OfficeMax Reports Fourth Quarter and Full Year 2009 Financial Results
NAPERVILLE, Ill., Feb. 17 /PRNewswire-FirstCall/ -- OfficeMax® Incorporated (NYSE: OMX) today announced the results for its fiscal fourth quarter and full year ended December 26, 2009. Total sales were $1,810.5 million in the fourth quarter of 2009, a decline of 3.9% from the fourth quarter of 2008, while total sales for the full year 2009 decreased 12.8% to $7,212.1 million compared to the full year 2008. For the fourth quarter of 2009, OfficeMax reported a net loss available to OfficeMax common shareholders of $3.2 million, or $0.04 per diluted share. For the full year 2009, OfficeMax reported a net loss available to OfficeMax common shareholders of $2.2 million, or $0.03 per diluted share.
Sam Duncan, Chairman and CEO of OfficeMax, said, "We are pleased with our strong balance sheet and liquidity position as well as our improving performance throughout 2009 in what has remained a tough environment for our business. Notably for the fourth quarter, the year-over-year sales decrease moderated, which was consistent with the trend we saw each quarter during the year, and we expanded gross margin. We believe our company is well positioned to grow sales and operating margin as the economy improves."
Summary Consolidated Results
----------------------------
(in millions, except per-
share amounts) 4Q 09 4Q 08 YTD 09 YTD 08
------------------------- ----- ----- ------ ------
Sales $1,810.5 $1,883.1 $7,212.1 $8,267.0
----- -------- -------- -------- --------
Sales decline (from prior
year period) -3.9% -12.8%
------------------------- ---- -----
Operating loss $(29.2) $(430.7) $(4.0) $(1,936.2)
-------------- ------ ------- ----- ---------
Adjusted operating income
(loss) $(2.0) $15.0 $62.9 $191.9
------------------------- ----- ----- ----- ------
Adjusted operating income
margin -0.1% 0.8% 0.9% 2.3%
------------------------- ---- --- --- ---
Adjusted diluted income
(loss) per common share $(0.03) $0.02 $0.24 $1.30
------------------------ ------ ----- ----- -----
Cash and cash equivalents $486.6 $170.8
------------------------- ------ ------
Available (unused) borrowing
capacity $513.0 $546.9
---------------------------- ------ ------
Adjusted income and adjusted diluted income per share are non-GAAP financial measures that exclude the effect of certain charges and items described in the footnotes to the accompanying financial statements. A reconciliation to the company's GAAP financial results is included in this press release.
Results for the fourth quarter and full year 2009 and 2008 included certain charges and other items that are not considered indicative of core operating activities. Fourth quarter 2009 results included a $17.6 million non-cash impairment charge (pre-tax) related to certain of our Retail stores in the U.S. and Mexico; $9.6 million of severance and other charges (pre-tax), principally related to reorganizations of our U.S. and Canadian Contract sales forces and customer fulfillment centers, as well as a reduction of our Retail store staffing; and a $14.9 million tax benefit resulting from the reversal of a reserve associated with industrial revenue bonds that were under appeal with the Internal Revenue Service. Fourth quarter 2008 results included a $429.1 million non-cash charge (pre-tax) recorded among the Contract and Retail segments related to impairment of goodwill, trade names, and store fixed assets; a $3.2 million non-cash impairment-related interest expense charge on the securitization notes payable related to the Lehman Brothers Holdings Inc. ("Lehman") guaranteed installment notes; and a $16.6 million charge, which was included in Contract, Retail, and Corporate and Other for reductions in force in the corporate office and in the field and certain store and site leases.
Excluding the items described above, the adjusted operating loss in the fourth quarter of 2009 was $2.0 million, or -0.1% of sales, compared to adjusted operating income of $15.0 million, or 0.8% of sales in the fourth quarter of 2008. The adjusted net loss available to OfficeMax common shareholders in the fourth quarter of 2009 was $2.3 million, or $0.03 per diluted share, compared to adjusted net income available to OfficeMax common shareholders of $1.9 million, or $0.02 per diluted share, in the fourth quarter of 2008.
Contract Segment Results
------------------------
(in millions) 4Q 09 4Q 08 YTD 09 YTD 08
------------- ----- ----- ------ ------
Sales $947.8 $953.9 $3,656.7 $4,310.0
----- ------ ------ -------- --------
Sales decline (from prior year
period) -0.6% -15.2%
------------------------------ ---- -----
Gross profit margin 21.8% 21.6% 20.8% 22.0%
------------------- ---- ---- ---- ----
Adjusted operating income margin 1.5% 2.3% 1.6% 3.9%
-------------------------------- --- --- --- ---
OfficeMax Contract segment sales decreased 0.6% (a decrease of 6.2% after adjusting for the foreign currency exchange rate impact) compared to the prior year period to $947.8 million in the fourth quarter of 2009, reflecting a U.S. Contract operations sales decline of 5.8%, mostly offset by an International Contract operations sales increase of 13.2% in U.S. dollars (a sales decrease of 7.3% in local currencies). The U.S. Contract sales decline in the fourth quarter showed significant improvement from the 15.4% year-over-year sales decline in the third quarter due to improvement from existing accounts as well as sales from new customers which exceeded prior year period sales from former customers.
Contract segment gross profit margin increased to 21.8% in the fourth quarter of 2009 from 21.6% in the fourth quarter of 2008, primarily due to improved gross profit margin at International Contract, partially offset by a U.S. sales mix shift to a higher percentage of lower-margin consumable items and lower sales of off-contract items and higher customer acquisition and retention expense. Contract segment operating, selling & administrative expense as a percentage of sales increased to 20.3% in the fourth quarter of 2009 from 19.3% in the fourth quarter of 2008, primarily due to higher incentive compensation expense, partially offset by reduced payroll expense. Contract segment operating income was $7.1 million in the fourth quarter of 2009. Contract segment adjusted operating income was $14.0 million, or 1.5% of sales, in the fourth quarter of 2009 compared to $22.6 million, or 2.3% of sales, in the fourth quarter of 2008.
Retail Segment Results
----------------------
(in millions) 4Q 09 4Q 08 YTD 09 YTD 08
------------- ----- ----- ------ ------
Sales $862.7 $929.2 $3,555.4 $3,957.0
----- ------ ------ -------- --------
Same-store sales decline
(from prior year period) -6.7% -11.0%
------------------------- ---- -----
Gross profit margin 27.3% 27.0% 27.4% 28.0%
------------------- ---- ---- ---- ----
Adjusted operating income
(loss) margin -0.8% 0.0% 1.3% 1.5%
------------------------- ---- --- --- ---
OfficeMax Retail segment sales decreased 7.2% to $862.7 million in the fourth quarter of 2009 compared to the fourth quarter of 2008, reflecting a same-store sales decrease of 6.7% (a same-store sales decrease of 6.2% in local currencies) and fewer stores. Retail same-store sales for the fourth quarter of 2009 declined across all major product categories primarily due to weaker small business and consumer spending.
Retail segment gross profit margin increased to 27.3% in the fourth quarter of 2009 from 27.0% in the fourth quarter of 2008, primarily due to reduced inventory shrinkage, partially offset by deleveraging of fixed occupancy costs from the same-store sales decrease. Retail segment operating, selling & administrative expense as a percentage of sales increased to 28.1% in the fourth quarter of 2009 compared to 27.0% in the fourth quarter of 2008 primarily due to higher incentive compensation expense, partially offset by reduced advertising expense and other targeted cost controls. Retail segment operating loss was $26.5 million in the fourth quarter of 2009. Retail segment adjusted operating loss was $6.8 million, or -0.8% of sales, in the fourth quarter of 2009 compared to breakeven results in the fourth quarter of 2008.
OfficeMax ended 2009 with a total of 1,010 retail stores, consisting of 933 retail stores in the U.S. and 77 retail stores in Mexico. During the fourth quarter of 2009, OfficeMax opened one retail store in the U.S., and closed one store in Mexico. During 2009, OfficeMax opened 12 retail stores in the U.S., and closed 18 stores in the U.S. and 6 in Mexico.
Corporate and Other Segment Results
The OfficeMax Corporate and Other segment includes support staff services and certain other expenses that are not fully allocated to the Retail and Contract segments. Corporate and Other segment operating, selling & administrative expense was $9.2 million in the fourth quarter of 2009 compared to $7.6 million in the fourth quarter of 2008. The increase was primarily due to higher pension expense and incentive compensation expense.
Balance Sheet and Cash Flow
As of December 26, 2009, OfficeMax had total debt of $297.1 million, excluding $1,470.0 million of non-recourse debt which relates to timber securitization notes that have recourse limited to the timber installment notes receivable and related guarantees. At the end of fiscal 2009, OfficeMax had $486.6 million in cash and cash equivalents, and $513.0 million in available (unused) borrowing capacity under its revolving credit facilities. The company's unused borrowing capacity reflects an available borrowing base of $574.1 million, zero outstanding borrowings, and $61.1 million of standby letters of credit.
During the full year 2009, OfficeMax generated $358.9 million of cash from operations which reflected significant reductions in inventory levels and good working capital management and included $71.0 million of tax refunds, net of payments, and $45.7 million from borrowings on accumulated earnings held in company-owned life insurance policies.
OfficeMax invested $14.3 million for capital expenditures in the fourth quarter of 2009 compared to $31.9 million in the fourth quarter of 2008. For the full year 2009, OfficeMax invested $38.3 million for capital expenditures compared to $144.0 million in 2008.
Outlook
Mr. Duncan added, "As we enter 2010 with a strong balance sheet and a highly disciplined corporate culture, we are encouraged by the momentum that we have built in 2009 and we are confident that our team is prepared to execute well this year and beyond. OfficeMax has been establishing itself as a key partner for both business and retail customers and we are well positioned as the economy begins to recover. We expect to continue progressing on our productivity initiatives in 2010 and, importantly, we will be increasing our focus toward driving long-term growth and differentiating our company in the marketplace."
The company expects to continue facing challenging economic conditions, such as U.S. unemployment trends, over the near-term with these trends beginning to work in the company's favor toward the latter part of the year. Additionally, the company plans to invest in initiatives to drive growth, and the successful execution of these initiatives is expected to benefit operations and financial results as the year progresses. Based on these assumptions, OfficeMax anticipates that for the full year 2010, total sales, including the impact of foreign currency translation, and adjusted operating income margin will be slightly higher than they were in 2009.
The company's outlook also includes the following assumptions for the full year 2010:
- Pension expense of approximately $7 million and cash contributions to the frozen pension plans of approximately $4 million
- Capital expenditures of approximately $90-110 million, primarily related to technology and infrastructure investments and upgrades
- Depreciation & amortization of approximately $105-115 million
- Interest expense of approximately $74-78 million and interest income of approximately $41-43 million
- Effective tax rate slightly less than the company's marginal tax rate of approximately 39 percent
- Positive cash flow from operations, although lower than for 2009 due to the projected 2009 incentive compensation payout which will occur in the first quarter, and from higher inventory levels working capital
- Liquidity position remaining strong
- Net reduction in retail store count for the year with two planned openings in Mexico and up to 20 store closings in the U.S. and Mexico
The January 2010 total sales percentage decrease continued to moderate compared to the year-over-year fourth quarter of 2009 total sales percentage decrease, and we expect the sales trend for the first quarter of 2010, including the impact of foreign currency translation, will be in line with what we saw in January. We also anticipate adjusted operating income margin for the first quarter of 2010 will be in line with the prior-year period.
Forward-Looking Statements
Certain statements made in this press release and other written or oral statements made by or on behalf of the company constitute "forward-looking statements" within the meaning of the federal securities laws, including statements regarding the company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future. Management believes that these forward-looking statements are reasonable. However, the company cannot guarantee that the macroeconomy will perform within the assumptions underlying our projected outlook, or that its actual results will be consistent with the forward-looking statements and you should not place undue reliance on them. These statements are based on current expectations and speak only as of the date they are made. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Important factors regarding the company that may cause results to differ from expectations are included in the company's Annual Report on Form 10-K for the year ended December 27, 2008, under Item 1A "Risk Factors", and in the company's other filings with the SEC.
Conference Call Information
OfficeMax will host a webcast and conference call with analysts and investors to review its fourth quarter and full year 2009 financial results today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The live audio webcast of the conference call can be accessed via the Internet by visiting the OfficeMax website at http://investor.officemax.com. The webcast will be archived and available online for one year following the call and will be posted on the "Presentations" page located within the "Investors" section of the OfficeMax website.
About OfficeMax
OfficeMax Incorporated (NYSE: OMX) is a leader in both business-to-business office products solutions and retail office products. The OfficeMax mission is simple. We help our customers do their best work. The company provides office supplies and paper, in-store print and document services through OfficeMax ImPress®, technology products and solutions, and furniture to consumers and to large, medium and small businesses. OfficeMax customers are served by over 30,000 associates through direct sales, catalogs, e-commerce and more than 1,000 stores. To find the nearest OfficeMax, call 1-877-OFFICEMAX. For more information, visit www.officemax.com.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands)
December 26, December 27,
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $486,570 $170,779
Receivables, net 539,350 566,846
Inventories 805,646 949,401
Deferred income taxes and receivables 133,836 105,140
Other current assets 55,934 62,850
------ ------
Total current assets 2,021,336 1,855,016
Property and equipment:
Property and equipment 1,316,855 1,289,279
Accumulated depreciation (894,707) (798,551)
-------- --------
Property and equipment, net 422,148 490,728
Intangible assets, net 83,806 81,793
Timber notes receivable 899,250 899,250
Deferred income taxes 300,900 436,182
Other non-current assets 342,091 410,614
------- -------
Total assets $4,069,531 $4,173,583
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt $22,430 $64,452
Accounts payable 687,340 755,797
Income taxes payable 3,389 18,288
Accrued liabilities and other 378,533 345,081
------- -------
Total current liabilities 1,091,692 1,183,618
Long-term debt, less current portion 274,622 289,922
Non-recourse debt 1,470,000 1,470,000
Other long-term obligations:
Compensation and benefits 277,247 502,447
Other long-term liabilities 424,715 415,722
------- -------
Total other long-term liabilities 701,962 918,169
Noncontrolling interest in joint venture 28,059 21,871
Shareholders' equity:
Preferred stock 36,479 42,565
Common stock 211,562 189,943
Additional paid-in capital 989,912 925,328
Accumulated deficit (602,242) (600,095)
Accumulated other comprehensive loss (132,515) (267,738)
-------- --------
Total shareholders' equity 503,196 290,003
Total liabilities and equity $4,069,531 $4,173,583
========== ==========
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(thousands, except per-share amounts)
Quarter Ended
---------------
December 26, December 27,
2009 2008
---- ----
Sales $1,810,501 $1,883,108
Cost of goods sold and occupancy costs 1,368,106 1,426,564
--------- ---------
Gross profit 442,395 456,544
Operating expenses:
Operating and selling expenses 355,714 363,927
General and administrative expenses 88,737 77,635
Goodwill and other asset impairments (a) 17,612 429,122
Other operating expenses (b) 9,553 16,577
----- ------
Total operating expenses 471,616 887,261
Operating loss (29,221) (430,717)
------- --------
Other income (expense):
Interest expense (c) (18,406) (24,497)
Interest income 10,820 10,664
Other expense, net (89) (801)
--- ----
(7,675) (14,634)
------ -------
Loss before income taxes (36,896) (445,351)
Income tax benefit (d) 33,183 41,001
------ ------
Net loss attributable to OfficeMax and
noncontrolling interest (3,713) (404,350)
Joint venture results attributable to
noncontrolling interest (a) 1,132 9,178
----- -----
Net loss attributable to OfficeMax (2,581) (395,172)
Preferred dividends (659) (824)
---- ----
Net loss available to OfficeMax common
shareholders $(3,240) $(395,996)
======= =========
Basic loss per common share $(0.04) $(5.21)
====== ======
Diluted loss per common share $(0.04) $(5.21)
====== ======
Weighted Average Shares
Basic 81,232 75,954
Diluted 81,232 75,954
(a) Fourth quarter of 2009 includes non-cash charges of $17.6 million to
impair fixed assets associated with certain of our Retail stores in the
U.S. and Mexico. These charges reduced net income (loss) by $9.9 million or $0.12 per diluted share. Fourth quarter of 2008 includes non-cash
impairment charges of $351.5 million and $77.6 million in our Contract and
Retail segments, respectively, to impair goodwill, trade names and fixed
assets. The cumulative effect of these items reduced net income (loss) by
$385.5 million, or $5.07 per diluted share.
(b) Fourth quarter of 2009 includes $9.6 million of severance and other
charges, principally related to reorganizations of our U.S. and Canadian
Contract sales forces and customer fulfillment centers, as well as a
streamlining of our Retail store staffing. These items reduced net income
(loss) by $5.9 million, or $0.07 per diluted share. Fourth quarter of 2008
includes a $16.6 million charge for severance and the termination of
certain store and site leases which reduced net income (loss) by $10.5
million, or $0.13 per diluted share.
(c) Fourth quarter of 2008 includes $3.2 million related to the timber
installment notes receivable due from Lehman. Additional interest expense
resulted when we stopped accruing interest income on these installment
notes as of the last interest payment date (April 29, 2008), while
continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29, 2008).
The additional interest expense will only be paid if the corresponding
interest income is recovered from Lehman on the installment notes, which
we do not expect to occur. This item reduced net income (loss) by $1.9
million, or $0.03 per diluted share.
(d) During the fourth quarter, the Company was notified that the IRS
conceded an issue under appeal regarding the deductibility of interest on
certain of its industrial revenue bonds and the Company released $14.9
million in tax uncertainty reserves. This item increased net income (loss)
by $0.18 per diluted share.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(thousands, except per-share amounts)
Year Ended
------------
December 26, December 27,
2009 2008
---- ----
Sales $7,212,050 $8,267,008
Cost of goods sold and occupancy costs 5,474,452 6,212,591
--------- ---------
Gross profit 1,737,598 2,054,417
Operating expenses:
Operating and selling expenses 1,377,057 1,555,615
General and administrative expenses 297,654 306,940
Goodwill and other asset impairments (a)(b) 17,612 2,100,212
Other operating expenses (c) 49,263 27,851
------ ------
Total operating expenses 1,741,586 3,990,618
Operating loss (3,988) (1,936,201)
------ ----------
Other income (expense):
Interest expense (b) (76,363) (113,641)
Interest income (e) 47,270 57,564
Other income, net (d) 2,748 19,878
----- ------
(26,345) (36,199)
------- -------
Loss before income taxes (30,333) (1,972,400)
Income tax benefit (f) 28,758 306,481
------ -------
Net loss attributable to OfficeMax and
noncontrolling interest (1,575) (1,665,919)
Joint venture results attributable to
noncontrolling interest (a) 2,242 7,987
----- -----
Net income (loss) attributable to OfficeMax 667 (1,657,932)
Preferred dividends (2,818) (3,663)
------ ------
Net loss available to OfficeMax common
shareholders $(2,151) $(1,661,595)
======= ===========
Basic loss per common share $(0.03) $(21.90)
====== =======
Diluted loss per common share $(0.03) $(21.90)
====== =======
Weighted Average Shares
Basic 77,483 75,862
Diluted 77,483 75,862
(a) 2009 includes non-cash charges of $17.6 million to impair fixed
assets associated with certain of our Retail stores in the U.S. and
Mexico. These charges reduced net income (loss) by $9.9 million or $0.12
per diluted share. In 2008, the Company recorded non-cash impairment
charges of $815.5 million and $548.9 million in the Contract and Retail
segments, respectively. The charges related to impairment of goodwill,
trade names and fixed assets. The cumulative effect of these items reduced
net income (loss) by $1,294.7 million, or $17.05 per diluted share.
(b) In 2008, a $735.8 million non-cash impairment-related charge was
recorded related to the timber installment notes receivable due from
Lehman. In addition, we stopped accruing interest income on these
installment notes as of the last interest payment date (April 29, 2008),
while continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29, 2008).
This resulted in $20.4 million of additional interest expense that will
only be paid if the corresponding interest income is recovered from Lehman
on the installment notes, which we do not expect to occur. The cumulative
effect of these items was a reduction of net income (loss) by $462.0
million, or $6.08 per diluted share.
(c) In 2009, we recorded $31.2 million of charges in our Retail segment
related to store closures. 2009 also includes $18.1 million of severance
and other charges, principally related to reorganizations of our U.S. and
Canadian Contract sales forces, customer fulfillment centers and customer
service centers, as well as a streamlining of our Retail store staffing.
The cumulative effect of these items was a reduction of net income (loss)
by $30.0 million, or $0.39 per diluted share. In 2008, $27.9 million of
charges were recorded for severance and the termination of certain store
and site leases. The cumulative effect of these items was a reduction of
net income (loss) by $17.5 million, or $0.23 per diluted share.
(d) Other income includes income related to the company's investment in
Boise Cascade Holdings, L.L.C. of $2.6 million and $20.5 million in 2009
and 2008, respectively. The large distribution in 2008 was primarily
related to Boise's sale of a majority interest in their paper and
packaging and newsprint business. These items increased net income (loss)
by $1.6 million, or $0.02 per diluted share in 2009 and $12.5 million, or
$0.16 per diluted share in 2008.
(e) 2009 includes a $4.4 million of interest income related to a tax
escrow balance established in a prior period in connection with our legacy
Voyager Panel business sold in 2004. This item increased net income (loss)
by $2.7 million, or $0.04 per diluted share.
(f) During 2009, the Company was notified that the IRS conceded an issue
under appeal regarding the deductibility of interest on certain of its
industrial revenue bonds and the Company released $14.9 million in tax
uncertainty reserves. This item increased net income (loss) by $0.18 per
diluted share.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(thousands)
Year Ended
------------
December 26, December 27,
2009 2008
---- ----
Cash provided by operations:
Net loss attributable to OfficeMax and
noncontrolling interest $(1,575) $(1,665,919)
Items in net income (loss) not using
(providing) cash:
Depreciation and amortization 116,417 142,896
Non-cash impairment charges 17,612 2,120,572
Non-cash deferred taxes on impairment
charges (6,484) (357,313)
Other 13,961 (4,043)
Changes in operating assets and liabilities:
Receivables and inventory 190,361 217,244
Accounts payable and accrued
liabilities (56,471) (137,716)
Income taxes and other 85,123 (92,044)
------ -------
Cash provided by operations 358,944 223,677
Cash provided by (used for) investment:
Expenditures for property and equipment (38,277) (143,968)
Proceeds from sale of restricted
investments - 20,252
Proceeds from sale of assets 980 11,592
Other 40,119 -
------ ---
Cash provided by (used for) investment 2,822 (112,124)
Cash used for financing:
Cash dividends paid (3,089) (47,477)
Changes in debt, net (57,716) (39,990)
Other 247 1,333
--- -----
Cash used for financing (60,558) (86,134)
Effect of exchange rates on cash and
cash equivalents 14,583 (7,277)
Increase in cash and cash equivalents 315,791 18,142
Cash and cash equivalents at beginning
of period 170,779 152,637
------- -------
Cash and cash equivalents at end of period $486,570 $170,779
======== ========
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NON-GAAP RECONCILIATION
(unaudited)
(millions, except per-share amounts)
Quarter Ended
---------------
December 26, 2009 December 27, 2008
----------------- -----------------
As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted
-------- ------- -------- -------- ------- --------
Sales $1,810.5 $- $1,810.5 $1,883.1 $- $1,883.1
Cost of goods
sold and
occupancy costs 1,368.1 - 1,368.1 1,426.6 - 1,426.6
------- --- ------- ------- --- -------
Gross profit 442.4 - 442.4 456.5 - 456.5
Operating expenses:
Operating
and selling
expenses 355.7 - 355.7 363.9 - 363.9
General and
administrative
expenses 88.7 - 88.7 77.6 - 77.6
Goodwill and
other asset
impairments (a) 17.6 (17.6) - 429.1 (429.1) -
Other operating
expenses (b) 9.6 (9.6) - 16.6 (16.6) -
--- ---- --- ---- ----- ---
Total operating
expenses 471.6 (27.2) 444.4 887.2 (445.7) 441.5
Operating
income
(loss) (29.2) 27.2 (2.0) (430.7) 445.7 15.0
----- ---- ---- ------ ----- ----
Other income
(expense):
Interest
expense (c) (18.4) - (18.4) (24.5) 3.2 (21.3)
Interest income 10.8 - 10.8 10.6 - 10.6
Other expense,
net (0.1) - (0.1) (0.8) - (0.8)
---- --- ---- ---- --- ----
(7.7) - (7.7) (14.7) 3.2 (11.5)
---- --- ---- ----- --- -----
Income (loss)
before
income taxes (36.9) 27.2 (9.7) (445.4) 448.9 3.5
Income tax
benefit
(expense) (d) 33.2 (25.1) 8.1 41.0 (44.5) (3.5)
---- ----- --- ---- ----- ----
Net income (loss)
attributable to
OfficeMax and
noncontrolling
interest (3.7) 2.1 (1.6) (404.4) 404.4 -
Joint venture
results
attributable to
noncontrolling
interest (a) 1.1 (1.2) (0.1) 9.2 (6.5) 2.7
--- ---- ---- --- ---- ---
Net income (loss)
attributable to
OfficeMax (2.6) 0.9 (1.7) (395.2) 397.9 2.7
Preferred
dividends (0.6) - (0.6) (0.8) - (0.8)
---- --- ---- ---- --- ----
Net income (loss)
available
to OfficeMax
common
shareholders $(3.2) $0.9 $(2.3) $(396.0) $397.9 $1.9
===== ==== ===== ======= ====== ====
Basic income
(loss) per
common share $(0.04) $0.01 $(0.03) $(5.21) $5.23 $0.02
====== ===== ====== ====== ===== =====
Diluted income
(loss)
per common
share $(0.04) $0.01 $(0.03) $(5.21) $5.23 $0.02
====== ===== ====== ====== ===== =====
Weighted Average
Shares
Basic 81,232 81,232 75,954 75,954
Diluted 81,232 81,232 75,954 77,852
(a) Fourth quarter of 2009 includes non-cash charges of $17.6 million to
impair fixed assets associated with certain of our Retail stores in the
U.S. and Mexico. These charges reduced net income (loss) by $9.9 million
or $0.12 per diluted share. Fourth quarter of 2008 includes non-cash
impairment charges of $351.5 million and $77.6 million in our Contract and
Retail segments, respectively, to impair goodwill, trade names and fixed
assets. The cumulative effect of these items reduced net income (loss) by
$385.5 million, or $5.07 per diluted share.
(b) Fourth quarter of 2009 includes $9.6 million of severance and other
charges, principally related to reorganizations of our U.S. and Canadian
Contract sales forces and customer fulfillment centers, as well as a
streamlining of our Retail store staffing. These items reduced net income
(loss) by $5.9 million, or $0.07 per diluted share. Fourth quarter of 2008
includes a $16.6 million charge for severance and the termination of
certain store and site leases which reduced net income (loss) by $10.5
million, or $0.13 per diluted share.
(c) Fourth quarter of 2008 includes $3.2 million related to the timber
installment notes receivable due from Lehman. Additional interest expense
resulted when we stopped accruing interest income on these installment
notes as of the last interest payment date (April 29, 2008), while
continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29, 2008).
The additional interest expense will only be paid if the corresponding
interest income is recovered from Lehman on the installment notes, which
we do not expect to occur. This item reduced net income (loss) by $1.9
million, or $0.03 per diluted share.
(d) During the fourth quarter, the Company was notified that the IRS
conceded an issue under appeal regarding the deductibility of interest on
certain of its industrial revenue bonds and the Company released $14.9
million in tax uncertainty reserves. This item increased net income (loss)
by $0.18 per diluted share.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NON-GAAP RECONCILIATION
(unaudited)
(millions, except per-share amounts)
Year Ended
------------
December 26, 2009 December 27, 2008
----------------- -----------------
As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted
-------- ------- -------- -------- ------- --------
Sales $7,212.1 $- $7,212.1 $8,267.0 $- $8,267.0
Cost of goods
sold and
occupancy
costs 5,474.5 - 5,474.5 $6,212.6 - 6,212.6
------- --- ------- -------- --- -------
Gross profit 1,737.6 - 1,737.6 2,054.4 - 2,054.4
Operating
expenses:
Operating
and selling
expenses 1,377.0 - 1,377.0 1,555.6 - 1,555.6
General and
administrative
expenses 297.7 - 297.7 306.9 306.9
Goodwill and
other asset
impairments
(a), (b) 17.6 (17.6) - 2,100.2 (2,100.2) -
Other
operating
expenses (c) 49.3 (49.3) - 27.9 (27.9) -
---- ----- --- ---- ----- ---
Total
operating
expenses 1,741.6 (66.9) 1,674.7 3,990.6 (2,128.1) 1,862.5
Operating
income
(loss) (4.0) 66.9 62.9 (1,936.2) 2,128.1 191.9
---- ---- ---- -------- ------- -----
Other income
(expense):
Interest
expense (b) (76.4) - (76.4) (113.6) 20.4 (93.2)
Interest
income (e) 47.3 (4.4) 42.9 57.5 - 57.5
Other income
(loss), net (d) 2.8 (2.6) 0.2 19.9 (20.5) (0.6)
--- ---- --- ---- ----- ----
(26.3) (7.0) (33.3) (36.2) (0.1) (36.3)
----- ---- ----- ----- ---- -----
Income (loss)
before
income taxes (30.3) 59.9 29.6 (1,972.4) 2,128.0 155.6
Income tax
benefit
(expense) (f) 28.7 (37.4) (8.7) 306.5 (359.8) (53.3)
---- ----- ---- ----- ------ -----
Net income (loss)
attributable
to OfficeMax
and noncontrolling
interest (1.6) 22.5 20.9 (1,665.9) 1,768.2 102.3
Joint venture
results
attributable to
noncontrolling
interest (a) 2.2 (1.7) 0.5 8.0 (6.5) 1.5
--- ---- --- --- ---- ---
Net income (loss)
attributable
to OfficeMax 0.6 20.8 21.4 (1,657.9) 1,761.7 103.8
Preferred
dividends (2.8) - (2.8) (3.7) - (3.7)
---- --- ---- ---- --- ----
Net income (loss)
available
to OfficeMax
common
shareholders $(2.2) $20.8 $18.6 $(1,661.6) $1,761.7 $100.1
===== ===== ===== ========= ======== ======
Basic income
(loss) per
common share $(0.03) $0.27 $0.24 $(21.90) $23.22 $1.32
====== ===== ===== ======= ====== =====
Diluted income
(loss) per
common share $(0.03) $0.27 $0.24 $(21.90) $23.20 $1.30
====== ===== ===== ======= ====== =====
Weighted
Average
Shares
Basic 77,483 77,483 75,862 75,862
Diluted 77,483 78,462 75,862 77,150
(a) 2009 includes non-cash charges of $17.6 million to impair fixed
assets associated with certain of our Retail stores in the U.S. and
Mexico. These charges reduced net income (loss) by $9.9 million or $0.12
per diluted share. In 2008, the Company recorded non-cash impairment
charges of $815.5 million and $548.9 million in the Contract and Retail
segments, respectively. The charges related to impairment of goodwill,
trade names and fixed assets. The cumulative effect of these items reduced
net income (loss) by $1,294.7 million, or $17.05 per diluted share.
(b) In 2008, a $735.8 million non-cash impairment-related charge was
recorded related to the timber installment notes receivable due from
Lehman. In addition, we stopped accruing interest income on these
installment notes as of the last interest payment date (April 29, 2008),
while continuing to accrue interest expense on the Lehman guaranteed
securitization notes payable until the default date (October 29, 2008).
This resulted in $20.4 million of additional interest expense that will
only be paid if the corresponding interest income is recovered from Lehman
on the installment notes, which we do not expect to occur. The cumulative
effect of these items was a reduction of net income (loss) by $462.0
million, or $6.08 per diluted share.
(c) In 2009, we recorded $31.2 million of charges in our Retail segment
related to store closures. 2009 also includes $18.1 million of severance
and other charges, principally related to reorganizations of our U.S. and
Canadian Contract sales forces, customer fulfillment centers and customer
service centers, as well as a streamlining of our Retail store staffing.
The cumulative effect of these items was a reduction of net income (loss)
by $30.0 million, or $0.39 per diluted share. In 2008, $27.9 million of
charges were recorded for severance and the termination of certain store
and site leases. The cumulative effect of these items was a reduction of
net income (loss) by $17.5 million, or $0.23 per diluted share.
(d) Other income includes income related to the company's investment in
Boise Cascade Holdings, L.L.C. of $2.6 million and $20.5 million in 2009
and 2008, respectively. The large distribution in 2008 was primarily
related to Boise's sale of a majority interest in their paper and
packaging and newsprint business. These items increased net income (loss)
by $1.6 million, or $0.02 per diluted share in 2009 and $12.5 million, or
$0.16 per diluted share in 2008.
(e) 2009 includes a $4.4 million of interest income related to a tax
escrow balance established in a prior period in connection with our legacy
Voyager Panel business sold in 2004. This item increased net income (loss)
by $2.7 million, or $0.04 per diluted share.
(f) During 2009, the Company was notified that the IRS conceded an issue
under appeal regarding the deductibility of interest on certain of its
industrial revenue bonds and the Company released $14.9 million in tax
uncertainty reserves. This item increased net income (loss) by $0.18 per
diluted share.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
CONTRACT SEGMENT STATEMENTS OF OPERATIONS
(unaudited)
(millions, except per-share amounts)
Quarter Ended
---------------
December 26, December 27,
2009 2008
---- ----
Sales $947.8 100.0% $953.9 100.0%
Cost of goods sold and
occupancy costs 741.2 747.8
----- -----
Gross profit 206.6 21.8% 206.1 21.6%
Operating expenses:
Operating expenses (a) 192.6 20.3% 183.5 19.3%
Goodwill and other asset
impairments - 0.0% 351.5 36.8%
Other operating expenses 6.9 0.7% 6.9 0.7%
--- --- --- ---
Total operating expenses 199.5 21.0% 541.9 56.8%
Operating income (loss) $7.1 0.8% $(335.8) -35.2%
---- -------
Non-GAAP Reconciliation
-----------------------
Operating income (loss) $7.1 0.8% $(335.8) -35.2%
Goodwill and other asset
impairments - 0.0% 351.5 36.8%
Other operating expenses 6.9 0.7% 6.9 0.7%
--- --- --- ---
Adjusted operating income $14.0 1.5% $22.6 2.3%
----- -----
Year Ended
------------
December 26, December 27,
2009 2008
---- ----
Sales $3,656.7 100.0% $4,310.0 100.0%
Cost of goods sold and
occupancy costs 2,894.3 3,361.9
------- -------
Gross profit 762.4 20.8% 948.1 22.0%
Operating expenses:
Operating expenses (a) 704.4 19.2% 780.8 18.1%
Goodwill and other asset
impairments - 0.0% 815.5 18.9%
Other operating expenses 15.3 0.4% 9.3 0.2%
---- --- --- ---
Total operating expenses 719.7 19.6% 1,605.6 37.2%
Operating income (loss) $42.7 1.2% $(657.5) -15.2%
----- -------
Non-GAAP Reconciliation
-----------------------
Operating income (loss) $42.7 1.2% $(657.5) -15.2%
Goodwill and other asset
impairments - 0.0% 815.5 18.9%
Other operating expenses 15.3 0.4% 9.3 0.2%
---- --- --- ---
Adjusted operating income $58.0 1.6% $167.3 3.9%
----- ------
(a) Operating expenses includes operating and selling expenses as well as
general and administrative expenses.
OFFICEMAX INCORPORATED AND SUBSIDIARIES
RETAIL SEGMENT STATEMENTS OF OPERATIONS
(unaudited)
(millions, except per-share amounts)
Quarter Ended
---------------
December 26, December 27,
2009 2008
---- ----
Sales $862.7 100.0% $929.2 100.0%
Cost of goods sold and
occupancy costs 626.9 678.8
----- -----
Gross profit 235.8 27.3% 250.4 27.0%
Operating expenses:
Operating expenses (a) 242.6 28.1% 250.4 27.0%
Goodwill and other asset
impairments 17.6 2.1% 77.6 8.3%
Other operating expenses 2.1 0.2% 5.4 0.6%
--- --- --- ---
Total operating expenses 262.3 30.4% 333.4 35.9%
Operating loss $(26.5) -3.1% $(83.0) -8.9%
------ ------
Non-GAAP Reconciliation
-----------------------
Operating loss $(26.5) -3.1% $(83.0) -8.9%
Goodwill and other asset
impairments 17.6 2.1% 77.6 8.3%
Other operating expenses 2.1 0.2% 5.4 0.6%
--- --- --- ---
Adjusted operating income (loss) $(6.8) -0.8% $0.0 0.0%
----- ----
Year Ended
------------
December 26, December 27,
2009 2008
---- ----
Sales $3,555.4 100.0% $3,957.0 100.0%
Cost of goods sold and
occupancy costs 2,580.2 2,850.7
------- -------
Gross profit 975.2 27.4% 1,106.3 28.0%
Operating expenses:
Operating expenses (a) 930.3 26.1% 1,045.1 26.5%
Goodwill and other asset
impairments 17.6 0.5% 548.9 13.9%
Other operating expenses 33.3 1.0% 17.4 0.4%
---- --- ---- ---
Total operating expenses 981.2 27.6% 1,611.4 40.8%
Operating loss $(6.0) -0.2% $(505.1) -12.8%
----- -------
Non-GAAP Reconciliation
-----------------------
Operating loss $(6.0) -0.2% $(505.1) -12.8%
Goodwill and other asset
impairments 17.6 0.5% 548.9 13.9%
Other operating expenses 33.3 1.0% 17.4 0.4%
---- --- ---- ---
Adjusted operating income $44.9 1.3% $61.2 1.5%
----- -----
(a) Operating expenses includes operating and selling expenses as well as
general and administrative expenses.
Reconciliation of non-GAAP Measures to GAAP Measures
In addition to assessing our operating performance as reported under U.S. generally accepted accounting principles (GAAP), we also evaluate our results of operations before non-operating legacy items and operating items that are not indicative of our core operating activities such as severances, facility closures, and asset impairments. We believe our presentation of financial measures before, or excluding, these items, which are non-GAAP measures, enhances our investors' overall understanding of our recurring operational performance and provides useful information to both investors and management to evaluate the ongoing operations and prospects of OfficeMax by providing better comparisons. Whenever we use non-GAAP financial measures, we designate these measures as "adjusted" and provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure. In the preceding tables, we reconcile our non-GAAP financial measures to our reported GAAP financial results for the fourth quarter and full year of 2009 and 2008.
Although we believe the non-GAAP financial measures enhance an investor's understanding of our performance, our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The non-GAAP financial measures we use may not be consistent with the presentation of similar companies in our industry. However, we present such non-GAAP financial measures in reporting our financial results to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what we believe to be our ongoing business operations.
Media Contact Investor Contacts
Bill Bonner Mike Steele Tony Giuliano
630 864 6066 630 864 6826 630 864 6820
SOURCE OfficeMax Incorporated
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