Officemax 8-K Acquisition or disposition of assets

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Exhibit 99.2

OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)

		13 Weeks Ended				39 Weeks Ended
		October 25, 2003		October 26, 2002		October 25, 2003		October 26, 2002
TOTAL SALES		$	1,286,223	$	1,255,606	$	3,558,739	$	3,440,029
COST OF MERCHANDISE SOLD INCLUDING BUYING & OCCUP COSTS			943,473		937,942		2,647,098		2,576,054
GROSS MARGIN			342,750		317,664		911,641		863,975
STORE OPERATING & SELLING EXPENSES			282,057		265,963		800,407		766,263
GEN & ADMIN EXPENSES			34,520		32,859		99,668		102,041
TOTAL OPERATING EXPENSES			316,577		298,822		900,075		868,304
OPERATING INCOME			26,173		18,842		11,566		(4,329	)
INTEREST EXPENSE, NET			1,028		1,280		2,443		4,746
INCOME BEFORE INCOME TAXES			25,145		17,562		9,123		(9,075	)
INCOME TAX BENEFIT			—		—		—		(57,500	)
JV MINORITY INTEREST			1,079		1,050		1,980		1,757
NET INCOME		$	24,066	$	16,512	$	7,143	$	46,668
INCOME PER COMMON SHARE:
	BASIC	$	0.19	$	0.13	$	0.06	$	0.38
	DILUTED	$	0.18	$	0.13	$	0.06	$	0.37
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
	BASIC		127,961		124,011		126,138		123,723
	DILUTED		132,647		124,790		128,493		124,867

F-1

OFFICEMAX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

			October 25, 2003			January 25, 2003
			(Unaudited)
Assets
Current assets:
	Cash and equivalents		$	143,346		$	137,143
	Accounts receivable, net of allowances of $1,020 and $1,073, respectively			114,693			90,339
	Merchandise inventories			936,313			927,679
	Other current assets			34,448			27,585
	Total current assets			1,228,800			1,182,746
Property and Equipment:
	Buildings and land			36,271			36,133
	Leasehold improvements			219,247			183,547
	Furniture, fixtures and equipment			669,485			645,466
	Total property and equipment			925,003			865,146
	Less: Accumulated depreciation			(628,786	)		(567,709	)
		Property and equipment, net		296,217			297,437
Other assets and deferred charges				15,316			14,763
Goodwill, net of accumulated amortization of $89,757				290,495			290,495
			$	1,830,828		$	1,785,441
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable—trade		$	502,632		$	437,884
	Accrued expenses and other liabilities			196,725			227,022
	Accrued salaries and related expenses			47,336			60,190
	Taxes other than income taxes			89,864			79,781
	Credit facilities			—			—
	Redeemable preferred shares—Series B			—			21,750
	Mortgage loan, current portion			133			128
	Total current liabilities			836,690			826,755
Mortgage loan				1,281			1,390
Other long-term liabilities				152,673			157,587
		Total liabilities		990,644			985,732
Commitments and contingencies				—			—
Minority interest				20,047			19,264
Shareholders' equity:
	Common stock, without par value; 200,000,000 shares authorized; 140,344,516 and 134,801,656 shares issued and outstanding, respectively			869,405			887,556
	Cumulative translation adjustment			(3,716	)		(2,457	)
	Deferred stock compensation			(191	)		(153	)
	Retained (deficit)/earnings			(6,722	)		(13,865	)
	Less: Treasury stock, at cost			(38,639	)		(90,636	)
	Total shareholders' equity			820,137			780,445
			$	1,830,828		$	1,785,441

F-2

OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

			39 Weeks Ended
			October 25, 2003			October 26, 2002
Cash provided by (used for):
Operations
	Net income		$	7,143		$	46,668
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		66,698			67,308
		Other—net		2,377			632
	Changes in current assets and liabilities:
		Increase in inventories		(9,983	)		(95,971	)
		Increase (decrease) in accounts payable		50,660			(10,271	)
		(Increase) decrease in accounts receivable		(25,438	)		11,337
		(Decrease) increase in accrued liabilities		(24,630	)		12,672
		Store closing and asset impairment		(17,306	)		(18,267	)
	Other—net			507			(15,665	)
		Net cash provided by (used for) operations		50,028			(1,557	)
Investing
	Capital expenditures			(71,660	)		(33,007	)
	Other—net			(572	)		(2,905	)
		Net cash used for investing		(72,232	)		(35,912	)
Financing
	Increase in revolving credit facility			—			19,000
	Payments of mortgage principal			(104	)		(99	)
	Increase in overdraft balances			15,994			10
	Proceeds from issuance of common stock, net			33,846			3,578
	Redemption of preferred share purchase rights			(21,750	)		—
	Other—net			854			(1,002	)
		Net cash provided by financing		28,840			21,487
Effect of exchange rate changes on cash and equivalents				(433	)		(733	)
Net increase (decrease) in cash and equivalents				6,203			(16,715	)
Cash and equivalents, beginning of period				137,143			76,751
Cash and equivalents, end of period			$	143,346		$	60,036

F-3

OFFICEMAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 AND 39 WEEKS ENDED
OCTOBER 25, 2003 AND OCTOBER 26, 2002

Significant Accounting and Reporting Policies

1.

The accompanying unaudited consolidated financial statements have been prepared from the financial records of OfficeMax, Inc. and its subsidiaries (the "Company" or "OfficeMax") and reflect all adjustments which are, in the opinion of management, necessary to fairly present the results of the interim periods covered in this report. The results for any interim period are not necessarily indicative of the results to be expected for the full fiscal year.

2.

The Company's consolidated financial statements for the 13 and 39 weeks ended October 25, 2003 and October 26, 2002 included in this Report on Form 8-K have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the fiscal year ended January 25, 2003 which are attached as Exhibit 99.1 to this Report on Form 8-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto attached as Exhibit 99.1 referred to above. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

3.

OfficeMax serves its customers through nearly 1,000 superstores, e-Commerce Web sites and direct-mail catalogs. The Company has operations in the United States, Canada, Puerto Rico, the U.S. Virgin Islands and Mexico. In addition to offering office products, business machines and related items, OfficeMax superstores also feature CopyMax and FurnitureMax, store-within-a-store modules devoted exclusively to print-for-pay services and office furniture. The Company also reaches customers in the United States with an offering of over 40,000 items through its e-Commerce site, OfficeMax.com, its direct-mail catalogs and its outside sales force, all of which are serviced by its three PowerMax inventory distribution facilities, 17 delivery centers and two national customer call and contact centers.

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4.

The Company accounts for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and provides pro forma disclosures of compensation expense determined under the fair value provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123") as amended by Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." The following pro forma disclosures of compensation expense are based on the fair value provisions of FAS 123 using the Black-Scholes option pricing model to estimate the fair value of options at the date of grant.

	13 Weeks Ended				39 Weeks Ended
	October 25, 2003		October 26, 2002		October 25, 2003		October 26, 2002
	(In thousands, except per share data)
Net income, as reported	$	24,066	$	16,512	$	7,143	$	46,668
Stock-based compensation excluded from reported net income		1,446		1,277		2,351		3,599
Pro forma net income	$	22,620	$	15,235	$	4,792	$	43,069
Pro forma basic earnings per common share	$	0.18	$	0.12	$	0.04	$	0.35
Pro forma diluted earnings per common share	$	0.17	$	0.12	$	0.04	$	0.34

5.

The components of the Company's comprehensive income are as follows:

		13 Weeks Ended					39 Weeks Ended
		October 25, 2003		October 26, 2002			October 25, 2003			October 26, 2002
		(In thousands)
Net income (loss)		$	24,066	$	16,512		$	7,143		$	46,668
Other comprehensive income (loss):
	Cumulative translation adjustment		55		(2,898	)		(38	)		(3,015	)
Comprehensive income (loss)		$	24,121	$	13,614		$	7,105		$	43,653

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6.

Basic earnings per common share is based on the weighted average number of common shares outstanding. Diluted earnings per common share is based on the weighted average number of common shares outstanding and all potentially dilutive common stock equivalents.

A reconciliation of the basic and diluted per share computations is as follows:

		13 Weeks Ended						39 Weeks Ended
		October 25, 2003			October 26, 2002			October 25, 2003			October 26, 2002
		(Dollars in thousands, except per share data)
Net income available to common shareholders		$	24,066		$	16,512		$	7,143		$	46,668
Weighted average number of common shares outstanding			127,960,737			124,011,459			126,138,273			123,722,642
Effect of dilutive securities:
	Stock options		4,487,984			727,148			2,155,796			1,093,642
	Restricted stock		198,560			51,207			199,130			51,207
Weighted average number of common shares outstanding and assumed conversions			132,647,281			124,789,814			128,493,199			124,867,491
Basic earnings per common share		$	0.19		$	0.13		$	0.06		$	0.38
Diluted earnings per common share		$	0.18	(1)	$	0.13	(2)	$	0.06	(1)	$	0.37	(2)

(1)

Options to purchase 3,743,163 and 4,247,368 common shares were excluded from the calculation of diluted earnings per common share for the 13 and 39 weeks ended October 25, 2003, respectively, because the exercise prices of these options were greater than the average market price. The weighted average exercise price of these options was $13.16 and $12.60, respectively.

(2)

Options to purchase 12,908,071 and 12,710,824 common shares were excluded from the calculation of diluted earnings per common share for the 13 and 39 weeks ended October 26, 2002, respectively, because the exercise prices of these options were greater than the average market price. The weighted average exercise price of these options was $8.66 and $8.72, respectively.

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7.

The Company has two business segments: Domestic and International. The Company's operations in the United States, Puerto Rico and the U.S. Virgin Islands, comprised of its retail stores, e-Commerce operations, catalog business and outside sales groups, are included in the Domestic segment. The operations of the Company's majority-owned subsidiary in Mexico, OfficeMax de Mexico, are included in the International segment.

The following table summarizes the results of operations for the Company's business segments for the 13 weeks ended October 25, 2003 and October 26, 2002:

13 Weeks Ended October 25, 2003	Total Company		Domestic		International
	(In thousands)
Sales	$	1,286,223	$	1,243,962	$	42,261
Cost of merchandise sold, including buying and occupancy costs		943,473		911,637		31,836
Gross profit		342,750		332,325		10,425
Operating income		26,173		24,030		2,143
Interest expense (income), net		1,028		1,085		(57	)
Minority interest		1,079		—		1,079
Net income	$	24,066	$	22,945	$	1,121

13 Weeks Ended October 26, 2002	Total Company		Domestic		International
Sales	$	1,255,606	$	1,213,243	$	42,363
Cost of merchandise sold, including buying and occupancy costs		937,942		905,881		32,061
Gross profit		317,664		307,362		10,302
Operating income		18,842		16,835		2,007
Interest expense (income), net		1,280		1,416		(136	)
Minority interest		1,050		—		1,050
Net income	$	16,512	$	15,419	$	1,093

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The following table summarizes the results of operations for the Company's business segments for the 39 weeks ended October 25, 2003 and October 26, 2002:

39 Weeks Ended October 25, 2003	Total Company		Domestic		International
	(In thousands)
Sales	$	3,558,739	$	3,451,721	$	107,018
Cost of merchandise sold, including buying and occupancy costs		2,647,098		2,567,394		79,704
Gross profit		911,641		884,327		27,314
Operating income		11,566		8,153		3,413
Interest expense (income), net		2,443		3,070		(627	)
Minority interest		1,980		—		1,980
Net income	$	7,143	$	5,083	$	2,060

39 Weeks Ended October 26, 2002	Total Company			Domestic			International
Sales	$	3,440,029		$	3,323,434		$	116,595
Cost of merchandise sold, including buying and occupancy costs		2,576,054			2,486,487			89,567
Gross profit		863,975			836,947			27,028
Operating income (loss)		(4,329	)		(7,470	)		3,141
Interest expense (income), net		4,746			5,190			(444	)
Income tax benefit		(57,500	)		(57,500	)		—
Minority interest		1,757			—			1,757
Net income	$	46,668		$	44,840		$	1,828

The total assets of the International segment were approximately $72,448,000 and $69,728,000 as of October 25, 2003 and January 25, 2003, respectively. The total assets of the International segment included long-lived assets, primarily property and equipment, of approximately $22,097,000 and $23,676,000 as of October 25, 2003 and January 25, 2003, respectively. Depreciation expense for the International segment was approximately $790,000 and $2,409,000 for the 13 and 39 weeks ended October 25, 2003, respectively, and $791,000 and $2,490,000 for the 13 and 39 weeks ended October 26, 2002, respectively. Included in the total assets of the International segment was goodwill, net of accumulated amortization, of $3,699,000 as of October 25, 2003 and January 25, 2003.

F-8

8.

During the fourth quarter of fiscal year 2002, the Company conducted a review of its domestic real estate portfolio and committed to close eight underperforming superstores and one delivery center. In conjunction with these closings, the Company recorded a pre-tax charge for store closing and asset impairment of $11,915,000 during the fourth quarter of fiscal year 2002. Also during the fourth quarter of fiscal year 2002, the Company reversed certain portions of the store closing reserves established in fiscal year 2001 and fiscal year 2000 when those portions of the reserves were deemed no longer necessary. The reversals reduced the fiscal year 2002 charge by approximately $11,203,000.

During the first quarter of fiscal year 2003, the Company closed the delivery center and two of the superstores included in the charge for store closing and asset impairment recorded during the fourth quarter of fiscal year 2002. The remaining superstores are expected to close during fiscal year 2003.

A reconciliation of the major components of the Company's store closing reserve is as follows:

		Balance January 25, 2003		Payment / Usage		Balance October 25, 2003
		(in thousands)
Lease disposition costs, net of sublease income		$	101,304	$	14,890	$	86,414
Other closing costs			2,926		2,415		511
	Total	$	104,230	$	17,305	$	86,925

As of October 25, 2003 and January 25, 2003, $69,921,000 and $81,330,000 of the store closing reserve, respectively, was included in other long-term liabilities. Lease disposition cost included in the reserve for store closing costs includes the aggregate rent expense for the closed stores net of expected future sublease income of $94,070,000 and $109,139,000 as of October 25, 2003 and January 25, 2003, respectively. Of the total expected future sublease income included in the reserve for store closing costs, the Company had obtained sublease or assignment agreements for certain of its closed stores totaling $52,925,000 as of October 25, 2003.

9.

In the fourth quarter of fiscal year 2001, the Company recorded a $170,616,000 charge to establish a valuation allowance for its net deferred tax assets, including amounts related to its net operating loss carryforwards. The valuation allowance was calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), which places primary importance on the Company's operating results in the most recent three-year period when assessing the need for a valuation allowance. Although management believes the Company's results for those periods were heavily affected by deliberate and planned infrastructure improvements, including its PowerMax distribution network and state-of-the-art SAP computer system, as well as an aggressive store closing program, the Company's cumulative loss in the most recent three-year period represented negative evidence sufficient to require a full valuation allowance under the provisions of FAS 109. As of October 25, 2003, the valuation allowance was approximately $106,063,000, which represents a full valuation allowance of the Company's net deferred tax assets, including amounts related to its net operating loss carryforwards. The Company intends to maintain a full valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support reversal of some portion or the remainder of the allowance. Until such time, except for minor state, local and foreign tax provisions, the Company will have no reported tax provision, net of valuation allowance adjustments.

On March 9, 2002, President Bush signed into law the "Job Creation and Worker Assistance Act" (H.R. 3090). This new tax law temporarily extended the carryback period, to five years from two years, for net operating losses incurred during the Company's taxable years ended in 2001 and 2000. During the first quarter of fiscal year 2002, the Company reversed a portion of the valuation

F-9

allowance recorded during the fourth quarter of fiscal year 2001 and recognized an income tax benefit of $57,500,000 due to the extension of the carryback period. As of October 26, 2002, a receivable for the $57,500,000 income tax refund was included in other current assets. The Company received refunds for the additional net operating loss carryback resulting from the extension of the carryback period during fiscal year 2002.

10.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 clarifies consolidation requirements for variable interest entities ("VIEs") which establishes additional factors beyond ownership of a majority voting interest to indicate that a company has a controlling financial interest in an entity (or a relationship sufficiently similar to a controlling financial interest that it requires consolidation). Consolidation of a VIE by an investor is required when it is determined that the investor will absorb a majority of the VIE's expected losses or residual returns, if they occur. In October 2003, the FASB voted to defer adoption of FIN 46 for all VIE's or potential VIE's created before February 1, 2003 until the first fiscal period ending after December 15, 2003. FIN 46 may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements with a cumulative-effect adjustment as of the beginning of the first year restated.

The Company leases two of its PowerMax distribution facilities from VIEs (previously referred to as special purpose entities or SPEs) that have been established by nationally prominent, creditworthy commercial lessors to facilitate the financing of the inventory distribution facilities. The VIEs finance the cost of the property through the issuance of commercial paper. The Company has provided standby letters of credit of approximately $81,000,000 in support of the commercial paper. In the event that the Company defaults on its obligations under the leases, the VIEs could draw on the letters of credit in order to redeem the commercial paper. These letters of credit utilize a portion of the Company's available borrowing capacity under its revolving credit facility. Upon expiration of the synthetic operating leases, the Company can elect to purchase the related assets of both facilities at a total cost specified in the lease agreements of approximately $80,000,000. If the Company does not elect to purchase the related assets, the Company is required to honor certain fair value guarantees. These guarantees require the Company to reimburse the lessor for any shortfall from a fair value specified in the lease agreements. Currently, the Company expects to purchase the related assets upon expiration of the synthetic operating leases, or otherwise enter into an arrangement to maintain the continued use of these facilities.

Based on the provisions of FIN 46, as of the beginning of its fourth quarter of fiscal year 2003, the Company is required to consolidate in its financial statements the assets and related depreciation, liabilities and non-controlling interests of the VIEs involved in the leasing of its PowerMax inventory distribution facilities. The Company's fourth quarter consolidated financial statements will reflect the outstanding debt of the VIEs of approximately $80,000,000 in other long-term liabilities. Also as a result of consolidating the VIEs, the Company's consolidated financial statements will reflect the net fixed assets of the VIEs of approximately $59,000,000 which is net of accumulated depreciation of approximately $21,000,000.

The Company has elected to adopt the provisions of FIN 46 prospectively with a cumulative-effect adjustment as of the beginning of the fourth quarter of fiscal year 2003. Accordingly, the Company will record a non-cash extraordinary loss of approximately $21,000,000 in its fiscal fourth quarter which represents the excess of the carrying value of the newly consolidated liabilities and non-controlling interests over the carrying value of the newly consolidated assets. As a result of consolidating the VIEs, the Company will incur additional depreciation expense of approximately $1,000,000 per quarter beginning in the fourth quarter of fiscal year 2003. Consolidation of the VIEs will have no impact on the Company's cash flows.

F-10

11.

In November 2002, the FASB Emerging Issues Task Force ("Task Force") issued EITF Issue 02-16, "Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor" ("EITF 02-16"). EITF 02-16 addressed the following two issues: (i) the classification in a reseller's financial statements of cash consideration received from a vendor ("Issue 1"); and (ii) the timing of recognition by a reseller of a rebate or refund from a vendor that is contingent upon achieving a specific cumulative level of purchases or remaining a customer for a specified time period ("Issue 2"). Issue 1 stipulates that cash consideration received from a vendor is presumed to be a reduction of the prices of the vendors' products and should, therefore, be recognized as a reduction of cost of merchandise sold when recognized in the reseller's financial statements. However, that presumption is overcome when the consideration is either (a) a payment for assets or services delivered to the vendor, in which case the cash consideration should be recognized as revenue (or other income, as appropriate) when recognized in the reseller's income statement, or (b) a reimbursement of a specific, incremental, identifiable cost incurred by the reseller in selling the vendor's products, in which case the cash consideration should be characterized as a reduction of that cost when recognized in the reseller's income statement. Issue 2 states that vendor rebates should be recognized on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in progress by the reseller toward earning the rebate, provided the amounts are probable and reasonably estimable. Issue 1 was effective for all new arrangements, including modifications of existing arrangements, entered into after December 31, 2002. Issue 2 was effective for all new arrangements initiated after November 21, 2002.

The Company and its vendors participate in cooperative advertising programs and other vendor marketing programs in which vendors reimburse the Company for a portion of its advertising expenses and other costs. In accordance with the transition provisions of EITF 02-16, the Company is required to adopt the new guidance prospectively as it negotiates agreements with new vendors or modifies existing agreements. The Company's vendor agreements typically do not have expiration dates and remain in effect until replaced, and therefore, it is expected to take up to 18 months to cycle through all vendor program negotiations in the normal course of business. As a result of the more restrictive standards defined in Issue 1 of EITF 02-16, the Company is required to record certain consideration received from its vendors as a reduction of cost of merchandise sold, which previously would have been recognized as a reduction of a related advertising expense. This change in accounting may impact the timing of recognition of cash consideration received from the Company's vendors and increase its gross profit and net advertising expenses. These changes do not affect the total amount of vendor income the Company receives from its vendors. The application of the new guidance reduced earnings by approximately $.01 per diluted share during each of the first and second quarters of fiscal year 2003 and by approximately $.02 per diluted share for the 39 weeks ended October 25, 2003.

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OFFICEMAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share data)