Exhibit 99.1
Headquarters: 3605 Warrensville Center Rd., Shaker Heights, OH 44122-5203
Mailing Address: P.O. Box 228070, Cleveland, OH 44122-8070
[OFFICEMAX LOGO]
NEWS RELEASE FOR IMMEDIATE RELEASE
For inquiries:
Steve Baisden
Manager, Investor &
Public Relations
(216) 471-3441
investor@officemax.com
OFFICEMAX REPORTS SIGNIFICANTLY IMPROVED FOURTH QUARTER AND FULL YEAR 2002
RESULTS
DOMESTIC FOURTH QUARTER SAME-STORE SALES INCREASED 8.5 PERCENT, CONSOLIDATED
INCLUDING MEXICO UP 7.7 PERCENT;
FOURTH QUARTER GAAP EARNINGS OF 22 CENTS PER SHARE, PRO-FORMA EPS OF 13 CENTS;
GROSS MARGIN INCREASED 3.7 PERCENTAGE POINTS IN FOURTH QUARTER TO 24.91 PERCENT
OFFICEMAX ENDS FISCAL 2002 WITH NO DEBT NET OF $137 MILLION IN CASH
FIRST MONTH OF THE NEW FISCAL YEAR OFF TO STRONG START WITH SAME-STORE SALES
TRACKING IN THE HIGH SINGLE-DIGIT RANGE, DESPITE NEGATIVE EFFECTS OF MAJOR SNOW
STORMS
CLEVELAND - March 4, 2003 - OfficeMax, Inc. (NYSE: OMX) today reported
significantly improved results for its fourth quarter and full fiscal year ended
Jan. 25, 2003. Same-store sales increased 8.5 percent in the fourth quarter for
the Company's U.S. operations and including Mexico were up 7.7 percent. This
represents the Company's fifth consecutive quarter of year-over-year
comparable-store sales improvement. Overall sales for the fourth quarter
increased five percent to $1.336 billion compared to $1.271 billion for the like
period in fiscal 2001, which included sales for 29 stores closed on the first
day of fiscal 2002. For the full 52-week period in fiscal 2002, consolidated
comparable-store sales increased approximately four percent. Overall, full-year
sales were up three percent to $4.776 billion compared to $4.626 billion for the
previous fiscal year including the sales for the 29 closed stores.
Michael Feuer, the Company's chairman and chief executive officer, said,
"Throughout the fourth quarter, during a very difficult economic environment,
OfficeMax achieved major gains in the number of same-store customer transactions
and increases in the average amount per transaction, both of which fueled our
industry-leading same-store sales results. We attribute these substantial gains
to the long-term programs that we completed over the past three years which have
positioned us for a new phase of accelerated growth. These improvements included
the development and installation of state-of-the-art supply chain management and
computer systems, store execution programs including an emphasis on associate
training, more effective merchandise presentations, and focused marketing
tactics that are allowing us to gain market share with the core business
customer while maintaining gross margin dollars."
FOURTH QUARTER NET INCOME IMPROVED WITH $270 MILLION SWING FROM SAME QUARTER IN
THE PREVIOUS YEAR
On a Generally Accepted Accounting Principles (GAAP) basis, in the fourth
quarter, OfficeMax reported a $270 million positive swing in net income to $27.1
million, or 22 cents per diluted share, from a net loss of $243.1 million, or
$2.06 per share, in the like period of the previous year. The loss in the fourth
quarter of fiscal 2001 included net pre-tax charges of $76.8 million related to
store closings, fixed asset impairments and the write-off of certain
non-productive assets, along with $3.7 million for the liquidation of inventory
from the closed stores. Additionally, in this same quarter of fiscal 2001, the
Company recorded a non-cash charge of $170.6 million to establish a valuation
allowance for its net deferred tax assets and net operating loss carryforwards.
Assuming an approximate 40 percent tax rate, which is consistent with
OfficeMax's historical tax rate and how most Wall Street analysts typically
evaluate performance, in the fourth quarter, OfficeMax earned net income of
$16.4 million, or 13 cents per diluted share, one cent ahead of analysts'
consensus expectation. This compares to a pro-forma loss of $22.2 million, or 19
PAGE 2 of 6
OFFICEMAX, INC.
FISCAL 2002 FOURTH QUARTER RELEASE
MARCH 4, 2003
cents per share, in the same period a year ago when assuming the same tax rate
and excluding the fiscal 2001 fourth quarter pre-tax charges and tax allowance.
FULL YEAR NET INCOME JUMPED $383 MILLION
For the full year, net income on a GAAP basis jumped approximately $383 million
to $73.7 million, or 59 cents per diluted share, from a loss in fiscal year 2001
of $309.5 million, or $2.72 per share. On a pro-forma basis assuming a 40
percent tax rate and excluding a $57.5 million tax benefit, OfficeMax earned net
income of approximately $9.8 million, or eight cents per diluted share, for
fiscal 2002. This compares to a net loss of $88.9 million, or 79 cents per
share, in fiscal 2001, excluding the fiscal 2001 fourth quarter pre-tax charges
and tax allowance as well as assuming the same tax rate.
GROSS MARGIN INCREASED 371 BASIS POINTS IN FOURTH QUARTER
OfficeMax said gross margin in the fourth quarter increased 371 basis points
year-over-year to 24.91 percent of sales from 21.20 percent in the same quarter
of the previous year. Excluding the $3.7 million inventory liquidation charge in
the fiscal 2001 fourth quarter, gross margin would have improved 342 basis
points year-over-year.
Mr. Feuer said, "During the Company's January back-to-business selling season, a
period in which its small business customers typically restock office supplies
for the new year, OfficeMax experienced an anticipated merchandise sales mix
shift from lower margin holiday business gift and technology products to more
profitable core office supplies and furniture including OfficeMax private label
products. This seasonal merchandise sales transition, along with increased
expense leverage, propelled OfficeMax to achieve its highest fourth quarter
gross margin in four years."
INTERNATIONAL SEGMENT SALES RESULTS
Primarily as a result of unfavorable currency translation from the weakening of
the Mexican Peso against the U.S. Dollar, the OfficeMax International Business
Segment, comprised of the Company's 30-store Mexico operations, reflected a
comparable-store sales decrease of approximately 17 percent. Fourth quarter
sales in local currencies for this segment increased slightly, while sales in
U.S. Dollars reached $36.5 million, down from $40.2 million in the same quarter
for the prior year. For the full year, sales increased nine percent to $153.1
million from $140.6 million in the previous fiscal year.
COMPANY REPORTS BEST FINANCIAL POSITION IN SIX YEARS
OfficeMax ended fiscal 2002 in its best financial position in six years with
$137 million in cash and no short-term borrowings. This compares to $220 million
in borrowings two years earlier when the Company was in the process of
rebuilding its supply chain and distribution infrastructure.
Mr. Feuer said, "We plan to capitalize on our dramatically improved financial
position, accelerated sales trend and infrastructure advancements to continue to
gain market share at the retail level. Beginning in the fourth quarter, all new
OfficeMax superstore openings incorporated the Company's latest 20,000
square-foot prototype, reduced from its previous 23,500 square-foot layout. This
year, OfficeMax plans to open a relatively small number of new superstores but
will remodel over 250 existing outlets. The Company is also developing a new
store initiative, internally dubbed `Project Phoenix,' focusing on a 4,000 to
7,000 square-foot format that will be an offshoot of its current small footprint
PDQ store, which includes its high-margin CopyMax print-for-pay operation." The
Phoenix concept will be tested in the second half of this fiscal year in new
environments and venues.
In addition, Mr. Feuer said OfficeMax's public e-commerce Internet site will
continue to further integrate with its retail business, along with more cohesive
marketing and management of its outside sales force which focuses on
medium-sized companies. OfficeMax will also launch a new eCommerce site in
Canada utilizing its OfficeMax.com platform to provide Canadian customers access
to thousands of office products that will be fulfilled within Canada.
"In 2003, we will continue to invest in programs to improve execution at every
level of our business, including a new point-of-sale system at our stores," Mr.
Feuer said. "This new system includes a multitude of features including Customer
Relationship Management tools that will provide us insight into our customers'
buying habits which will be used for real-time purchase recommendations as well
as for targeted marketing efforts. The system also features Line Buster
technology which will allow store associates to check out customers paying with
a credit card anywhere in the store, further enhancing and speeding up the
OfficeMax shopping experience. We expect the initial suite of features from this
state-of-the-art system to be rolled out to all U.S. stores by the end of the
third quarter of this fiscal year."
PAGE 3 of 6
OFFICEMAX, INC.
FISCAL 2002 FOURTH QUARTER RELEASE
MARCH 4, 2003
NEW YEAR OFF TO A STRONG START WITH SAME-STORE SALES TRACKING IN THE HIGH
SINGLE-DIGIT RANGE
OfficeMax said its domestic comparable-store sales in February, the first month
and the most important period of the first quarter, tracked in the high
single-digit range. "This is particularly gratifying despite the effects of
unusually harsh winter storms in the Northeast, mid-Atlantic and Midwest, which
the Company estimates negatively impacted comparable-store sales by
approximately one percent," Mr. Feuer said. "We believe our impressive gains are
the continuing result of our three-pronged strategy of consistently providing
high merchandise in-stock positions, strong execution at the store level, and
tactical marketing that is driving store traffic while positively maintaining
gross margin."
FIRST QUARTER AND FISCAL 2003 GUIDANCE
Mr. Feuer said, "We are very pleased that current domestic same-store sales
trends are exceeding our expectations. Based on this, the Company's guidance for
this new fiscal year includes anticipated significant top and bottom line gains
as we invest in infrastructure and programs that enhance all aspects of our
business. However, the Company is very cognizant of the numerous unknowns that
could adversely affect its business including tenuous economic conditions,
perceived or actual effects of terrorist activity, and the possibility of a war
in Iraq."
In the first quarter, OfficeMax expects comparable-store sales above the
mid-single digit range with GAAP earnings of seven to eight cents per diluted
share which, assuming an estimated 40 percent tax rate, would be four to five
cents on a pro-forma basis. For the full fiscal year, OfficeMax is
conservatively planning overall sales at somewhat above $5 billion, with
comparable-store sales in the mid-single digit range. On a GAAP basis, this
would produce earnings of 47 to 50 cents per diluted share, or 28 to 30 cents
using a tax rate of 40 percent, which would be more than three times fiscal year
2002 pro-forma results."
ABOUT OFFICEMAX
OfficeMax operates nearly 1,000 superstores in 49 states, 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. Additionally, the Company reaches
customers with an offering of over 40,000 items through its award-winning
eCommerce site, OfficeMax.com, its direct-mail catalogs and its outside sales
force, all of which are serviced by its three PowerMax distribution facilities,
18 delivery centers and two national call centers.
Note: Statements made in this press release, other than those concerning
historical information, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, and are made
pursuant to the "safe harbor" provisions of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These statements
use such words as "may," "will," "should," "expects," "plans," "anticipates,"
"estimates," "believes," "thinks," "continues," "indicates," "outlook," "looks,"
"goals," "initiatives," "projects," or similar expressions. These statements are
likely to address the Company's growth strategy, future financial performance
(including sales, gross margin and earnings), strategic initiatives, marketing
and expansion plans and the impact of operating initiatives. The forward-looking
statements, which speak only as of the date of this release, are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from those stated, projected or implied in the forward-looking
statements. These risks and uncertainties include the following: risks
associated with general economic conditions (including effects of the threat or
actual occurrence of war, the stock market decline, currency devaluation,
additional terrorist attacks and hostilities, slower than anticipated economic
recovery and declining employment rate or other changes in our customers'
business environments, including an increase in bankruptcy filings); increasing
competition that includes office supply superstores, warehouse clubs, contract
stationers, electronics stores and mass merchant retailers, as well as grocery
and drug store chains; the result of continuing SFAS 142 assessments and other
new accounting pronouncements; and other risks and uncertainties described in
Exhibit 99.1 of the Company's Annual Report on Form 10-K for the fiscal year
ended January 26, 2002, and in other reports and exhibits to reports filed with
the Securities and Exchange Commission (these descriptions are incorporated
herein by reference). You are strongly urged to review such filings for a more
detailed discussion of such risks and uncertainties. The Company's SEC filings
are available, at no charge, at www.sec.gov and www.freeEDGAR.com, as well as on
a number of other Web sites. The foregoing list of important factors is not
exclusive. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
# # #
(Financial tables follow)
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OFFICEMAX, INC.
FISCAL 2002 FOURTH QUARTER RELEASE
MARCH 4, 2003
OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13 WEEKS ENDED 13 Weeks Ended 52 WEEKS ENDED 52 Weeks Ended
JAN. 25, 2003 Jan. 26, 2002 JAN. 25, 2003 Jan. 26, 2002
-------------- -------------- -------------- --------------
Sales(1).............................. $1,335,534 $1,271,302 $4,775,563 $4,625,877
Cost of merchandise sold, including
buying and occupancy costs......... 1,002,818 998,089 3,578,872 3,536,069
Inventory liquidation................. - 3,680 - 3,680
-------------- -------------- -------------- --------------
Gross profit.......................... 332,716 269,533 1,196,691 1,086,128
Store operating and selling expenses.. 270,288 268,576 1,034,122 1,052,958
General and administrative expenses... 32,722 34,678 134,763 145,680
Pre-opening expenses.................. 20 105 672 2,790
Goodwill amortization................. - 2,464 - 9,855
Store closing and asset impairment.... 712 76,761 2,489 76,761
-------------- -------------- -------------- --------------
Total operating expenses.............. 303,742 382,584 1,172,046 1,288,044
-------------- -------------- -------------- --------------
Operating income (loss)............... 28,974 (113,051) 24,645 (201,916)
Interest expense and other, net....... 1,234 1,881 5,980 14,865
-------------- -------------- -------------- --------------
Income (loss) before income taxes and
minority interest.................. 27,740 (114,932) 18,665 (216,781)
Income tax benefit.................... - (43,080) (57,500) (80,912)
Deferred tax assets valuation
allowance........................... - 170,616 - 170,616
Joint venture minority interest....... 684 629 2,441 2,973
-------------- -------------- -------------- --------------
Net income (loss)..................... $ 27,056 $ (243,097) $ 73,724 $ (309,458)
============== ============== ============== ==============
EARNINGS (LOSS) PER COMMON SHARE:
Basic............................... $0.22 $(2.06) $0.60 $(2.72)
Diluted............................. $0.22 $(2.06) $0.59 $(2.72)
============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic............................... 124,094 117,741 123,817 114,308
Diluted............................. 125,255 117,741 125,109 114,308
============== ============== ============== ==============
(1) 2001 sales results include sales from 29 stores closed on the first day
of fiscal year 2002.
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OFFICEMAX, INC.
FISCAL 2002 FOURTH QUARTER RELEASE
MARCH 4, 2003
OFFICEMAX, INC.
BUSINESS SEGMENT DATA
(In thousands, except per share data)
13 WEEKS ENDED 52 WEEKS ENDED
JAN. 25, Jan. 26, JAN. 25, Jan. 26,
2003 2002 2003 2002
---------- ---------- ---------- ----------
DOMESTIC BUSINESS SEGMENT
Sales(1)....................................... $1,299,045 $1,231,070 $4,622,479 $4,485,293
Cost of merchandise sold, including
buying and occupancy costs................... 974,879 964,855 3,461,366 3,429,069
Inventory Liquidation.......................... - 3,680 - 3,680
---------- ----------- ---------- ----------
Gross profit................................... 324,166 262,535 1,161,113 1,052,544
Operating income (loss)........................ 27,777 (113,969) 20,307 (206,580)
Net income (loss).............................. $26,345 ($243,637) $71,185 ($312,089)
========== =========== ========== ==========
INTERNATIONAL BUSINESS SEGMENT
Sales.......................................... $36,489 $40,232 $153,084 $140,584
Cost of merchandise sold, including
buying and occupancy costs................... 27,939 33,234 117,506 107,000
---------- ----------- ---------- ----------
Gross profit................................... 8,550 6,998 35,578 33,584
Operating income............................... 1,197 918 4,338 4,664
Net income..................................... $711 $540 $2,539 $2,631
========== =========== ========== ==========
EARNINGS (LOSS) PER DILUTED SHARE:
Domestic Business Segment................... $0.21 ($2.07) $0.57 ($2.74)
International Business Segment.............. $0.01 $0.01 $0.02 $0.02
(1) 2001 sales results include sales from 29 stores closed on the first day of
fiscal year 2002.
PAGE 6 OF 6
OFFICEMAX, INC.
FISCAL 2002 FOURTH QUARTER RELEASE
MARCH 4, 2003
OFFICEMAX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
JAN. 25, JAN. 26,
2003 2002
---------- ------------
ASSETS
Current assets:
Cash and equivalents $ 137,143 $ 76,751
Accounts receivable, net of allowances
of $1,073 and $974, respectively 90,339 87,511
Merchandise inventories 927,679 884,827
Other current assets 27,585 43,834
----------- ------------
Total current assets 1,182,746 1,092,923
Property and Equipment:
Buildings and land 36,133 35,725
Leasehold improvements 183,547 185,998
Furniture, fixtures and equipment 645,466 616,768
----------- ------------
Total property and equipment 865,146 838,491
Less: Accumulated depreciation (567,709) (479,204)
----------- ------------
Property and equipment, net 297,437 359,287
Other assets and deferred charges 14,763 12,302
Goodwill, net of accumulated amortization of $89,757 290,495 290,495
----------- ------------
$1,785,441 $1,755,007
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 437,884 $ 495,505
Accrued expenses and other liabilities 227,022 196,297
Accrued salaries and related expenses 60,190 50,705
Taxes other than income taxes 79,781 68,509
Revolving credit facility - 20,000
Redeemable preferred shares - Series B 21,750 21,750
Mortgage loan, current portion 128 122
----------- ------------
Total current liabilities 826,755 852,888
Mortgage loan 1,390 1,530
Other long-term liabilities 157,587 175,456
----------- ------------
Total liabilities 985,732 1,029,874
----------- ------------
Minority interest 19,264 19,184
Shareholders' equity:
Common stock 887,556 895,466
Deferred stock compensation (153) (29)
Cumulative translation adjustment (2,457) 616
Retained deficit (13,865) (87,589)
Less: Treasury stock, at cost (90,636) (102,515)
----------- ------------
Total shareholders' equity 780,445 705,949
----------- ------------
$1,785,441 $1,755,007
=========== ============