deems necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, punish the wrongdoer in a manner it deems appropriate. In determining what remedies to pursue, the Board shall take into account all relevant factors, including whether the restatement was the result of negligent, intentional or gross misconduct. The Board will, to the extent permitted by governing law, and as it determines appropriate, require reimbursement of any bonus or incentive compensation awarded to an Executive Officer after July 26, 2007, effect the cancellation of any stock awards granted to the Executive Officer after July 26, 2007, and/or require the payment of stock proceeds if: a) the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, b) the Executive Officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and c) the amount of the bonus or incentive compensation that would have been awarded to the Executive Officer had the financial results been properly reported would have been lower than the amount actually awarded. In addition, the Board may dismiss the Executive Officer, authorize legal action for breach of fiduciary duty or take such other action to enforce the Executive Officer’s obligations to OfficeMax as may fit the facts surrounding the particular case. The Board may, in determining the appropriate punishment, take into account penalties or punishments imposed by third parties, such as law enforcement agencies, regulators or other authorities. The Board’s power to determine the appropriate punishment for the wrongdoer is in addition to, and not in replacement of, any remedies which may be imposed by such entities.
For the purposes of this policy, “Executive Officer” means any officer who has been designated an executive officer by the Board.